Foreign contribution regulation act 2010
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FOREIGN CONTRIBUTION (REGULATION) ACT, 2010. Go. 1. HAS BECOME EFFECTIVE FROM 1 ST MAY, 2011. 2. COMPARATIVE STATUS :. FOREIGN CONTRIBUTION REGULATION ACT, 2010. Previous. Next.

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FOREIGN CONTRIBUTION (REGULATION) ACT, 2010

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Foreign contribution regulation act 2010

FOREIGN CONTRIBUTION (REGULATION) ACT, 2010

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1 has become effective from 1 st may 2011 2 comparative status

1. HAS BECOME EFFECTIVE FROM 1ST MAY, 2011.2. COMPARATIVE STATUS :

FOREIGN CONTRIBUTION REGULATION ACT, 2010

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Foreign contribution regulation act 2010

DEFINITION & APPLICABILTYPROHIBITIONREGISTRATIONOPERATIONAL REQUIREMENTSRESTRICTIONSCONSEQUENCESISSUES NEED CLARITYIMMEDIATE ACTION POINTS

COVERAGE

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Foreign contribution regulation act 2010

DEFINITION & COVERAGE

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Foreign contribution regulation act 2010

DEFINITION

“FOREIGN CONTRIBUTION” Means the donation, delivery or transfer, made by any foreignsource of :-a) currency, whether Indian or foreignInclusions :a) Interest accrued on foreign contribution.b) Any other income derived from foreign contribution.Exclusions :a) Amount received by way of fees or towards cost in lieu of goods & servicerendered in the ordinary course of business.

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Definition

DEFINITION

“FOREIGN SOURCE” includes :

a) government of any foreign country or territory

b) international agency

c) foreign company

d) citizen of a foreign country

e) Company with more than 50 % foreign shareholding.

f) some of the sources appear to be foreign but are exempted

from the definition of foreign source, e.g. Agencies of the

United Nations, World Bank and other International

agencies as may be specified

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Definition1

DEFINITION

IMPORTANT INDICATORS –

a) Source is important and not the currency.

b) Contribution from NRI through normal banking channels are not

foreign contribution. However it is advisable to obtain the

passport details to establish that the person sending the

remittance is an Indian citizen.

c) Foreign citizen making donation in Indian currency is covered

under foreign sources.

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Coverage

COVERAGE

a) Earlier only Association was covered

b) But now the Act is applicable to :-

i) Association

ii) Individual

iii) HUF

iv) Section 25 Companies

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Foreign contribution regulation act 2010

PROHIBITION

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Prohibition

PROHIBITION

SECTION -3

There is a prohibition on certain category of person to

receive foreign contribution. These categories include –

a) Member of legislature

b) Correspondent, editor, columnist of an

association/company engaged in production or broad-cast of

audiovisual news or current affairs program through any

electrical media or through any mode of mass communication.

Organisation of a political nature as may be specified.

The member of legislature shall include the Panchayat member.

However the payment in ordinary course of business towards rendering of goods & services or in the form of salary & wages are allowed.

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Prohibition1

PROHIBITION

Organisation of political in nature :

As per Rule 3 the Central Govt. may specify an organisation

as a political in nature if it falls under following situations –

a) Organisation having political objectives in its

Memorandum of Association or bylaws;

b) Any voluntary action group with objectives of a political

nature or which participates in political activities.

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Prohibition2

PROHIBITION

c) Organisation which is not directly aligned to any political

party, but whose objectives, as stated in the Memorandum

of Association, or activities gathered through other material

evidence, include steps towards advancement of political

interests of such groups;

d) Any organisation, by whatever name called, which habitually

engages itself in or employs common methods of political action

like `bandh’ or `hartal’, `rasta roko’ or `jail bharo’ in support

of public causes.

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Foreign contribution regulation act 2010

REGISTRATION

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Registration

REGISTRATION

WHO CAN RECEIVE FOREIGN CONTRIBUTION?

A) A person having a definite cultural, economic, educational,

religious or social program can receive foreign contribution

after it –

a) obtains the prior permission of the Central Government (FC – 4)

or,

b) gets itself registered with the Central Government. ( FC – 3)

B) Application for registration or prior permission, under the

previous Act : To furnishes the prescribed fees of Rs.1,000/- for prior permission & Rs.2,000/- for permanent registration.

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Registration1

REGISTRATION

KEY ISSUES :

a) The permanent registration is valid for 5 years from

the date of issue of registration.

b) For existing registered NGOs the date of 5-year shall be

calculated from 1st May, 2011.

c) Prior permission shall be valid for the specific amount

of contribution proposed to be received.

d) No deemed approval of prior permission within 90 days from the

date of receipt of application.

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Renewal of registration

RENEWAL OF REGISTRATION

a) Application for renewal is to be made in Form FC-5 latest by

six months before the date of expiry of the certificate.

b) The person implementing multi year projects shall apply

for renewal latest by 12 months before the date of expiry of

the certificate.

c) If an organisation fails to renew within the due date, the

department may condone the delay. However such delay

should not be more than 4 months after the expiry of the

original certificate.

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Renewal of registration1

RENEWAL OF REGISTRATION

d) The Central Govt. may renew the certificate within 90 days or

reject the application communicating the reasons thereof.

e) In case of rejection the aggrieved NGO has a right to file

an appeal within 60 days from the date of such order or

may apply for revision of order.

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Foreign contribution regulation act 2010

OPERATIONAL REQUIREMENTS

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Operational requirements

OPERATIONAL REQUIREMENTS

A) BANK ACCOUNT :

a) All foreign contribution should be received through

one designated bank account

b) Now multiple bank account are allowed for utilisation

purposes provided it is intimated to the Ministry within 15

days of the opening of the account.

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Operational requirements1

OPERATIONAL REQUIREMENTS

B) BOOKS OF ACCOUNTS :

a) Rule 11 : a separate set of Books of Accounts &

records shall be maintained, exclusively for foreign

contribution received & utilised.

b) If the foreign contribution is received in kind then the

details should be preserved as mentioned in Form FC-7

c) Books of accounts should be preserved for a period of

six years [As per Rule 17 (7)]

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Operational requirements2

OPERATIONAL REQUIREMENTS

C) SUBMISSION OF RETURNS :

a) Annual Return :

1. Yearly Return in form FC-6 (earlier FC-3) accompanies

by Receipt & Payment A/c, Income & Expenditure A/c

& Balance Sheet within nine months.

2. Form FC-6 should reflect the foreign contribution

received in the exclusive bank account & include

the details of fund transfer to other bank a/c for

utilisation.

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Operational requirements3

OPERATIONAL REQUIREMENTS

C) SUBMISSION OF RETURNS :

3. FC-6 form is more or less same except requirement of

furnishing purpose wise expenditures on the basis of

location /place with address of each of specific

activities

4. FC-6 shall also be accompanied with a statement of A/c

from the bank through which FC money is received

duly certified by the officer of the bank.

5. Nil return shall be furnished if no receipt during

the financial year.

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Operational requirements4

OPERATIONAL REQUIREMENTS

D) INTIMATION :

a) Rule 15 : The bank should report to the FCRA

department within 30 days under two circumstances :

1) if any foreign contribution is received without

registration or prior permission,

2) if foreign contribution is receive in excess of

Rs.OneCrore during a period of 30 days,

b) Public Domain : Intimation for receipt of foreign contribution

is in excess of Rs.1.00 Crore in a Financial Year :

Organisation should place the data on receipt & utilisation

pertaining to the year of receipt as well as for one year

thereafter in public domain.

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Foreign contribution regulation act 2010

RESTRICTIONS

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Restrictions

RESTRICTIONS

FCRA, 2010 HAS COMPOSED FOLLOWING RESTRICTIONS :

A) ADMINISTRATIVE EXPENDITURE :

a) Admin. Exp. should not be more than 50% of the total

FC Received during a financial year . In excess of

50% can be incurred with prior approval of the

Central Govt.

b) Rule 5 defines Admin. exp. & basically it includes :-

> Remuneration & other expenditure to Board Members

and Trustees

> Remuneration for person managing activity and other

related expenses..

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Restrictions1

RESTRICTIONS

FCRA, 2010 HAS COMPOSED FOLLOWING RESTRICTIONS :

> Expenses at the office of the NGO.

> Cost of accounting and administration.

> Expenses towards running & maintenance of vehicle

> Cost of writing and filing reports

> Legal and professional charges

> Rent and repairs to premises

The rule further provides that any type of expenditure expended

directly on program activities shall not be considered as

administrative in nature.

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Restrictions2

RESTRICTIONS

B) Foreign Contribution shall be utilised for the purpose for

which the contribution has been received [Sec. 8(1)(a)].

C) Utilisation of FC for speculative purpose :

FC or income arising therefrom shall not be used for

speculative purpose.

Rule 4 defines speculative activities :

> As per the Rule in investment in equity market even through

mutual fund shall be considered as sepculative activities.

> The Rule basically prohibits investment into risk

bearing instruments or assets.

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Restrictions3

RESTRICTIONS

D) Transfer of FC fund to other FC registered organisation :

FC fund can be transferred to other FC registered organisation

provided the recipient organisation has not been proceeded

against under any of the provision of the act.

E) Transfer of FC fund to Non-FC registered organisation :

a) Can be made under prior approval.

b) The application shall be made in form FC-10.

c) As per Rule 24 the total transfer to non-FC registered

organisation shall not exceed 10% of the total

contribution received.

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Foreign contribution regulation act 2010

CONSEQUENCES

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Consequences

CONSEQUENCES

A) CANCELLATION OF CERTIFICATE :

Sec. 14(1) : FCRA certificate can be cancelled if :

a) the holder of the certificate has made a statement in, or

in relation to, the application for the grant of registration

or renewal thereof, which is incorrect or false; or

b) the holder of the certificate has violated any of the terms

and conditions of the certificate or renewal thereof; or

c) if the holder of the certificate has not been engaged in

any reasonable activity in its chosen field for the benefit

of the society for two consecutive years or has become

defunct.

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Consequences1

CONSEQUENCES

A) CANCELLATION OF CERTIFICATE :

d) in the opinion of the Central Government, it is necessary

in the public interest to cancel the certificate.

e) No order of cancellation shall be made unless the person

concerned has been given a reasonable opportunity of

being heard.

f) Once the certificate is cancelled, eligibility of registration

or prior permission only after a period of three

years from the date of cancellation.

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Consequences2

CONSEQUENCES

B) SUSPENSION OF CERTIFICATE :

a) During the period of cancellation of certificate :-

> The new act allows the power to suspend the

registration for a period upto 180 days.

> FC can be received only with prior approval.

> the organisation can utilise existing foreign fund

upto 25% that too with prior approval.

b) Before suspending any organisation the department shall

record the reason in writing. However provision of

opportunity of being heard is not provided.

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Consequences3

CONSEQUENCES

C) CUSTODY OF FUNDS & ASSETS IN THE

EVENT OF CANCELLATION :

a) In case of available bank balances, the respective banking

authority will become the custodian till the Central Govt.

issues further directions.

b) If funds have been transferred to another NGO after

cancellation, then the funds in the bank a/c of such NGO

will also go to the custody of the banking authority.

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Consequences4

CONSEQUENCES

C) CUSTODY OF FUNDS & ASSETS IN THE

EVENT OF CANCELLATION :

c) All other assets of the organisation shall go to the interim

custody of the District Magistrate or any other authority

which the Central Govt. may direct and for such period as

may be prescribed.

d) May also sale the assets if funds are not available for running

the activity.

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Foreign contribution regulation act 2010

ISSUES NEED CLARITY

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Issues need clarity

ISSUES NEED CLARITY

a) Giving of loans under Micro Credit program to individuals

or groups.

b) Whether transfer of fund directly to end beneficiaries is

permissible?

c) Will non-receipt of foreign contribution for two years

results in cancellation?

How to report multiple bank accounts opened earlier?

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Foreign contribution regulation act 2010

IMMEDIATE ACTION POINTS

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Immdiate action points

IMMDIATE ACTION POINTS

a) Operational bank account & intimation thereof.

b) Review of investments in view of the definition of speculative

activities.

c) Adjust the accounting framework so that the location wise

expenditure can be determined.

d) Separate books of accounts for documenting & accounting

of foreign contribution received in kind.

e) Process of transfer of foreign fund to FC registered

organisation after obtaining a certificate.

f) Process of transfer of fund to non-FC organisation with

prior approval.

g) Application for prior permission and registration filed under

the old act to be regularised by furnishing filing fees

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Thank you

THANK YOU

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