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Why FCRA REGISTRATION

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Why FCRA REGISTRATION
By: Sandeep Rawat
May 6, 2020
All Articles by: Sandeep Rawat       View Profile
  • Contents

Non profit organization is formed to help society. For helping society source of fund is play important role in form of domestic source or foreign source.Whenever any NGO either in the form of Trust, Society or Section 8 company is willing to receive any kind of foreign contribution or donation, they are required to obtain FCRA Registration under Section 6 (1) of Foreign Contribution (Regulation) Act, 2010. Irrespective of the nature of the contribution i.e. either cash or kind, the registration is mandatory.

Introduction

FCRA Department comes under the Ministry of Home Affairs. FCRA Registration is optional for NGO ,Trust and Section 8 Company

In order to regulate the foreign contribution or foreign hospitality received by any individual, association or company the Government has consolidated all the laws and regulations relating to such transactions. For this purpose Foreign Contribution (Regulation) Act, 2010 was enacted. This was done to create a transparent mechanism for individuals and organizations through E-governance of FCRA related activities. This transparent system was created to discourage any detrimental activities which can be against national interest.

FCRA Registration?

FCRA stands for Foreign Contribution Regulation Act that governs and regulated foreign contributions occurring within India. FCRA Registration Certificate issued by the government authority is a mandatory obligation to acquire or receive any foreign contribution or foreign grants by any registered trust, society, institution, association, and NGOs.

The primary objective of FCRA registration is to legalize the receipt of any foreign contribution by domestic entities and for ensuring the proper utilization of such funds for the specified objective.

TYPE OF REGISTREATION

 For receiving any kind of foreign contribution FCRA registration is mandatory. There are two TYPES OF registration to receive such contribution under the Act, they are:

  1. Proper Registration:

They are already under business for a minimum period of 3 years.

  1. Prior Permission:

An organization in formative stage is not eligible for registration. Such organization may apply for grant of prior permission under FCRA, 2010.This route is for organizations in their initial formative stage.

In order to accept foreign contribution following basic conditions must be satisfied:

  1. The receiver must have been involved in cultural, economic, educational, religious or social program me.
  2. It must either have proper FCRA registration or prior permission under the Act.
  3. The receiver is not included in the prohibited list under Section 3 of FCRA, 2010

Eligibility criteria for grant of registration?

For grant of registration under FCRA, 2010, the association should need following key requirement:

  1. Eligibility For Proper FCRA Registration:
  1. be registered under an existing statute like the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or section 25 of the Companies Act, 1956 (Now Section 8 of Companies Act, 2013) etc;
  2.  Normally be in existence for at least three years and
  3. Has undertaken/ INVOLVED reasonable activity in its chosen field for the benefit of the society in cultural, economic, educational, religious or social program me for which the foreign contribution is proposed to be utilized.
  4. Applicant entity must have spent at least INR 10 Lakhs in the previous three years for the attainment of its main objects for which the entity was registered excluding administrative expenses made.

The applicant NGO/association will be free to choose its items of expenditure (excluding the administrative expenditure as defined in Rule 5 of FCRR, 2011) to become eligible for the minimum threshold of ₹ 10.00 lac spent during the last three years. It the association wants inclusion of its capital investment in assets like land, building, other permanent structures, vehicles, equipment’s etc, then the Chief Functionary shall have to give an undertaking that these assets shall be utilized only for the FCRA activities and they will not be diverted for any other purpose till FCRA registration of the NGO holds.

  1. The last three years financial statement audited by a qualified chartered accountant shall be submitted by an applicant.

 

  1. Eligibility For Prior Permission FCRA Registration:

An organization in formative stage is not eligible for registration. Such organization may apply for grant of prior permission under FCRA, 2010.Prior permission is granted for receipt of a specific amount from a specific donor for carrying out specific activities/projects. For this purpose, the association should meet

Following criteria:

  1. be registered under an existing statute like the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or section 25 of the Companies Act, 1956 (Now Section 8 of Companies Act, 2013) etc;
  2. The fund received shall be utilized only for the specified purpose for the benefit of the society in cultural, economic, educational, religious or social program me for which the foreign contribution is proposed to be utilised
  3. submit a specific commitment letter from the donor indicating the amount of foreign contribution and the purpose for which it is proposed to be given; and
  4. For Indian recipient organizations and foreign donor organizations having common members, FCRA Prior Permission shall be granted to the Indian recipient organizations subject to its satisfying the following:
  1. The Chief Functionary of the recipient Indian organization should not be a part of the donor organization.
  2. At least 75% of the office-bearers/ members of the Governing body of the Indian recipient organization should not be members/employees of the foreign donor organization.
  3. In case of foreign donor organization being a single person/individual that person should not be the Chief Functionary or office bearer of the recipient Indian organization.
  4. In case of a single foreign donor, at least 75% office bearers/members of the governing body of the recipient organization should not be the family members and close relatives of the donor.

The conditions to be met for the grant of registration

In terms of Sec.12 (4) of FCRA, 2010, the following shall be the conditions for the grant of registration and prior permission:

(a) The 'person' making an application for registration or grant of prior permission-

  1. is not fictitious or benami;
  2. has not been prosecuted or convicted for indulging in activities aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another;
  3. has not been prosecuted or convicted for creating communal tension or disharmony in any specified district or any other part of the country;
  4. has not been found guilty of diversion or mis-utilisation of its funds;
  5. is not engaged or likely to engage in propagation of sedition or advocate violent methods to achieve its ends;
  6. is not likely to use the foreign contribution for personal gains or divert it for undesirable purposes;
  7. has not contravened any of the provisions of this Act;
  8. has not been prohibited from accepting foreign contribution;
  9. The person being an individual, such individual has neither been convicted under any law for the time being in force nor is any prosecution for any offence pending against him.
  10. The person being other than an individual, any of its directors or office bearers has neither been convicted under any law for the time being in force nor is any prosecution for any offence pending against him.

(b) The acceptance of foreign contribution by the association/ person is not likely to affect prejudicially –

  1.  the sovereignty and integrity of India;
  2.  the security, strategic, scientific or economic interest of the State;
  3. the public interest;
  4. freedom or fairness of election to any Legislature;
  5. friendly relation with any foreign State;
  6. Harmony between religious, racial, social, linguistic, regional groups, castes or communities.

(c) The acceptance of foreign contribution-

  1. shall not lead to incitement of an offence;
  2. shall not endanger the life or physical safety of any person

Document -applying for FCRA Registration

Application for FCRA registration can be made using Form FC-3. Along with the application, the following documents must be submitted:

  • Self-certified copy of registration certificate/Trust deed etc., of the association
  • Self-certified copy of relevant pages of Memorandum of Association/ Article of Association showing aim and objects of the association.
  • Activity Report indicating details of activities during the last three years;
  • Copies of relevant audited statement of accounts for the past three years (Assets and Liabilities, Receipt and Payment, Income and Expenditure) clearly reflecting expenditure incurred on aims and objects of the association and on administrative expenditure;

Field Enquiry

The FCRA department may ask the intelligence bureau for a report. Some authorities from the  intelligence bureau may visit the office and the project area of the organisation and inspect the books of account and other records available. On the basis of the reports submitted by the intelligence bureau the FCRA department decides whether to accept or reject the application.

Time limit for granting registration

There is no time limit mentioned under the FCRA either for granting or rejecting the application. Normally, the application is expected to be processed within a period of six The FCRA guidelines available on the website of the Ministry of Home Affairs, provide that the certificates from recommending activities (District Collector, etc.) are very important and help in expending the process of registration. In the absence of a prescribed time limit, it is expected that the authority should dispose of the application within a reasonable time. The duration of such reasonable time will depend upon the prevailing facts and circumstances.

Compliance required after FCRA Registration

After Successful FCRA registration, the registered entity is required to maintain proper accounts and record of all the foreign contribution received as well as its utilization. And to file a return annually in prescribed Form FC –4 along with following documents certified by chartered Accountant shall be annexed with FC-4:

  • Income and expenditure statement,
  • Balance sheet
  • Statement of receipt of Foreign contribution and
  • Payment made by the entity.

Due date of filing an annual return (FC 4)

FC-4 is the annual compliance filed within the end of 9 months from the end of the financial year, i.e., this shall be filed on or before the 31st day of December every year.

General Rule and Compliance

  • Open a dedicated Foreign Contribution Bank Account. Intimate opening of additional dedicated Foreign Contribution Utilization Bank Account(s).Do not Transfer funds from FC Bank to Non FC (even Direct Bank Transfer)
  •  Books of Accounts must be separate.
  • Make sure while getting FC funds that the purpose is crystal clear for what purpose it is received.
  • Make sure that you used these funds for the very specific purpose And, care should be taken that, this specific purpose should even reflect in the books of accounts, FC Annual Returns and Annual Reports.
  • Do not utilize foreign contribution for administrative purpose (Sec.8)
  • No association/NGO/Society, will accepts, or assists any person, political party or organization in accepting, any foreign contribution or any currency or security from a foreign source in contravention of any provision of this Act or any rule or order made thereunder.

Renewal of FCRA License

FCRA registration remains valid for five years, which can be renewed by applying for the renewal. An entity shall apply for renewal within the following timelines:

  • At least six months before the date when the license is getting lapsed.
  • At least 12 months before the date when registration lapses, in cases the entity is operating on a multi-year project.

Cancellation/Suspension of FCRA Registration

In case authorities are of the view that registered entity is not operating as per the provisions of law and its license needs to be cancelled, such authority can do so by giving the notice to the concerned entity. Following are the few reasons that can be considered while cancelling the license:

  • NGO fails to comply with the provisions of the Foreign Contribution (Regulation) Act. If the entity fails to submit an annual return within the due date
  • In case any inquiry is made for any allegation imposed against such organization for any wrongdoing in operations, and such allegation proved to be true
  • Contribution received is not utilized for the attainment of the main object of entity neither for achieving the purpose stated during FCRA registration application

For further explanation & professional assistance, please connect at sandeeprawatca@gmail.com

 

By: Sandeep Rawat - May 6, 2020

 

 

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