FAQS ON FCRA REGISTRATION
FAQS ON FCRA REGISTRATION
- Does FCRA regulated by the Reserve Bank of India?
FCRA is an integral legislation, thus the same is not regulated by RBI. FCRA regulations are undertaken by the Ministry of Home Affairs, Government of India.
- Does FEMA apply to contribution received by the Indian NGOs?
It is to be noted that FEMA is a fiscal legislation implemented under the Ministry of Finance, Government of India and thus, the same does not apply to foreign contribution received by Indian NGOs.
- Is it compulsory for a NGO to be registered in India, for getting FCRA registration?
As per the Section 2(1)(a) of FCRA an association is an individual, society or any other entity in India. Thus, there is not clarity upon their registration under the respective act implemented in India. However, there are certain documents required for FCRA registration, that relates registered entities.
- Is registration under Section 12A compulsory, to apply for registration under FCRA?
As discussed above, requirement for registration of the association is not specified anywhere in the FCRA. However, under the Income Tax Act, 1961, the registration of an entity earning any income, is mandatory in nature, and thus, the same be undertaken at the time of establishment.
- Can the foreign contribution be received in kind?
The definition of foreign contribution is quite wide and also includes donations received in kind. As per the definition, foreign contribution includes any donation, delivery or transfer through any foreign source.
- Any donation received in Indian rupees shall account for foreign contribution?
Looking into the definition of foreign contribution, we can say that any money received from a foreign source, whether in India or outside India, and whether in Indian currency or foreign currency shall be termed as the foreign contribution.
- Any amount of donation received from a NRI, be termed as foreign contribution?
It is to be noted that NRIs are not covered in the definition of foreign source as provided in the FCRA. Thus, any amount of donation received from them, shall not be considered as foreign contribution.
- Does the definition of foreign source include United Nations or World Bank?
As per the notification in the official gazette by the Central Government, it was clarified that agency of United Nations and certain other international organisations shall not be considered as the foreign source.
- What are the associations debarred from receiving foreign contribution?
As per the Section 4 of FCRA the following persons cannot receive any foreign contribution –
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- Any candidate standing in election.
- Any correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper, working in India.
- Any Judge or government servant or employee of any corporation.
- Member of Rajya and Lok Sabha.
- Any political party and their office-bearer in personal competence.
It is to be noted that the above-mentioned persons cannot receive foreign contribution, however there are certain exception to it, namely –
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- Where the foreign funds are received as salary, wages or remuneration for services provided to person outside India.
- Funds are received as payment in ordinary course of business transaction in India.
- Funds are received in the course of international trade or commerce relating to transactions outside India.
- Amount received as payment to an agent of a foreign source of organization in respect of any transaction made by the principle.
- Amount received by way of gift or presentation as a part of any Indian delegation, provided the same is within the norms prescribed by the Central Government.
- Any payment received from relative staying abroad and a prior permission is required where such amount exceeds Rs.8, 000.00.
- Payment received through official channel, post office or any authorized dealer during the ordinary course of business.
- Can an individual, other than prescribed in section 4 of FCRA, receive foreign contribution?
It is to be noted that any other person, except for those mentioned under section 4 of FCRA, shall receive foreign contribution. However, FCRA is not applicable to private individuals. They can only take contribution in the form of stipend or scholarship from foreign source and is required to report to CG, where the amount exceeds Rs.36, 000.00.
- What are the two main conditions for an entity to receive foreign contribution?
As per the section 6 of FCRA, (I), every entity wanting to receive foreign contribution, shall comply with the following –
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- The said entity is required to be registered with the Central Government.
- Also, they must agree to receive foreign contribution only through a specific bank account.
- What all documents are required to obtain FCRA registration?
The following documents are required for registration –
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- Form FC-8 duly to be properly filled and provided in the triplicate form.
- Duly Audited statement of accounts of the entity for the last 3 years.
- Annual Report providing the details pertaining to the activities performed by the entity during the last 5 years.
- Detail of the respective beneficiaries, along with their socio-economic factors of the region in which they resides and provide their service.
- List and geographical detail of each and every state, and districts in which the NGO is working and providing their service.
- Certified copy of the Registration Certificate.
- Certified copy of the Bye-laws that can in the form of Memorandum of Association and Article of Association of the NGO.
- Certified copies of registration issued u/s. 80G and 12A for claiming exemptions under the Income Tax Act.
- Copy of any prior permission, received by the entity from FCRA authority.
- Copy of resolution by the Governing Body of the organisation which authorises the NGO for the registration under FCRA
- Copy of Power of Attorney authorizing the Chief Functionary to represent their entity.
- List of present members of the Governing Body of the organisation and the office bearers who are holding the office at the time of FCRA registration.
- If the association is having any parent or subsidiary organisation, which is registered under the FCRA, then the registration number of such organisation along with Ministry of Home Affairs file number should be mentioned
- If any application has been submitted before by the association, then its reference number should be mentioned.
- Details of any foreign contribution, received with or without any prior approval of the Central Government.
- By what time shall an entity apply for registration under FCRA?
No specific time limit has been prescribed under FCRA, regarding the application for registration. However, the same be made, before the entity is looking to receive any foreign contribution, and also the entity is operational for at least 3 years.
- What are the provisions relating to undertaking by Chief functionary?
Once the application is filed for registration, an undertaking is also required to be obtained from the Chief Functionary, affirming about the correctness of the information and also the entity comply with the following provisions –
- The entity will inform regarding change of name, address, objects, etc. with evidence, within 30days from such change.
- The entity will not accept any foreign contribution without prior permission, where more than 50% of the office bearers are changed or replaced.
- The entity will also not change their registered bank account or its branch without prior permission.
- Can a foreigner be appointed in the board of directors of the NGO, applying for FCRA registration?
Even though FCRA provides not to appoint any foreigner in the board, however, the same can be done, provided the FCRA authorities shall exercise greater vigil and caution in processing such application. Any application under such condition is an exception.
- Is there any certification required by the local authority, for an entity to receive FCRA registration?
Under the Foreign Contribution Amendment Rules, 2000, a new clause was inserted named 10A in Form FC-1A, which requires the inclusion of a certificate from a competent authority, as provided by any of the following authorities –
- The authorized Collector of District, where the entity is performing its operations.
- Any authorized Department of the State Government.
- The Ministry or Department authorized by the Government of India.
The certificate should certify that the address and the field of activities in which the organisation is working, is true and correct. It also provides that there are no adverse effects of the organisation and the proposed activities will benefit the people living in that area.
- Where to file the application for registration under FCRA?
The application for registration, should be filed in the Form FC-8, and the said form along with enclosures is required to be filed in duplicate form to the Secretary, Government of India, Ministry of Home Affairs, established in New Delhi-110003.
- By what time, can an entity expect the authority to grant registration?
It is generally seen that the time taken for the registration is approximately 4 months but it depends upon the type of entity and its branches. If an entity is having branches, it takes comparatively more time, as within 1 month from the filing of online application for FCRA registration, the policeman of Knowledge Bureau, Department of Ministry of Home Affairs visits the places where the entity is operating. Thus, the FCRA department generally dispose of the application within a maximum period of 120 days.
- What are the provisions relating to opening of a bank account?
It is essential for an NGO to receive foreign contribution only in one designated bank account which they are required to open with AD banks regulated by RBI. Thus, the applicant needs to open a fresh bank account and the same be used for operations of the business. The Ministry shall be in direct communication with the said bank for monitoring the use of the foreign contribution and report back to the Ministry in case of any discrepancy. For the filing of Form FC-8 and Form FC-1A, details of a bank account number and the branch of the bank, is required to be mentioned.
- What is the process for changing the bank account details?
For changing the details of bank account, provided in the FCRA registration, the following procedure be followed –
- First of all, a new bank account which will be the new designated bank account, shall be opened by depositing the minimum deposit required for opening it.
- Such newly opened account shall not be used for receiving foreign contribution, before the approval from the authority.
- Then, an application is required to be made to the FCRA authorities, clearly citing the justifiable reasons for such change along with complete details of the old account and the new account.
- Once the permission is received from FCRA authorities, the entire amount of balance of foreign contribution lying in the old designated account, be transferred to the new account.
- The entity shall operate the old account as well, but the same shall not receive any foreign fund in future.
- Does any change in signatory to bank account, be informed to the department?
Any change in the signatories of bank accounts is a normal routine issue and therefore the same need not be informed to the FCRA authorities.
- What there any requirement to inform department regarding any change in account number due to computerisation?
It is to be noted that many account numbers have been changed due to computerisation. And in such cases, the entity is required to inform the FCRA authorities about such changes.
- Can an entity have separate bank account for separate donors?
Under FCRA, all foreign contributions are required to be received in one designated bank account only. Therefore, under no circumstances, the entity cannot have separate bank accounts for receiving funds from various donors. However, once the contribution is received, they can classify the same as sub accounts in the designated account.
- Can an NGO open different accounts for undertaking different projects?
It seems to be justifiable toe have different accounts for receiving donations for different projects. Thus, they may open bank account(s) for different projects, and link them to the main foreign contribution bank account. Once the funds are received in the designated bank, they can be subsequently transferred to various project accounts.
- Can an entity receive in project loan in their FCRA account?
The main and only source of deposit in FCRA could only be foreign contribution. Thus, if the loan or advance is received from some other organisation then the same be foreign contribution receipt and the same be received in the designated bank account only.
- Does the bank interest earn on the deposits in FCRA account, accounts for foreign contribution?
there is no clear provision for accounting of interest earned on the deposit in FCRA account. Thus, in the absence of any clear-cut provisions, such interest earned on FCRA funds shall be considered as the foreign contribution only.
- Can the entity create any fixed deposit in the FCRA account?
There does not seems to be any restriction on the creation of fixed deposits of FCRA funds. All the funds received in the designated bank account be utilized for the objects for which they are used and any surplus funds left may be placed in fixed deposits with the bank. However, due care be taken that such investments are in compliance with the section 11(5) of the Income Tax Act.
- What are provisions related to any fixed asset purchased out of the proceeds of domestic and foreign funds?
It is clarified, that where any asset is purchased, jointly through the proceeds of domestic and foreign proceeds, the respective amount be identified and the said respective amount be accounted in the statement of accounts. Also, where such asset is sold, the amount received on sales be apportionment on a reasonable basis.
- Can the FCRA funds be transferred to other NGOs?
Yes, the funds can be transferred to another NGO, provided the said NGO is also registered under FCRA.
- Can FCRA funds be appropriated to the general fund?
It is evident that many NGOs transfer their surplus from FCRA account to the general fund in the local books of account. A general fund is an unrestricted fund, created at the discretion of the entity. However, transfer of such funds foreign contribution should be reflected in FC books of account. It is to be noted that an organisation can create two general funds, one from foreign funds and other from domestic funds.
- Is it possible to mix the domestic and foreign fund, while performing the business activities?
It is clearly provided in the FCRA, that the organisations should distinguish between domestic and foreign contribution. They, in no way, can mix the domestic and foreign contributions, as the reporting of the two amount is different. Thus, an organisation is required to take great care and caution in segregating the foreign contributions and domestic contribution.
- How is an undisclosed foreign contribution, treated in India?
It is commonly seen, that many organisations, receive funds through direct credit in their bank account from various sources outside India and the identity of the donor is also not available. In such a case, the organisation is required to instruct their bank to trace the source of donation and the details if obtained, should be reported in the Form FC-3.
- Which accounting method be undertaken for foreign contribution received in kind?
Under the FCRA, we have already discussed that an entity can receive foreign contribution in kind as well. For this, Form FC-6 is maintained for recording the receipt as well as the utilisation of contributions received in kind
- Is there any specific accounting method, prescribed by FCRA?
FCRA has not prescribed any specific accounting method to be implemented for FCRA accounts. Thus, an entity is free to select from the cash and accrual basis of accounting.
- What is the annual filing required to be made by a registered entity?
Every entity registered under FCRA, is required to file an annual return in Form FC-3, within 120 days of the closure of the financial year.
Apart from the annual return, the following documents be submitted in duplicate form, duly signed by the chief signatory and certified by a chartered accountant. These documents are –
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- Duly filled Form FC-3.
- Properly maintained balance Sheet and statement of Receipt and Payment, prepared exclusively for foreign contribution received and utilised during the year.
- Does an entity have to file annual return, even in case of zero foreign contribution?
Under the FCRA regulations, where an entity, registered under FCRA and zero foreign contribution is received, are required to file nil returns for that particular FY. Thus, filing of annual return is compulsory, till the entity is registered under FCRA. In case of non-submission of return in time or furnish of false submission, the same shall constitute violation of the provision of the Act and will attract penal provisions.
- What could be the effects of delay in filing of annual return?
No such effects/implications have been provided for delay in filing form FC-3. However, the entity could presume, that any delay in annual return filing, could result in cancellation of FCRA registration. Thus, it is advised, that where the NGO fails to file form FC-3 by 31st of July coming after the end of relevant FY, they should write a letter to the FCRA authority, providing the reasons for the said delay.
- What are the charges to be paid for FCRA registration?
For taking up FCRA registration, an entity is required to pay Rs 1000 for obtaining prior permission, while for taking registration, the said fess if of Rs 2000.
- How can an investigation be made into FCRA registration?
Any investigation to be made under FCRA, be done by Crime Branch Department. Under FCRA Act, 2010, the department is having no authority to undertake any investigation at the time of renewal of the FCRA certificate, but they can conduct audits and inspections at any time, however, such investigation by the Central Government can be made only on providing a valid cause for such investigation. However, the FCRA Amendment Act of 2020, enacted on September 29, 2020, gave the Central government full authority to make inquiries and satisfy itself as to Section 12(4) conformity prior to FCRA renewal. The need of authentication of the documents were acknowledged at the time of registration.
- What purpose does the annual return fulfil?
Every entity is required to file annual report, by 31st July coming after the end of the relevant financial year, and the annual return shall contain the details of all the activity & program performed by the entity with the use of foreign contribution.
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