Foreign Contribution Regulation Act (FCRA) Explained: Key Provisions and Compliance

The Foreign Contribution Regulation Act (FCRA) is one of the significant laws passed by the Indian Parliament for regulation of acceptance and utilization of foreign contribution and foreign hospitality by individuals, associations and companies to ensure that such contributions or hospitality is not being utilized for activities that are detrimental to national interest of India. The FCRA India aims to protect the country against use of foreign contribution for any activities that may be detrimental to the national interest and security of the country.

First enacted in 1976 over concerns about foreign meddling in India’s domestic affairs, the Foreign Contribution Regulation Act was significantly amended in 2010 to streamline the law and to impose stronger controls on the receipt and utilization of foreign donations. The FCRA, 2010, and its rules, and periodic amendments (specifically in 2020 and 2022) provide a mandatory framework for individuals and entities – including NGOs – to be registered or granted prior permission by the Ministry of Home Affairs before receiving foreign contributions.

This Act thus does not only apply within India but right up to Indian citizens outside India, as well as to foreign companies controlled by Indian companies. It has a very wide definition of “foreign contribution”, which includes donations/ remittances/ currencies/ securities and even articles received from foreign source. FCRA India requires transparency, accountability and regulatory compliance and lack of any of these would result in severe penalties in terms of cancellation and prosecution.

• Safeguarding National Interest: The objective of FCRA India is to ensure that foreign contribution does not affect (directly or indirectly) the sovereignty, security, or integrity of India and also the public interest, the interest of the weaker section of Indian society, its democratic process and its electoral politics.
• Regulating Foreign Donations: The FCR Act mandates that a registered organization/entity alone can accept and spend foreign donation for defined purposes like Cultural, Economic, Educational, Religious and Social.
• Promoting Transparency and Accountability: By mandating registration, maintenance of a dedicated bank account, record-keeping, and annual reporting, the FCRA India promotes transparency in the flow and use of foreign funds.
• Strengthening Regulatory Oversight: Amendments to the Foreign Contribution Regulation Act, particularly in 2010 and 2020, have unified the law and increased government control over the inflow and use of foreign funding, making it even more of a centralized control with tighter controls on its misuse.

Applicability: Who is Covered Under FCRA?

The Foreign Contribution Regulation Act, to all intending recipients and users of foreign contributions in India. The following are included by the Act –

• Individuals: Every person who is a citizen can accept FCRA, provided they have a valid FCRA registration, or a prior permission from Central Government.
• Associations and NGOs: This includes societies, trusts, charitable organizations, and non-profit entities engaged in cultural, economic, educational, religious, or social programs.
• Companies: Companies incorporated under the Companies Act including and Section 8 (non-profit) companies are also included if they plan to accept forgiven contributions.
• Hindu Undivided Families (HUFs): HUFs are specifically included in the definition of “person” under FCRA and thus fall under its purview.

Under the Foreign Contribution Regulation Act, ‘foreign contribution’ is defined as any donation or transfer made by a foreign source of the following –

• Articles: Any article (excluding gifts given to a person for personal use with a market value below a threshold specified by the government).
• Currency: Any currency, whether Indian or foreign.
• Securities: Any security as defined under the Securities Contracts (Regulation) Act, 1956, including foreign securities as defined under the Foreign Exchange Management Act, 1999.

Key Provisions of the FCRA –

The following are the FCRA key provisions -

• Registration and Prior Permission: Any person, organization or business that intends to receive foreign contribution should either be registered under FCRA India or should obtain prior permission from the Central Government. Registration is given to those organizations that have worked for not less than three years and built a satisfactory performance record in that field.
• Purpose and Utilization of Funds: Foreign contributions, money received from abroad, shall be utilised only for the purpose for which they were received. The Foreign Contribution Regulation Act caps administrative expenses to not more than 20% of the foreign contribution received in a financial year except with prior approval of the Central Government.
• Designated Bank Account: Foreign contribution shall be received only in one account in the State Bank of India’s, New Delhi branch. This measure ensures transparency and centralized monitoring of foreign funds.
• Prohibition on Transfer: Funds received by an organization permitted to receive Foreign Contributions, should not be passed on for another person/ organization unless that person/ organization is also duly registered/ permitted under FCRA to receive Foreign Contributions.
• Mandatory Identification: Aadhaar number or passport/OCI number of the office bearers and key functionaries of the organizations is required for registration and compliance.
• Renewal and Surrender of Registration: The government may review and enquire into the activities of organizations before renewing FCRA registration.
• Suspension and Cancellation: The Central Government has the power to suspend or cancel the registration, if it finds infringement of the Act, misappropriation of funds or work against the national interest. The utilisation of FC unspent balance is also prohibited during suspension.
• Reporting and Record-Keeping: Organizations must maintain proper accounts and records of foreign contributions received and utilized. Annual returns must be filed with the Ministry of Home Affairs, detailing the source, amount, and purpose of each contribution.
• Prohibited Recipients: Certain categories, such as candidates for election, journalists, judges, government servants, members of legislatures, and political parties, are strictly prohibited from receiving foreign contributions.
• Thresholds for Individuals: As per the FCRA Rules 2022, Indian citizens can receive up to Rs 10 lakh annually from relatives abroad without notifying authorities; amounts above this threshold must be reported within three months.

FCRA Registration and Prior Permission Process –

FCRA Registration Process –

FCRA eligibility criteria -

1. The applicant must be registered as a society, trust, or Section 8 company under Indian law.
2. The organization should have been in existence for at least three years and have spent at least Rs 10 lakh over the last three years on its core activities (excluding administrative expenses).

Application -

1. Open your web browser and visit the official FCRA website: http://fcraonline.nic.in.
2. Click on “Where do I need to file to apply for any FCRA services.”
3. Then select “Application for FCRA Registration”.
4. Click on “Click to apply online”.
5. Select “Sign Up” and fill out the registration form with accurate details.
6. Submit the form to generate your unique user ID.
7. Use your newly generated user ID and password to log in to the portal.
8. After logging in, select “FCRA Registration”.
9. Click on “Click here to proceed with new registration.”
10. Complete the application forms.
11. Attach all necessary documents as per the guidelines provided on the portal.
12. Review your application thoroughly, then click on “Final Submit” to complete the process.
13. Proceed to the payment section and pay the applicable registration fee online.
14. After successful submission and payment, print a copy of your completed application form for your records and future reference.

When to Apply-If an organization is newly established or does not meet the eligibility for full registration, it can apply for prior permission to receive foreign funds for a specific project, purpose, and donor.

1. Open your web browser and go to http://fcraonline.nic.in.
2. Click on “Where do I need to file to apply for any FCRA services”, then select “Application for FCRA Prior Permission”.
3. Click on “Click to apply online”.
4. Select “Sign Up for a new account” and fill in all the required details accurately. Click “Save” to complete registration.
5. Use the user ID and password generated during sign-up to log in.
6. Choose “FCRA Prior Permission” and click “Apply Online”.
7. Click on “Instructions” to carefully read the guidelines before proceeding.
8. Click “Click here to file Prior Permission” to start the application process.
9. Complete the Association Details form and save your entries.
10. Fill in the details of the Executive Committee members. You can add, edit, or delete records as needed. For any foreign members, click “Add New” to provide their details. Save the information.
11. Provide additional Executive Committee details and other relevant information, then save.
12. Enter the designated bank account details where foreign contributions will be received and save.
13. Complete any remaining sections under Other Details and save.
14. Enter the details of the donor’s commitment and save it.
15. Fill in the donor’s particulars and save.
16. Upload all necessary supporting documents as per the checklist.
17. Review and complete the final submission form, then save your application.
18. Proceed to the payment section and pay the applicable application fee online.
19. After successful submission, print a copy of your application for your records.

The following are the FCRA compliance -

1. All international contributions must be deposited into a specific FCRA bank account at the Main Branch of the State Bank of India (SBI) in New Delhi.
2. Fund transfers to other utilisation accounts may be made by the organisation, but all transactions must be accurately recorded.
3. Only the exact purpose specified at registration may be used with the funds.
4. Every year, NGOs are required to submit Form FC-4 via the FCRA portal.
5. Every quarter, NGOs are required to provide information about their foreign contributions on the FCRA website. Donor information, the amount received, and the contribution's purpose must all be included in the report.
6. Keep accurate activity and money records for a minimum of six years.
7. Every year, NGOs are required to have a chartered accountant (CA) perform an audit. The auditor has to attest that the money was spent in accordance with FCRA guidelines.
8. The Ministry of Home Affairs (MHA) must first approve certain operations, such as changing the organization's governing body members or office address, transferring foreign funds to other NGOs that are registered with the FCRA, or changing the organization's goals.
9. FCRA registration is good for five years and needs to be renewed using Form FC-3C six months prior to its expiration.
10. NGOs have 15 days to inform MHA of any changes to their names, addresses, or key people.
11. Bank account freeze, fines, legal action under the FCRA and associated legislation, and suspension or termination of FCRA registration are all possible outcomes of noncompliance with FCRA regulations.

1. Foreign contributions can only be used for the specific cultural, economic, educational, religious, or social purposes for which they were received.
2. Funds must not be diverted to speculative activities or purposes unrelated to the registered objectives.
3. The use of foreign funds for administrative expenses is capped at 20% of the total foreign contribution received in a financial year, unless prior approval is obtained from the Central Government.

The Foreign Contribution Regulation Act stands as a critical legislative framework designed to regulate and monitor the acceptance and utilization of foreign funds in India. By mandating strict registration, designated bank accounts, and transparent reporting, the Act seeks to ensure that foreign contributions are used solely for legitimate, constructive purposes and do not compromise the nation’s sovereignty, security, or public interest.

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