The Foreign Contribution (Regulation) Act, 2010: by The End of This Chapter, You Will Be Able To

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4

THE FOREIGN CONTRIBUTION


(REGULATION) ACT, 2010

LEARNING OUTCOMES
By the end of this Chapter, you will be able to-
 Understand and appreciate significant terminologies used in the Act.
 Understand how the law regulates the acceptance and utilization of
foreign contribution or Foreign Hospitality
 Identify the restrictions on acceptance and utilisation of foreign
contribution or foreign hospitality
 Understand the procedure for the registration of persons to be regulated
in this Act
 Understand how persons regulated by the Act are required to manage the
financial aspects of Foreign Contribution
 Know the adjudicating authority, the provisions related to appeal and
revision, and offences and penalties on contravention of the compliances.

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4.2 CORPORATE AND ECONOMIC LAWS

1. INTRODUCTION
The Preamble to the Indian constitution defines India as a ‘Sovereign’ country, meaning India has
its own supreme law and is not a dominion or province of any other nation. Moreover, India is
independent of any kind of external intervention in its domestic operations. Therefore, no other
country or international body can infringe on India's sovereignty. One of the threats to the
sovereignty of India could be through transfer of funds from foreign sources as Foreign Contribution
for any activities detrimental to the national interest.
The Foreign Contribution (Regulation) Act, 2010, together with the Foreign Contribution (Regulation)
Rules, 2011 and other notification and orders, issued thereunder from time to time regulates the flow
of foreign contributions into India and ensures that such contributions do not adversely affect
national security. First enacted in 1976, it was amended in 2010 when new measures were adopted
to regulate foreign contributions with effect from 1-5-2011. The Foreign Contribution (Regulation)
Act, 2010 was again amended through the Foreign Contribution (Regulation) Amendment Act, 2020
with effect from 28th September, 2020. The FCRA is administered by Ministry of Home Affairs.
Amendments made by the 2020 Amendment Act – Following are the highlights of the Foreign
Contribution (Regulation) Amendment Act, 2020:
♦ No Foreign contribution can be accepted by Employee of any corporation or any other
body controlled or owned by the Government [section 3(1)(c) of FCRA, 2010]
♦ Amendment Act completely put Prohibition to transfer foreign contribution to other
person - [section 7 of FCRA, 2010]
♦ Central Government can restrict or prohibit a person from utilising unutilized foreign
contribution – [proviso to section 11(2) of FCRA, 2010].
♦ Aadhaar number, Passport or OCI card mandatory for prior permission or registration
under FCRA – [section 12A]
♦ Restriction on administrative expenses reduced to 20% of contribution from 50% of
contribution – [section 8(1) of FCRA, 2010]
♦ Opening of FCRA Account before making application for registration under FCRA –
[section 12(1A) of FCRA, 2010].
♦ Provision made for Surrender of Certificate of Registration under FCRA – [section 14A
of FCRA, 2010].
♦ All money should be received and spent from 'FCRA Account' with Bank. Money cannot
be transferred to any account other than 'FCRA Account' –[section 17 of FCRA, 2010].

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.3

Vide Notification G.S.R. 695(E) [F. NO. II/21022/23(12)/2020-FCRA-III], dated 10-11-2020, in


exercise of the powers conferred by section 48 of the Foreign Contribution (Regulation) Act,
2010, the Central Government hereby makes the following rules further to amend the Foreign
Contribution (Regulation) Rules, 2011, through the enforcement of the Foreign Contribution
(Regulation) (Amendment) Rules, 2020 w.r.e.f 29.04.2011.
Structure of the Act
The Foreign Contribution (Regulation) Act, 2010, (FCRA, 2010) comprises of nine chapters with 54
sections.

Chapter No. Chapter Name


Chapter I Preliminary (Section 1- 2)
Chapter II Regulation of Foreign Contribution and Foreign Hospitality (Section 3 -10)
Chapter III Registration (Section 11- 16)
Chapter IV Accounts, Intimation, Audit and Disposal of Assets, etc. (Section 17- 22)
Chapter V Inspection, Search and Seizure (section 23-27)
Chapter VI Adjudication (Section 28-29)
Chapter VII Appeal and Revision (Section 31- 32)
Chapter VIII Offences and Penalties (Section 33- 41)
Chapter IX Miscellaneous (Section 42- 54)

Extent, Application and Commencement of FCRA (Section 1)


As per Section 1(2) of FCRA, 2010, the provisions of the Act shall apply to:
• Whole of India
• Citizens of India outside India; and
• Associate Branches or subsidiaries, outside India, of companies or bodies corporate,
registered or incorporated in India.
In line with the stated provision, the Act is applicable to any citizen of India whether he is in India or
outside India. However, the Act is not applicable to a foreigner while outside India.
As per section 1(3) of the Act, the Central Government has appointed the 1st day of May, 2011 as
the date on which the provisions of the said Act would come into force.

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4.4 CORPORATE AND ECONOMIC LAWS

2. IMPORTANT DEFINITIONS (SECTION 2)


In this Act, unless the context otherwise requires,—
1"FCRA Account" [Section 2(1)(f)]
FCRA Account means the FCRA Account referred to in section 17 of the Act.
Foreign Company [Section 2(1)(g)]
Foreign Company means any company or association or body of individuals incorporated outside
India and includes :—
• a foreign company within the meaning of section 591 of the Companies Act, 1956 (Section
379 of the Companies Act, 2013)
• Company which is a subsidiary of a foreign company;
• the registered office or principal place of business of a foreign company referred above;
• a multi-national corporation.
Explanation.—For the purposes of this sub-clause, a corporation incorporated in a foreign country
or territory shall be deemed to be a multi-national corporation if such corporation,—
(a) has a subsidiary or a branch or a place of business in two or more countries or territories; or
(b) carries on business, or otherwise operates, in two or more countries or territories;
Example 1: Whether a Company incorporated in India under the Companies Act, 2013 having its
operations in 2 or more countries is to be treated as a MNC under FCRA, 2010?
Answer. No
Foreign Source [Section 2(1)(j)]
Foreign Source includes,—
(i) the Government of any foreign country or territory and any agency of such Government;
(ii) any international agency, not being the United Nations or any of its specialized agencies, the
World Bank, International Monetary Fund or such other agency as the Central Government
may, by notification, specify in this behalf;
(iii) a foreign company;
(iv) a corporation, not being a foreign company, incorporated in a foreign country or territory;
(v) a multi-national corporation referred to in Section 2(g) sub-clause (iv) of FCRA, 2010;

1 Inserted by the Foreign Contribution (Regulation) (Amendment) Rules, 2020, w.e.f. 10-11-2020.

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.5

(vi) a company within the meaning of the Companies Act, 1956 (presently, the Companies Act,
2013) and more than one-half of the nominal value of its share capital is held, either singly or
in the aggregate, by one or more of the following, namely:-
A. the Government of a foreign country or territory;
B. the citizens of a foreign country or territory;
C. corporations incorporated in a foreign country or territory;
D. trusts, societies or other associations of individuals (whether incorporated or not),
formed or registered in a foreign country or territory;
E. Foreign company;
Provided that where the nominal value of share capital is within the limits specified for foreign
investment under the Foreign Exchange Management Act, 1999, or the rules or regulations
made there under, then, notwithstanding the nominal value of share capital of a company
being more than one-half of such value at the time of making the contribution, such company
shall not be a foreign source.
(vii) a trade union in any foreign country or territory, whether or not registered in such foreign
country or territory;
(viii) a foreign trust or a foreign foundation, by whatever name called, or such trust or foundation
mainly financed by a foreign country or territory;
(ix) a society, club or other association or individuals formed or registered outside India;
(x) a citizen of a foreign country;”
DEFINITION OF FOREIGN SOURCE
Government of any foreign country / agency of such government
International agency
foreign company
Corporation incorporated in a foreign country/territory
MNC
Company
Trade Union
Foreign trust/foundation
Society, club, association/individuals registered outside India
Citizen of foreign country

A few bodies/ organisations of the United Nations, World Bank (including the International Monetary
Fund (IMF) and some other International agencies or multilateral organisations are exempted from

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4.6 CORPORATE AND ECONOMIC LAWS

this definition, and are not treated as foreign source. Hence, the funds received from them are not
considered as foreign contribution.
Foreign Contribution [Section 2(1)(h)]
Foreign Contribution means the donation, delivery or transfer made by any foreign source,—
(i) of any article,
Exception: An article given to a person as a gift for his personal use, if the market value, in
India, of such article, on the date of such gift, is not more than such sum as may be specified
from time to time, by the Central Government by the rules made by it in this behalf; 2(This
sum has been specified as 1,00,000/- as per Rule 6A of the Foreign Contribution (Regulation)
Amendment Rules, 2012 )
(ii) any currency, whether Indian or foreign;
(iii) of any security as defined in the Securities Contracts (Regulation) Act, 1956 and includes
any foreign security as defined in the Foreign Exchange Management Act, 1999;
Explanations Nature of contribution Whether Foreign
contribution or not
Explanation 1 A donation, delivery or transfer of
any article, currency or foreign
security by any person who has Shall also be deemed to be
received it from any foreign source, foreign contribution within
either directly or through one or the meaning of this clause
more persons
Explanation 2 • The interest accrued on the
foreign contribution deposited
in any bank referred to in
section 17(1), or
• any other income derived from
the foreign contribution or
interest thereon
Explanation 3 • Any amount received, by any Shall be excluded from the
person from any foreign source definition of foreign
in India, by way of fee contribution within the
(including fees charged by an meaning of this clause;
educational institution in India
from foreign student), or

2The Foreign Contribution (Regulation) (Second Amendment) Rules, 2019 inserted for the words “rupees twenty-
five thousand”, the words “one lakh rupees”

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.7

• towards cost in lieu of goods or


services rendered by such
person in the ordinary course
of his business, trade or
commerce whether within
India or outside India, or
• any contribution received from
an agent of a foreign source
towards such fee or cost

Example 2: Whether earnings from foreign client(s) by a person in lieu of goods sold or a service
rendered by it is treated as foreign contribution?
Answer: No. As per the above explanation 3, foreign contribution excludes earnings from foreign
client(s) by a person in lieu of goods sold or services rendered by it as this is a transaction of
commercial nature.
Example 3: Can foreign contribution be received in rupees?
Answer. Yes, any donation, delivery or transfer received from a ‘foreign source’ whether in rupees or in
foreign currency is construed as ‘foreign contribution’ under FCRA, 2010. Such transactions even in
rupees term are considered as foreign contribution.
Example 4: Will interest or any other income earned from foreign contribution be considered foreign
contribution?
Answer: Yes. It will become part of Foreign contribution (see Explanation 2)
Example 5: Whether donation given by Non-Resident Indians (NRIs) is treated as ‘foreign contribution’?
Answer: Foreign Contribution is defined under section 2(1)(h) to mean the donation, delivery or
transfer made by any foreign source. Section 2(1)(j) only speaks about citizen of a foreign country
while inclusively defining Foreign Source. Therefore, contributions made by a citizen of India living
in another country (i.e., Non-Resident Indian), from his personal savings, through the normal banking
channels, is not to be treated as foreign contribution. However, while accepting any donations from
such NRI, it is advisable to obtain his passport details to ascertain that he/she is actually an Indian
citizen.
Example 6: Whether 100% subsidiary of foreign company in IT sector can give donation to trust
who doesn’t have registration under FCRA?
Answer: Yes, it can. As per proviso of Section 2(1)(j)(vi) since the investment is within limits of
FEMA, hence though it may be a 100% subsidiary of a foreign company its not a foreign source.
Example 7: Whether an Individual of Indian Origin who has acquired foreign nationality is treated as
foreign source?
Answer: Yes. All citizens of a foreign country are treated as “Foreign Source.”

© The Institute of Chartered Accountants of India


4.8 CORPORATE AND ECONOMIC LAWS

Person [Section 2(1)(m)]


Person includes:
(i) an individual;
(ii) a Hindu undivided family;
(iii) an association;
a company registered under section 25 of the Companies Act, 1956 (now Section 8 of Companies
Act, 2013).
Foreign Hospitality [Section 2(1)(i)]
Foreign Hospitality means any offer, not being a purely casual one, made in cash or kind by a foreign
source for providing a person with the costs of travel to any foreign country or territory or with free
boarding, lodging, transport or medical treatment;
Political party [Section 2(1)(n)]
Political party means—
(i) an association or body of individual citizens of India—
(A) to be registered with the Election Commission of India as a political party under section
29A of the Representation of the People Act, 1951, or
(B) which has set up candidates for election to any Legislature, but is not so registered or
deemed to be registered under the Election Symbols (Reservation and Allotment)
Order, 1968;
(ii) a political party mentioned in column 2 of Table 1 and Table 2 to the notification of the Election
Commission of India No. 56/J&K/02, dated the 8th August, 2002, as in force for the time
being;
Relative [Section 2(1)(r)]
“Relative” has the meaning assigned to it in section 2(41) of the Companies Act, 1956 (Now section
2(77) of the Companies Act, 2013)
Words and expressions used in FCRA, 2010 and not defined in therein but defined in the
Representation of the People Act, 1950 or the Representation of the People Act, 1951 or the Foreign
Exchange Management Act, 1999 shall have the meanings respectively assigned to them in those
Acts. [Section 2(2)]

3. REGULATION OF FOREIGN CONTRIBUTION AND


FOREIGN HOSPITALITY
Chapter II of the Act deals with the regulation of foreign contribution and foreign hospitality. It covers
sections 3 to 10 of the Act. The chapter broadly focuses on certain prohibitions on acceptance of
Foreign Contribution and restrictions on acceptance of Foreign Hospitality by certain classes of
persons.

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.9

(I) Prohibition to accept foreign contribution (Section 3)


(1) No foreign contribution shall be accepted by any:
(a) candidate for election;
(b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered
newspaper;
(c) public servant, Judge, Government servant or employee of any corporation or any
other body controlled or owned by the Government; 3
(d) member of any Legislature;
(e) political party or office-bearer thereof;
(f) organisation of a political nature as may be specified under section 5(1) by the Central
Government;
(g) association or company engaged in the production or broadcast of audio news or audio
visual news or current affairs programmes through any electronic mode, or any other
electronic form as defined in the Information Technology Act, 2000 or any other mode
of mass communication;
(h) correspondent or columnist, cartoonist, editor, owner of the association or company
referred to in clause (g).
Explanation 1. - For the purpose of clause (c), "public servant" means a public servant as
defined in section 21 of the Indian Penal Code (45 of 1860).
Explanation 2. - In clause (c) and section 6, the expression "corporation" means a
corporation owned or controlled by the Government and includes a Government company as
defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013). 4
(2) The prohibition mentioned in (1) above deals with direct acceptance of Foreign Contribution.
The Act also prohibits indirect acceptance of foreign contribution by the following persons:
(a) Person, resident in India, and citizen of India resident outside India- shall not accept
any foreign contribution, or acquire or agree to acquire any currency from a foreign source,
on behalf of any political party, or any person referred to in (1) above, or both.
(b) Person, resident in India- shall not deliver any currency, whether Indian or foreign,
which has been accepted from any foreign source, to any person if he knows or has
reasonable cause to believe that such other person intends, or is likely, to deliver such
currency to any political party or any person referred to in (1) above, or both.

3Inserted by the Foreign Contribution (Regulation) Act, 2020 (Act 33 of 2020) with effect from 28th September
2020. The word “Public Servant” has been included.
4 Inserted by the Foreign Contribution (Regulation) Amendment Act, 2020 (Act 33 of 2020) with effect from 28th

September 2020. The word “Public Servant” has been defined by reference to Section 21 of the Indian Penal Code.
The definition of Government Company has been aligned to definition in the Companies Act, 2013.

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4.10 CORPORATE AND ECONOMIC LAWS

(c) Citizen of India resident outside India- shall not deliver any currency, whether Indian
or foreign, which has been accepted from any foreign source, to—
(i) any political party or any person referred to in (1) above, or both; or
(ii) any other person, if he knows or has reasonable cause to believe that such
other person intends, or is likely, to deliver such currency to a political party or
to any person referred to (1) above, or both.
(3) Section 9 of FCRA, 2010 empowers the Central Government to prohibit or regulate
acceptance of Foreign Contribution or Foreign Hospitality by persons not specified in (1)
above. Any person receiving any currency, whether Indian or foreign, from a foreign source on
behalf of any person or class of persons referred to in section 9 shall not deliver such currency—
(a ) to any person other than a person for which it was received, or
(b) to any other person, if he knows or has reasonable cause to believe that such other
person intends, or is likely, to deliver such currency to a person other than the person
for which such currency was received.

PROHIBITED FOREIGN CONTRIBUTIONS

PROHIBITION ON FOREIGN (a) candidate for election;


CONTRIBUTION (b) correspondent, columnist,
cartoonist, editor, owner, printer or
publisher of a registered
newspaper;
(c) public servant, Judge,
Government servant or employee
of any corporation or any other
body controlled or owned by the
FOREIGN Government;
SOURCE (d) member of any Legislature;
(e) political party or office-bearer
thereof;
(f) organisation of a political nature as
may be specified by the Central
Person, resident in India, Government;
and citizen of India resident (g) Association or company engaged
outside India accepting FC in news Broadcasting
on behalf of Political Party (h) correspondent, columnist,
or listed persons cartoonist, editor, owner, printer or
publisher of association or
company mentioned in (g) above

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.11

Procedure to notify an organisation of a political nature (Section 5)


Certain organisations may not be registered as a political party, but their activities and the ideologies
propagated by them may be such as to be closely aligned with that of a registered political party. This
section empowers the Central Government to identify these organizations and notify them as organisation
of a political nature. Thereafter, the provisions of the Act will apply to these organisations as if they are
an organisation of a political nature mentioned in section 3 (1) (f).
The Central Government may be satisfied that an organisation is of a political nature, having regard to
the activities of the organisation or the ideology propagated by the organisation or the programme of the
organisation or the association of the organisations with the activities of any political party.
When the Central Government is so satisfied, it may, by an order published in the Official Gazette, specify
such organisation as an organisation of a political nature not being a political party, referred to in clause
(f) of sub-section (1) of section 3.
Central Government has clarified the guidelines specifying the ground or grounds on which an
organisation shall be specified as an organisation of a political nature in Rule 3 of the Foreign Contribution
(Regulation) Rules, 2011.
Guidelines for declaration of an organisation to be of a political nature, not being a political
party. – 5(1) The Central Government may specify any organisation as organisation of political
nature on one or more of the following grounds: -
(i) organisation having avowed political objectives in its Memorandum of Association or bylaws;
(ii) any Trade Union whose objectives include activities for promoting political goals;
(iii) any voluntary action group with objectives of a political nature or which participates in political
activities;
(iv) front or mass organisations like Students Unions, Workers' Unions, Youth Forums and
Women's wing of a political party;
(v) organisation of farmers, workers, students, youth based on caste, community, religion,
language or otherwise, 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;
(vi) any organisation, by whatever name called, which habitually engages itself in or employs
common methods of political action like 'bandh' or 'hartal', 'rasta roko', 'rail roko' or 'jail bharo'
in support of public causes.

5 Numbered as sub-rule (1) by the Foreign Contribution (Regulation) (Amendment) Rules, 2020, w.e.f. 10-11-2020.

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4.12 CORPORATE AND ECONOMIC LAWS

6(2) The organisations specified under clauses (v) and (vi) of sub-rule (1) shall be considered
to be of political nature, if they participate in active politics or party politics, as the case may
be.
Before making an order as discussed above, the Central Government shall give the organisation in
respect of whom the order is proposed to be made, a notice in writing informing it of the ground or
grounds, on which it is proposed to be specified as an organisation of political nature under that sub-
section.
The organisation to whom a notice has been so served, may, within a period of thirty days from the
date of the notice, make a representation to the Central Government giving reasons for not
specifying such organisation as an organisation of a political nature.
The Central Government may entertain the representation after the expiry of the said period of thirty
days, if it is satisfied that the organisation was prevented by sufficient cause from making the
representation within thirty days.
The Central Government may, if it considers it appropriate, forward the representation made by such
organisation to any authority to report on such representation.
The Central Government may, after considering the representation and the report of the authority,
specify such organisation as an organisation of a political nature not being a political party and make
an order accordingly.
Every order under this section shall be made within a period of one hundred and twenty days from
the date of issue of notice informing the grounds.
In case no order is made within the said period of one hundred and twenty days, the Central
Government shall, after recording the reasons therefor, make an order under this section within a
period of sixty days from the expiry of the said period of one hundred and twenty days.
(II) Exceptions i.e. situations where section 3 shall not apply (Section 4)
Nothing contained in section 3 shall apply to the acceptance, by any person specified in that section,
of any foreign contribution where such contribution is accepted by him, —
(a) by way of salary, wages or other remuneration due to him or to any group of persons
working under him, from any foreign source or by way of payment in the ordinary course of
business transacted in India by such foreign source; or
(b) by way of payment, in the course of international trade or commerce, or in the ordinary
course of business transacted by him outside India; or
(c) as an agent of a foreign source in relation to any transaction made by such foreign source
with the Central Government or State Government; or

6 Inserted by the Foreign Contribution (Regulation) (Amendment) Rules, 2020, w.e.f. 10-11-2020.

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.13

(d) by way of a gift or presentation made to him as a member of any Indian delegation,
provided that such gift or present was accepted in accordance with the rules made by the
Central Government with regard to the acceptance or retention of such gift or presentation;
or
(e) from his relative; or
Note: Any person receiving foreign contribution in excess of one lakh rupees or equivalent
thereto in a financial year from any of his relatives shall inform the Central Government
7[regarding the details of the foreign contribution received by him in electronic form]

in Form FC-1 within thirty days from the date of receipt of such contribution.
(f) by way of remittance received, in the ordinary course of business through any official
channel, post office, or any authorised person in foreign exchange under the Foreign
Exchange Management Act, 1999 ; or
(g) by way of any scholarship, stipend or any payment of like nature:
In case any foreign contribution is received by any person specified under section 3, for any of the
purposes other than those specified above, such contribution shall be deemed to have been
accepted in contravention of the provisions of section 3.
The point to be noted is that where foreign contribution is accepted for the above purposes or in any
of the above circumstances, such contribution is exempted even if received by a person prohibited
under section 3.
Example 8: Whether foreign remittances received from a relative are to be treated as foreign
contribution as per FCRA, 2010?
Answer: No. As per Section 4(e) of FCRA, 2010 of FCRR, 2011, amounts received from relatives
are NOT foreign contribution even if received by a person prohibited to receive foreign contribution
under section 3. However, in terms of Rule 6 of FCRR, 2011, any person receiving foreign
contribution in excess of one lakh rupees or equivalent thereto in a financial year from any of his
relatives shall inform the Central Government 8 by uploading details electronically online in Form FC-
1 within thirty days from the date of receipt of such contribution.
(III) Restriction on acceptance of foreign hospitality (Section 6)
As per Section 6 of the Act, following categories of persons require prior permission of the Central
Government before accepting Foreign Hospitality, while visiting any country or territory outside India,:-

7 Substituted for "by uploading details electronically online" by the Foreign Contribution (Regulation) (Amendment)
Rules, 2020, w.e.f. 10-11-2020. Prior to its substitution said words was inserted by Foreign Contribution
(Regulation) Amendment Rules, 2019, w.e.f. 7-3-2019.
8 Amended vide the Foreign Contribution (Regulation) Amendment Rules, 2019 notified on 7th March, 2019

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4.14 CORPORATE AND ECONOMIC LAWS

Members of a Legislature
Office bearers of political parties
Judges
Government servants
Employees of any corporation or any other body owned or controlled by the Government.

Exception: It shall not be necessary to obtain any such permission for an emergent 9 medical aid
needed on account of sudden illness contracted during a visit outside India.
Intimation to CG in case of availing Foreign hospitality: But, where such foreign hospitality (in
connection with an emergent medical aid) has been received, the person receiving such hospitality
shall give an intimation to the Central Government as to the receipt of such hospitality within one
month from the date of receipt of such hospitality, and the source from which, and the manner in
which, such hospitality was received.
As per Rule 7 of Foreign Contribution (Regulation), Rules 2011, foreign hospitality may be received
by specified categories of persons in the following manner:
(1) Any person belonging to any of the categories specified in section 6 who wishes to avail of
foreign hospitality shall apply 10[to the Central Government in electronic form] to the
Central Government in prescribed Form for prior permission to accept such foreign
hospitality.
(2) Every application for acceptance of foreign hospitality shall be accompanied by an invitation
letter from the host or the host country, as the case may be, and administrative clearance of
the Ministry or department concerned in case of visits sponsored by a Ministry or department
of the Government.
(3) The application for grant of permission to accept foreign hospitality must reach the
appropriate authority ordinarily two weeks before the proposed date of onward journey.
(4) In case of emergent medical aid needed on account of sudden illness during a visit abroad,
the acceptance of foreign hospitality shall be required to be intimated to the Central
Government within 11One month of such receipt giving full details including the source,
approximate value in Indian Rupees, and the purpose for which and the manner in which it
was utilised.

9 Emergent means “in the process of coming into being or becoming prominent.” In all probability, the intention of
the legislature was to indicate an “emergency” which is something that arises unexpectedly.
10 Substituted for "electronically online to the Central Government" by the Foreign Contribution (Regulation)

(Amendment) Rules, 2020, w.e.f. 10-11-2020.


11the Foreign Contribution (Regulation) (Second Amendment) Rules, 2019 vide Notification dated 16th September, 2019

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.15

However, no such intimation is required if the value of such hospitality in emergent medical
aid is upto one lakh rupees or equivalent thereto.
Guidelines for consideration of proposals for acceptance of foreign hospitality under the
Foreign Contribution (Regulation) Act, 2010:
As per regulation 6 of the guidelines for consideration of proposals for acceptance of foreign
hospitality, the following cases need not be submitted to the Ministry of Home Affairs (MHA) for grant
of permission to accept foreign hospitality:-
(i) Where the entire expenditure on the proposed foreign visit is being met by the Central/ State
Government or any Central/State PSU etc.
(ii) Where the proposed foreign visit is being undertaken by a person in his/her personal capacity and
the entire expenditure thereon is being met by the person concerned.
(iii) Where the foreign hospitality is being provided by an Indian national living in a foreign country or
territory.
(iv) Cases involving acceptance of an assignment on salary, fee or remuneration etc.
(v) Cases involving funding offered by an agency/organization mentioned in Annexure-2.
(vi) Cases involving visits undertaken by the Members of an Indian Parliamentary delegation under
bilateral exchange.
(vii) Cases involving visits undertaken in pursuance of a bilateral agreement between the Government
of India and the Government of the country concerned, approved by the Ministry of Finance
(Department of Economics Affairs).
(viii) Cases involving long term/short term foreign training courses approved by the Ministry of
Personnel, Training and Public Grievances.
(IV) Prohibition to transfer foreign contribution to other person (Section 7)
No person who -
(a) is registered and granted a certificate or has obtained prior permission under this Act; and
(b) receives any foreign contribution,
shall transfer such foreign contribution to any other person. 12
Earlier, foreign contribution accepted with the permission of the Central Government could be
transferred to any other person who is registered under FCRA, 2010 or has obtained prior
permission. It can be seen that the legislature has placed a blanket prohibition on transfer of foreign
contribution received by any person to any other person. The intention is to prevent recipients of
foreign contribution acting as mere conduits or facilitating agents for obtaining foreign contributions.

12Inserted by the Foreign Contribution (Regulation) Amendment Act, 2020 (Act 33 of 2020) with effect from 28th
September 2020.

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4.16 CORPORATE AND ECONOMIC LAWS

(V) Restriction to utilize foreign contribution for administrative purpose (Section 8)


(1) Every person, who is registered and granted a certificate or given prior permission under this
Act and receives any foreign contribution, shall—
(a) utilise such contribution for the purposes for which the contribution has been received:
Any foreign contribution or any income arising out of it shall not be used for speculative
business;
The Central Government shall, by rules, specify the activities or business which shall be
construed as speculative business for the purpose of this section;
Speculative activities have been defined in Rule 4 of FCR, Rule 2011 as under:-
(i) any activity or investment that has an element of risk of appreciation or depreciation
of the original investment, linked to market forces, including investment in mutual funds
or in shares;
(ii) participation in any scheme that promises high returns like investment in chits or land
or similar assets not directly linked to the declared aims and objectives of the
organization or association.
Note: A debt-based secure investment shall not be treated as speculative investment.
(b) not defray as far as possible such sum, not exceeding twenty per cent of such contribution,
received in a financial year, to meet administrative expenses:
Administrative expenses exceeding twenty per cent of such contribution may be defrayed
with prior approval of the Central Government.
The Central Government may prescribe the elements which shall be included in the administrative
expenses and the manner in which the administrative expenses shall be calculated.
13Amounts that constitute Administrative Expenses
(i) salaries, wages, travel expenses or any remuneration realised by the Members of the
Executive Committee or Governing Council of the person;
(ii) all expenses towards hiring of personnel for management of the activities of the person and
salaries, wages or any kind of remuneration paid, including cost of travel, to such personnel;
(iii) all expenses related to consumables like electricity and water charges, telephone charges,
postal charges, repairs to premise(s) from where the organisation or Association is
functioning, stationery and printing charges transport and travel charges by the Members of
the Executive Committee or Governing Council and expenditure on office equipment;
(iv) cost of accounting for and administering funds;

13 Regulation - 5, Foreign Contribution (Regulation) Rules, 2011

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.17

(v) expenses towards running and maintenance of vehicles;


(vi) cost of writing and filing reports;
(vii) legal and professional charges; and
(viii) rent of premises, repairs to premises and expenses on other utilities:
Amounts not to be counted as administrative expenses:
1. Expenditure incurred on salaries or remuneration of personnel engaged in training or for
collection or analysis of field data of an association primarily engaged in research or training;
2. Expenses incurred directly in furtherance of the stated objectives of the welfare oriented
organisation such as salaries to doctors of hospital, salaries to teachers of school etc.;
(VI) Power of Central Government to prohibit receipt of foreign contribution, etc., in certain
cases (Section 9)
The Central Government shall be satisfied that the acceptance of foreign contribution by any person
or class of persons, as the case may be, or the acceptance of foreign hospitality by any person, is
likely to affect prejudicially—
(i) the sovereignty and integrity of India; or
(ii) public interest; or
(iii) freedom or fairness of election to any Legislature; or
(iv) friendly relations with any foreign State; or
(v) harmony between religious, racial, social, linguistic or regional groups, castes or
communities.
Then, the Central Government may—
(a) prohibit any person or organisation (not specified in section 3), from accepting any foreign
contribution;
(b) require any person or class of persons, (not specified in section 6), to obtain prior permission
of the Central Government before accepting any foreign hospitality;
(c) require any person or class of persons (not specified in section 11), to furnish intimation as
to the amount of any foreign contribution received by such person or class of persons as the
case may be, and the source from which and the manner in which such contribution was
received and the purpose for which and the manner in which such foreign contribution was
utilised;
(d) require any person or class of persons specified in that Section 11(1) to obtain prior
permission of the Central Government before accepting any foreign contribution;

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4.18 CORPORATE AND ECONOMIC LAWS

(e) require any person or class of persons, (not specified in section 6), to furnish intimation, as
to the receipt of any foreign hospitality, the source from which and the manner in which such
hospitality was received.
(VII) Power to prohibit payment of currency received in contravention of the Act (Section 10)
Where the Central Government is satisfied, after making such inquiry, that any person has in his
custody or control any-
• article or
• currency or
• security,
whether Indian or foreign, which has been accepted by such person in contravention of any of the
provisions of this Act, it may, by order in writing prohibit such person from-paying,
• delivering,
• transferring
• or otherwise dealing with,
• such article or currency or security.
A copy of such order shall be served upon the person so prohibited as per Rule 8 of the FCR, Rule
2011, and thereupon the provisions of section 7 of the Unlawful Activities (Prevention) Act, 1967
shall, apply to, or in relation to, such article or currency or security and references in the said sub-
sections to moneys, securities or credits shall be taken as references to such article or currency or
security.
Action in respect of article, currency or security received in contravention of the Act.
(1) The Central Government may issue a prohibitory order for contravention of the Act in
respect of any article, currency or securities.
(2) The prohibitory order issued shall be served on the person concerned in the following
manner -
(a) by delivering or tendering it to that person or to his duly authorised agent; or
(b) by sending it to him by 'registered post with acknowledgement due' or 'speed
post' to the address of his last known place of residence or the place where he
carries on, or is known to have last carried on, business or the place where he
personally works for gain or is known to have last worked for gain and, in case
the person is an organisation or an association, to the last known address of the
office of such organisation or association; or

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.19

(c) if it cannot be served in any of the manner aforesaid, by affixing it on the outer
door or some other conspicuous part of the premises in which that person
resides or carries on, or is known to have last carried on, business or personally
works for gain, or is known to have last worked personally for gain and, in case
the person is an organisation or an association, on the outer door or some other
conspicuous part of the premises in which the office of that organisation or
association is located, or is known to have been last located, and the written
report whereof should be witnessed by at least two persons.

4. REGISTRATION
The provisions related to registration of persons for acceptance of foreign contribution, grant of
certificate, its suspension, cancellation and renewal are dealt in chapter III of the FCRA. It covers
sections 11 to 16 of the Act.
There are two modes of accepting the foreign contribution according to FCRA, 2010-

Mode I
• By Registration (Section 11(1))
Mode II
• Through Prior Permission (Section 11(2))

(I) Registration of certain persons with Central Government (Section 11)


(1) No person having a definite cultural, economic, educational, religious or social
programme- shall accept foreign contribution unless such person obtains a certificate of registration
from the Central Government.
However,
• any association registered with the Central Government under section 6, or
• granted prior permission under that section of the Foreign Contribution (Regulation) Act,
1976, as it stood immediately before the commencement of this Act,
shall be deemed to have been registered or granted prior permission, as the case may be, under
this Act and such registration shall be valid for a period of five years from the date on which this
section comes into force.
(2) Acceptance of foreign contribution after obtaining prior permission of the Central
Government: Every person may, if it is not registered with the Central Government, accept any
foreign contribution only after obtaining the prior permission of the Central Government and such
prior permission shall be valid for the specific purpose for which it is obtained and from the specific
source.

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4.20 CORPORATE AND ECONOMIC LAWS

Forms for Application under Section 11 14: An application for certificate of registration by a person
under Section 11(1) for acceptance of foreign contribution shall be made [in electronic form] in Form
FC-3A with an affidavit executed by each office bearer and key functionary and member in Proforma
'AA'.
An application for obtaining prior permission by a person under Section 11(2), for acceptance of
foreign contribution, shall be made [in electronic form] in Form FC-3B [with an affidavit executed by
each office bearer and key functionary and member in Proforma 'AA' appended to these rules].
Any person making an application for registration shall have an FCRA Account.
If the Central Government, on the basis of any information or report, and after holding a summary
inquiry, has reason to believe that a person who has been granted prior permission has contravened
any of the provisions of this Act, it may, pending any further inquiry, direct that such person shall not
utilise the unutilised foreign contribution or receive the remaining portion of foreign contribution
which has not been received or, as the case may be, any additional foreign contribution, without
prior approval of the Central Government. 15
Further, if the person has been found guilty of violation of any of the provisions of this Act or the
Foreign Contribution (Regulation) Act, 1976, the unutilised or unreceived amount of foreign
contribution shall not be utilised or received, as the case may be, without the prior approval of the
Central Government.
(3) The Central Government may, by notification in the Official Gazette, specify—
(i) the person or class of persons who shall obtain its prior permission before accepting the
foreign contribution; or
(ii) the area or areas in which the foreign contribution shall be accepted and utilised with the prior
permission of the Central Government; or
(iii) the purpose or purposes for which the foreign contribution shall be utilised with the prior
permission of the Central Government; or
(iv) the source or sources from which the foreign contribution shall be accepted with the prior
permission of the Central Government.
The person may open one or more accounts in one or more banks for the purpose of utilising the
foreign contribution after it has been received and, in all such cases, intimation [in electronic
form] in Form [FC-6D] shall be furnished to the Secretary, Ministry of Home Affairs, New Delhi
within fifteen days of the opening of any account.
Example 9: Can a private limited company or a partnership firm get registration or prior permission
under FCRA, 2010?

14 Regulation - 9, Foreign Contribution (Regulation) Rules, 2011


15Inserted by the Foreign Contribution (Regulation) Amendment Act, 2020 (Act 33 of 2020) with effect from 28th
September 2020

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.21

Answer: Yes, a private limited company too may seek prior permission/registration for receiving
foreign funds in case they wish to do some charitable work at some point of time.
Example 10: Whether an individual or a Hindu Undivided Family (HUF) can be given registration
or prior permission to accept foreign contribution in terms of section 11 of FCRA, 2010?
Answer: Yes. The definition of the ‘person’ in the Foreign Contribution (Regulation) Act, 2010
includes any individual and ‘Hindu Undivided Family’ among others. As such an Individual or an HUF
is also eligible to apply for prior permission to accept foreign contribution.
Example 11: Whether organisations under Central/State Governments are required to obtain
registration or prior permission under FCRA, 2010 for accepting foreign contribution?
Answer: Yes. However, all bodies constituted or established by or under a Central Act or a State
Act requiring to have their accounts compulsorily audited by Comptroller & Auditor General of India
are exempted from the operations of all the provisions of FCRA, 2010.
(II) Grant of certificate of registration (Section 12)
1. Conditions to be met for the grant of registration and prior permission
(1) An application by a person, referred to in section 11 for grant of certificate or giving prior
permission, shall be made to the Central Government in such form and manner and along with such
fee, as may be prescribed under Rule 9 of the Foreign Contribution (Regulation) Rules, 2011.
In terms of Section 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-
i. is not fictitious or benami;
ii. 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;
iii. has not been prosecuted or convicted for creating communal tension or disharmony in
any specified district or any other part of the country;
iv. has not been found guilty of diversion or mis-utilisation of its funds;
v. is not engaged or likely to engage in propagation of sedition or advocate violent
methods to achieve its ends;
vi. is not likely to use the foreign contribution for personal gains or divert it for undesirable
purposes;
vii. has not contravened any of the provisions of this Act;
viii. has not been prohibited from accepting foreign contribution;

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4.22 CORPORATE AND ECONOMIC LAWS

(b) the person making an application for registration under sub-section (1) has undertaken
reasonable activity in its chosen field for the benefit of the society for which the foreign
contribution is proposed to be utilised;
(c) the person making an application for giving prior permission under sub-section (1) has
prepared a reasonable project for the benefit of the society for which the foreign contribution
is proposed to be utilised;
(d the person being an individual, such individual has neither been convicted under any law for
the time being in force nor any prosecution for any offence is pending against him.
(e) 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 any prosecution for any offence
is pending against him.
(f) the acceptance of foreign contribution by the association/ person is not likely to affect
prejudicially -
i. the sovereignty and integrity of India;
ii. the security, strategic, scientific or economic interest of the State;
iii. the public interest;
iv. freedom or fairness of election to any Legislature;
v. friendly relation with any foreign State;
vi. harmony between religious, racial, social, linguistic, regional groups, castes or
communities.
(g) the acceptance of foreign contribution-
i. shall not lead to incitement of an offence;
ii. shall not endanger the life or physical safety of any person.
(2) Procedure for grant of certificate of Registration

Application to be made to the Central Government (CG)

CG on receipt of duly filled application, may register such


person within 90 days and grant a certificate/give prior
permission

In case of refusal, CG shall record the reasons and furnish the


copy to the applicant

Certificate granted shall be valid for 5 years and prior


permission valid for specific purpose/specific amount of
Foreign contribution

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.23

(1) Application for Registration/ Prior Permission: An application by a person, referred to in


section 11 for grant of certificate or giving prior permission, shall be made to the Central
Government in such form and manner and along with such fee, as may be prescribed.
Every person who makes an application under sub-section (1) shall be required to open
"FCRA Account" in the manner specified in section 17 and mention details of such account
in his application. 16
(2) Rejection of Application: On receipt of an application the Central Government shall, by an
order, if the application is not in the prescribed form or does not contain any of the particulars
specified in that form, reject the application.
(3) Grant of Certificate/Prior Permission: If on receipt of an application for grant of certificate
or giving prior permission and after making such inquiry as the Central Government deems
fit, it is of the opinion that the conditions specified in sub-section (4) are satisfied, it may,
ordinarily within ninety days from the date of receipt of application, register such person and
grant him a certificate or give him prior permission, as the case may be, subject to such terms
and conditions as may be prescribed.
If the Central Government does not grant, within the said period of ninety days, a certificate
or give prior permission, it shall communicate the reasons therefor to the applicant.
Note: A person shall not be eligible for grant of certificate or giving of prior permission, if his
certificate has been suspended and such suspension of certificate continues on the date of
making application.
(4) Refusal to grant certificate/Prior Permission and furnishing of reasons therefor by
Central Government: Where the Central Government refuses the grant of certificate or does
not give prior permission, it shall record in its order the reasons therefor and furnish a copy
thereof to the applicant.
However, the Central Government may not communicate the reasons for refusal for grant of
certificate or for not giving prior permission to the applicant under this section in cases where
there is no obligation to give any information or documents or records or papers under the
Right to Information Act, 2005.
(5) Validity of Certificate: The certificate granted shall be valid for a period of five years from
the date of its issue and the prior permission shall be valid for the specific purpose or specific
amount of foreign contribution proposed to be received, as the case may be.

16 Section 11 (1A) inserted by the Foreign Contribution (Regulation) Amendment Act, 2020 (Act 33 of 2020) with
effect from 28th September 2020.

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4.24 CORPORATE AND ECONOMIC LAWS

No person shall prefer a second application for registration or prior permission within a period of six
months after submitting an application either for the grant of prior permission for the same project
or for registration.
17Permission for receipt of foreign contribution in application for obtaining prior permission.
As per Rule 9A of the Foreign Contribution (Regulation) Rules, 2011 If the value of foreign
contribution on the date of final disposal of an application for obtaining prior permission is
over rupees one crore, the Central Government may permit receipt of foreign contribution in
such instalments, as it may deem fit.
Provided that the second and subsequent instalment shall be released after submission of
proof of utilisation of seventy five per cent. of the foreign contribution received in the
previous instalment and after field inquiry of the utilisation of foreign contribution.
Power of Central Government to require Aadhaar number, etc., as identification
document: 18[Section 12A]
Notwithstanding anything contained in this Act, the Central Government may require that any person
who seeks
a. prior permission or prior approval under section 11, or
b. makes an application for grant of certificate under section 12, or,
c. as the case may be, for renewal of certificate under section 16,
shall provide an identification document.
For citizens of India, the Aadhaar number of all its office bearers or Directors or other key
functionaries, by whatever name called, issued under the Aadhaar (Targeted Delivery of Financial
and Other Subsidies, Benefits and Services) Act, 2016 shall be provided.
In case of a foreigner, a copy of the Passport or Overseas Citizen of India (OCI) Card shall be
provided,
(III) Suspension of certificate (Section 13)
(1) Circumstances when certificate may be suspended: The Central Government while
considering the cancellation of a certificate on any of the grounds mentioned in Section 14(1)
shall be satisfied that, it is necessary to suspend the certificate.
Period of suspension of certificate: Then, it may, by order in writing, suspend the certificate
for such period not exceeding one hundred and eighty days as may be specified in the order.

17 Inserted by the Foreign Contribution (Regulation) (Amendment) Rules, 2020, w.e.f. 10-11-2020.
18 New Section 12A inserted by the Foreign Contribution (Regulation) Amendment Act, 2020 (Act 33 of 2020) with
effect from 28th September 2020.

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.25

(2) Effect of suspension: Every person whose certificate has been suspended shall—
(a) not receive any foreign contribution during the period of suspension of certificate.
However, the Central Government may, on an application made by such person, if it
considers appropriate, allow receipt of any foreign contribution by such person on such
terms and conditions as it may specify;
(b) Not utilise, in the prescribed manner, the foreign contribution in his custody without
the prior approval of the Central Government.
Rule 14 of FCR, Rules 2011 defines the extent of amount that can be utilised in case of
suspension of the certificate of registration. The unspent amount that can be utilised in case
of suspension of a certificate of registration may be as under:—
(a) In case the certificate of registration is suspended under sub-section (1) of section 13
of the Act, up to twenty-five per cent of the unutilised amount may be spent, with the
prior approval of the Central Government, for the declared aims and objects for which
the foreign contribution was received.
(b) The remaining seventy-five per cent of the unutilised foreign contribution shall be
utilised only after revocation of suspension of the certificate of registration.
(IV) Cancellation of certificate (Section 14)
(1) Grounds for Cancellation of certificate
The Central Government may, by an order, cancel the certificate if the holder of the certificate
has—
(a) made an incorrect or false statement in, or in relation to, the application for the grant
of registration or renewal thereof; or
(b) violated any of the terms and conditions of the certificate or renewal thereof; or
(c) violated any of the provisions of this Act or rules or order made thereunder; or
(d) 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.
(e) in the opinion of the Central Government, it is necessary in the public interest to cancel
the certificate; or
(2) No order of cancellation of certificate under this section shall be made unless the person
concerned has been given a reasonable opportunity of being heard.
(3) Cooling period of three years: Any person whose certificate has been cancelled under this
section shall not be eligible for registration or grant of prior permission for a period of three
years from the date of cancellation of such certificate.

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4.26 CORPORATE AND ECONOMIC LAWS

GROUNDS FOR CANCELLATION OF CERTIFICATE BY CG -

Violation of Not engaged in Violation of


Incorrect or any of the It is any reasonable any of the
false terms and necessary activity for provisions
statement in conditions in the public two of this Act
application of the interest consecutive /rules /
certificate years order

(V) Surrender of certificate (Section 14A) 19


(1) A request may be made to the Central Government for surrender of certificate.
(2) The Central Government shall make such inquiry as it deems fit, and satisfy itself that such
person has not contravened any of the provisions of this Act, and the management of foreign
contribution and asset, if any, created out of such contribution has been vested in the
authority as provided in sub-section (1) of section 15.
(3) Thereafter the Central Government may permit any person to surrender the certificate
granted under this Act.
20The validity of certificate surrendered under section 14A of the Act shall be deemed to have expired
on the date of acceptance of the request by the Central Government.
21Voluntary surrender of certificate.
Every person who has been granted certificate of registration under section 12 of the Act
may make an application in electronic form in Form FC-7 for surrender of the certificate of
registration in terms of section 14A of the Act.
(VI) Management of foreign contribution of person whose certificate has been cancelled or
surrendered (Section 15)
(1) Vesting of custody: The foreign contribution and assets created out of the foreign
contribution in the custody of every person whose certificate has been cancelled or
surrendered shall vest in banking authority concerned till the Central Government issues
further directions in the matter as per Rule 15 of the FCR Rules, 2011.

19 Section 14A inserted by the Foreign Contribution (Regulation) Amendment Act, 2020 (Act 33 of 2020) with effect
from 28th September 2020.
20 Regulation - 10, Foreign Contribution (Regulation) Rules, 2011
21 Regulation - 15A, Foreign Contribution (Regulation) Rules, 2011 inserted by the Foreign Contribution (Regulation)

(Amendment) Rules, 2020, w.e.f. 10-11-2020.

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.27

Custody of foreign contribution in respect of a person whose certificate has been


cancelled.
If the certificate of registration of a person who has opened an FCRA Account under section
17 is cancelled, the amount of foreign contribution lying unutilised in that Account shall vest
with the prescribed authority under the Act.
(2) Role of Authority: Such an authority may, if it considers necessary and in public interest
manage the activities of the person, as the Central Government may direct and such authority
may utilise the foreign contribution or dispose of the assets created out of it in case adequate
funds are not available for running such activity.
(3) Return of vested Foreign Contribution & assets: The authority shall return the foreign
contribution and the assets vested upon it to the person, if such person is subsequently
registered under this Act.
(VII) Renewal of certificate (Section 16)
(1) Period for applying for renewal of certificate: Every person who has been granted a
certificate, shall have such certificate renewed within six months before the expiry of the
period of the certificate.
(2) 22Filing of an application to CG: An application for renewal of the certificate of
registration shall be made to the Central Government in electronic form in Form FC-3C
accompanied with an affidavit executed by each office bearer, key functionary and
member in Proforma 'AA' appended to these rules within six months [before] the date
of expiry of the certificate of registration.]
Every person seeking renewal of the certificate of registration under section 16 of the Act
shall open an FCRA Account and mention details of the account in his application for renewal
of registration.
An application made for renewal of the certificate of registration shall be accompanied by a
fee of rupees five thousand only, which shall be paid through payment gateway specified by
the Central Government.
No person whose certificate of registration has ceased to exist shall either receive or utilise
the foreign contribution until the certificate is renewed.
If no application for renewal of registration is received or the application is not accompanied
by requisite fee before the expiry of the validity of the certificate of registration, the validity of
the certificate of registration shall be deemed to have ceased from the date of completion of
the period of five years from the date of the grant of certificate of registration.
Note 1: A certificate of registration granted on the 1st January, 2012 shall be valid till the 31st
December, 2016 and a request for renewal of certificate of registration shall be submitted in

22 Regulation - 12, Foreign Contribution (Regulation) Rules, 2011

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4.28 CORPORATE AND ECONOMIC LAWS

electronic form accompanied by requisite fee after the 30th June, 2016 and within the 31st
December, 2016.
Note 2: If no application is received or is not accompanied by renewal fee, the validity of the
certificate of registration issued on the 1st January 2012 shall be deemed to have ceased
after the 31st December, 2016 and the applicant shall neither receive nor utilise the foreign
contribution until the certificate of registration is renewed.
The amount of foreign contribution lying unutilised in the FCRA Account and utilisation
account of a person whose certificate of registration is deemed to have ceased under sub-
rule (6) and assets, if any, created out of the foreign contribution, shall vest with the
prescribed authority under the Act until the certificate is renewed or fresh registration is
granted by the Central Government.
If the validity of the certificate of registration of a person has ceased in accordance with the
provisions of these rules, a fresh request for the grant of a certificate of registration may be
made by the person to the Central Government as per the provisions of rule 9.
Example 12: A certificate of registration was granted to an NGO on the 1st January, 2014.
A request for renewal of the certificate was received by the Central Government, by the 30th
June, 2018. But the request was not accompanied by the renewal fee. Comment on the
validity of the registration certificate issued on 1st January 2014.
Answer: A certificate of registration granted on the 1st January, 2014 shall be valid till the
31st December, 2018. A request for renewal of the registration certificate shall reach the
Central Government, accompanied by the requisite fee, by the 30th June, 2018. In the instant
case although an application has been made it was not accompanied by the renewal fee, the
validity of the registration certificate issued on the 1st January 2014 shall be deemed to have
lapsed with effect from the close of the day on 31st December, 2018.
(3) Period for renewal of certificate: The Central Government shall renew the certificate,
ordinarily within ninety days from the date of receipt of application for renewal of certificate
subject to such terms and conditions as it may deem fit and grant a certificate of renewal for
a period of five years.
The Central Government may, before renewing the certificate, make such inquiry, as it deems
fit, to satisfy itself that such person has fulfilled all conditions specified in sub-section (4) of
section 12. (Discussed earlier). 23
However, in case the Central Government does not renew the certificate within the said period
of ninety days, it shall communicate the reasons therefor to the applicant.
The Central Government may refuse to renew the certificate in case where a person has
violated any of the provisions of this Act or rules made thereunder.

23Proviso to Section 16 (1) introduced by the Foreign Contribution (Regulation) Amendment Act, 2020 (Act 33 of
2020) with effect from 28th September 2020.

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.29

(4) Procedure where certificate has lapsed or ceased to be valid: 24 If the validity of the
certificate of registration of a person has ceased in accordance with the provisions of Rule
12 a fresh request for the grant of a certificate of registration may be made by the person to
the Central Government as per the provisions of rule 9 (Discussed earlier).
In case a person provides sufficient grounds, in writing, explaining the reasons for not
submitting the certificate of registration for renewal within the stipulated time, his application
may be accepted for consideration along with the requisite fee and with late fee of`5000/-,
but not later than one year after the expiry of the original certificate of registration.

5. ACCOUNTS, INTIMATION, AUDIT AND DISPOSAL OF


ASSETS, ETC.
Chapter IV of the Act deals with incidental and consequential matters such as opening of a
designated “FCRA Account, maintenance of accounts, provision of information and disposal of
assets. It covers sections 17 to 22 of the Act.
(I) Foreign contribution through scheduled bank (Section 17)
Every person who has been granted certificate or prior permission under section 12 shall receive
foreign contribution only in an account designated as "FCRA Account" by the bank,
Such “FCRA Account” shall be opened by him for the purpose of remittances of foreign contribution
in such branch of the State Bank of India at New Delhi, as the Central Government may, by
notification, specify in this behalf:
Provided that such person may also open another "FCRA Account" in a scheduled bank of his choice
for the purpose of keeping or utilising the foreign contribution which has been received from his
"FCRA Account" in the specified branch of State Bank of India at New Delhi:
Provided further that such person may also open one or more accounts in one or more scheduled
banks of his choice to which he may transfer for utilising any foreign contribution received by him in
his "FCRA Account" in the specified branch of the State Bank of India at New Delhi or kept by him
in another "FCRA Account" in a scheduled bank of his choice:
No funds other than foreign contribution shall be received or deposited in any such account.
The specified branch of the State Bank of India at New Delhi or the branch of the scheduled bank
where the person referred to in sub-section (1) has opened his foreign contribution account or the
authorised person in foreign exchange, shall report to such authority as may be specified, -
(a) the prescribed amount of foreign remittance;
(b) the source and manner in which the foreign remittance was received; and

24 Sub Rules (7) and (8) of Rule 12 of the Foreign Contribution (Regulation) Rules, 2011.

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4.30 CORPORATE AND ECONOMIC LAWS

(c) other particulars,


in such form and manner as may be prescribed.
Reporting by banks of receipt of foreign contribution. 25The bank shall report to the Central
Government within forty-eight hours any transaction in respect of receipt or utilisation of any foreign
contribution by any person whether or not such person is registered or granted prior permission
under the Act.
The aim of the new Section 17, substituted by the FCR Amendment Act, 2020, appears to be to
ensure that all foreign contribution received into the country is routed through the State Bank of India
at New Delhi. The recipient may also open other accounts with scheduled banks of his choice for
operational convenience. Initial receipt shall be into the FCRA Account with designated branch of
State Bank of India, New Delhi. Later the amount may be transferred to another account with
scheduled bank of choice. Further transfers to “other” accounts with Scheduled banks of choice for
utilisation is also permitted. This somewhat cumbersome procedure would, apparently, ensure
tighter monitoring both at source as well as destination of the Foreign Contribution.
Example 13: Can foreign contribution be mixed with local receipts?
Answer: No. Foreign contribution cannot be deposited or utilised from the bank account being used
for domestic funds.
(II) Intimation (Section 18)
Every person who has been granted a certificate or given prior approval shall give an intimation to the
Central Government, and such other authority as may be specified by the Central Government.

amount
source

manner

CG shall be intimated by every person of the AMOUNT such foreign contribution received,the SOURCE
from which and the MANNER in which such foreign contribution was received and the PURPOSES for
which, and the MANNER in which such foreign contribution was utilised by him.

Every person receiving foreign contribution shall submit a copy of a statement with the particulars
of foreign contribution received duly certified by officer of the bank or authorised person in foreign
exchange and furnish the same to the Central Government along with the intimation.

25 Rule 16 of the Foreign Contribution (Regulation) Rules, 2011.

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.31

26Intimation of foreign contribution by the recipient.


(1) Every person who receives foreign contribution under the Act, shall submit a signed
or digitally signed report in electronic form in Form FC-4 with scanned copies of
income and expenditure statement, receipt and payment account and balance sheet for
every financial year beginning on the 1st day of April within nine months of the closure
of the financial year.
(2) The annual return in Form 2 FC-4 shall reflect the foreign contribution received in the
exclusive bank account and include the details in respect of the funds transferred to
other bank accounts for utilisation.
(3) If the foreign contribution relates only to articles, the intimation shall be submitted in
Form FC-1.
(4) If the foreign contribution relates to foreign securities, the intimation shall be
submitted in Form FC-1.
(5) Every report submitted under sub-rules (2) to (4) shall be duly certified by a chartered
accountant.
(6) Every such return in Form FC-4 shall also be accompanied by a copy of a statement of
account from the bank where the exclusive foreign contribution account is maintained
by the person, duly certified by an officer of such bank.
(7) The accounting statements referred to above in the preceding sub-rule shall be
preserved by the person for a period of six years.
(8) A 'NIL' report shall be furnished even if no foreign contribution is received during a
financial year:
Provided that where foreign contribution has not been received or utilised during a financial
year, it shall not be required to enclose certificate from Chartered Accountant or income and
expenditure statement or receipt and payment account or balance sheet with Form FC-4.
(III) Maintenance of accounts (Section 19)
Every person who has been granted a certificate or given prior approval under this Act shall maintain,
in such form and manner as may be prescribed,—
(a) an account of any foreign contribution received by him; and
(b) a record as to the manner in which such contribution has been utilised by him.

26Regulation - 17, Foreign Contribution (Regulation) Rules, 2011, amended through the Foreign Contribution
(Regulation) (Amendment) Rules, 2020, w.e.f. 10-11-2020.

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4.32 CORPORATE AND ECONOMIC LAWS

Rule 11 of FCR, Rule 2011 states that every person who has been granted registration or prior
permission under section 12 shall maintain a separate set of accounts and records, exclusively, for
the foreign contribution received and utilised.
(IV) Audit of accounts (Section 20)
(1) Where any person who has been granted a certificate or given prior permission,
a. fails to furnish any intimation under this Act, or
b. the intimation so furnished is not in accordance with law or
c. if, after inspection of such intimation, the Central Government has any reasonable
cause to believe that any provision of this Act has been, or is being, contravened,
the Central Government may-
• by general or special order, authorise such Gazetted Officer, holding a Group A post
under the Central Government or any other officer or authority or organisation, as it
may think fit.
• to audit any books of account kept or maintained by such person.
(2) Every such officer shall have the right to enter in or upon any premises at any reasonable
hour, before sunset and after sunrise, for the purpose of auditing the said books of account.
(3) Any information obtained from such audit shall be kept confidential and shall not be disclosed
except for the purposes of this Act.
(V) Intimation by candidate for election (Section 21)
Every candidate for election, who had received any foreign contribution, at any time within one
hundred and eighty days immediately preceding the date on which he is duly nominated as such
candidate, shall give, within such time and in such manner as may be prescribed, an intimation to
the Central Government or prescribed authority or both as to the amount of foreign contribution
received by him, the source from which, and the manner in which, such foreign contribution was
received and the purposes for which and the manner in which such foreign contribution was utilised
by him.
Foreign contribution received by a candidate for election
As per Regulation 18 of FCR, Rule 2011, foreign contribution received by a candidate for election,
shall be furnished in Form FC-1 in electronic form within forty-five days from the date on which he
is duly nominated as a candidate for election.
(VI) Disposal of assets created out of foreign contribution (Section 22)
Where any person who was permitted to accept foreign contribution under this Act-

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.33

(a) ceases to exist or has become defunct – in this case all the assets of such person shall be
disposed of in accordance with the provisions contained in any law for the time being in force
under which the person was registered or incorporated, and
(b) in the absence of any such law- the Central Government may, having regard to the nature
of assets created out of foreign contribution received under this Act, by notification, specify
that all such assets shall be disposed of by such authority, in such manner and procedure as
may be prescribed.

6. ADJUDICATION
Chapter VI of the Act deals with Adjudication. It covers sections 28 to 30 of the Act.
Confiscation of article or currency or security obtained in contravention of the Act
(Section 28)
Any article or currency or security which is seized under the Act shall be liable to confiscation if such
article or currency or security has been adjudged under section 29 to have been received or obtained
in contravention of this Act.
Adjudication of confiscation (Section 29)
(1) Any confiscation referred to in section 28 may be adjudged—
(a ) without limit, by the Court of Session within the local limits of whose jurisdiction the
seizure was made; and
(b) subject to such limits as may be prescribed, by such officer, not below the rank of
an Assistant Sessions Judge, as the Central Government may, by notification in the
Official Gazette, specify in this behalf.
As per Rule 19 of FCR, Rule 2011 an officer referred to above in clause 29(1)(b), may adjudge
confiscation in relation to any article or currency seized under the Act, if the value of such
article or the amount of such currency seized does not exceed Rs. 10,00,000 (Rupees Ten
lakh only).
(2) When an adjudication is concluded by the Court of Session or Assistant Sessions Judge, as
the case may be, the Sessions Judge or Assistant Sessions Judge may make such order as
he thinks fit for disposal of seized article or currency or security, as the case may be by
a. confiscation of seized article or currency or security which has been used for the
commission of any offence under this Act, or
b. delivery to any person claiming to be entitled to possession thereof or otherwise.

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4.34 CORPORATE AND ECONOMIC LAWS

Procedure for confiscation (Section 30)


No order of adjudication of confiscation shall be made unless a reasonable opportunity of making a
representation against such confiscation has been given to the person from whom any article or
currency or security has been seized.

7. APPEAL & REVISION


Chapter VIII of the Act deals with Appeal & Revision. It covers sections 31 and 32 of the Act.
Appeal (Section 31)
(1) Any person aggrieved by any order made under Section 29 may prefer an appeal as follows:

Where an order is passed by- Appellate Authority


the Court of Session The High Court to which such Court is subordinate
any officer specified section 29(1)(b) The Court of Session within the local limits of whose
jurisdiction such order of adjudication of confiscation
was made
Appeal is to be preferred within one month from the date of communication to such person of
the order.
However, the appellate court may, allow such appeal to be preferred within a further period of
one month, but not thereafter.

(2) Any organisation referred to in section 3(1)(f), or any person or association referred to in
section 6 or section 9, aggrieved by an order made in pursuance of section 5 or by an order
of the Central Government refusing to give permission under this Act, or by any order made
by the Central Government under section 12(2) or 12(4), or section 14(1), as the case may
be, may,
• prefer an appeal against such order to the High Court within the local limits of whose
jurisdiction the appellant ordinarily resides or carries on business or personally works
for gain, or, where the appellant is an organisation or association, the principal office
of such organisation or association is located-
• within sixty days from the date of such order.
The above appellate remedy is available to organisations
a. that have been adjudged to be Political in nature under Section 5;
b. that have been refused grant of registration; or
c. whose registration has been cancelled
by Central government.

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.35

Revision of orders by Central Government (Section 32)


(1) The Central Government may either-
• of its own motion or
• on an application for revision by the person registered under this Act,
call for and examine the record of any proceeding under this Act in which any such order has
been passed by it and may make such inquiry or cause such inquiry to be made and, subject
to the provisions of this Act, may pass such order thereon as it thinks fit.
(2) Time limit for power of revision: The Central Government shall not of its own motion revise
any order under this section if the order has been made more than one year previously.
(3) Time limit for making application for revision: In the case of an application for revision by
a person registered under the act, the application must be made within one year from the
date on which the order in question was communicated to him or the date on which he
otherwise came to know of it, whichever is earlier.
If the Central Government is satisfied that such person was prevented by sufficient cause
from making the application within that period it may admit an application made after the
expiry of that period.
(4) The Central Government shall revise any order where an appeal against the order lies but
has not been made until the time within which such appeal may be made has expired or such
person has waived his right of appeal or an appeal has been filed under this Act.
(5) Every application by such person for revision under this section shall be accompanied by
such fee, as may be prescribed.
An order by the Central Government declining to interfere shall, for the purposes of this
section, be deemed not to be an order prejudicial to such person. This means that the
applicant has no right of appeal against the declining to interfere.
As per Regulation 20 of the FCR Rule 2011, an application for revision of an order passed by the
competent authority under section 32 of the Act shall be made to the Secretary, Ministry of Home
Affairs, Government of India, New Delhi on a plain paper and it shall be accompanied by a fee of
rupees three thousand only, which shall be paid through the payment gateway specified by the
Central Government.

8. OFFENCES AND PENALTIES


Chapter VII of the Act deals with Offences & Penalties. It covers sections 33 to 41 of the Act. This
chapter lists out various types of offences committed and prescribes the penalties levied for the
same.

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4.36 CORPORATE AND ECONOMIC LAWS

Types of offences (Sections 33-38)


Section Type of offence Penalty
Any person who knowingly— shall, on conviction by a court, be
(a) gives false intimation under liable to imprisonment for a term
section 9(c) or section 18; or which may extend to six months or
(b) seeks prior permission or with fine or with both.
33
registration by means of fraud,
false representation or
concealment of material fact,
Any person, on whom any prohibitory • shall be punished with
34 order has been served under section imprisonment for a term which
10, pays, delivers, transfers or otherwise may extend to three years, or
deals with, any article or currency or with fine, or with both.
security, whether Indian or foreign, in • the court trying such
contravention of such prohibitory order. contravention may also impose
on the person convicted an
additional fine equivalent to the
market value of the article or the
amount of the currency or
security in respect of which the
prohibitory order has been
contravened by him or such part
thereof as the court may deem fit.
Whoever accepts, or assists any shall be punished with imprisonment
person, political party or organisation for a term which may extend to five
in accepting, any foreign contribution or years, or with fine, or with both.
any currency or security from a foreign
35
source, in contravention of any provision
of this Act or any rule or order made
thereunder
The court trying a person, who, in impose on such person a fine not
relation to any article or currency or exceeding five times the value of
security, whether Indian or foreign, does the article or currency or security
or omits to do any act which act or or one thousand rupees, whichever
omission would render such article or is more, if such article or currency or
currency or security liable to security is not available for
36 confiscation under this Act, may, in confiscation, and the fine so imposed
the event of the conviction of such shall be in addition to any other fine
person for the act or omission aforesaid which may be imposed on such
person under this Act.
Whoever fails to comply with any shall be punished with imprisonment
37 provision of this Act for which no for a term which may extend to one

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.37

separate penalty has been provided in year, or with fine or with both.
this Act
Second Conviction or Repeat shall not accept any foreign
38 Offender: Any person having been contribution for a period of five years
convicted of any offence under from the date of the subsequent
section 35 or section 37, insofar as conviction.
such offence relates to the acceptance
or utilisation of foreign contribution, is
again convicted of such offence

Offences by companies (Section 39)


Where an offence under this Act or any rule or order made thereunder has been committed by a company-
• every person who, at the time the offence was committed, was in charge of, and
• was responsible to, the company for the conduct of the business of the company,
• as well as the company,
shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished
accordingly.
Exemption: However, such person shall not be liable to any punishment if he proves that the offence was
committed –
• without his knowledge, or
• he had exercised all due diligence to prevent the commission of such offence.
Where an offence under this Act or any rule or order made thereunder has been committed by a
company and it is proved that the offence has been committed with the consent or connivance of, or
is attributable to any neglect on the part of, any director, manager, secretary or other officer of the
company, such director, manager, secretary or other officer shall also be deemed to be guilty of that
offence and shall be liable to be proceeded against and punished accordingly.
Explanation.—For the purposes of this section,—
(a) “company” means any body corporate and includes a firm, society, trade union or other
association of individuals; and
(b) “director”, in relation to a firm, society, trade union or other association of individuals, means
a partner in the firm or a member of the governing body of such society, trade union or other
association of individuals.
Bar on prosecution of offences under the Act (Section 40)
No court shall take cognizance of any offence under this Act, except with the previous sanction of
the Central Government or any officer authorised by that Government in this behalf.

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4.38 CORPORATE AND ECONOMIC LAWS

Compounding of certain offences (Section 41)


• any offence punishable under this Act (whether committed by an individual or association or
any officer or employee thereof), not being an offence punishable with imprisonment only,
may, before the institution of any prosecution, be compounded by such officers or authorities
and for such sums as the Central Government may, by notification in the Official Gazette,
specify.
• Compounding of offences as stated above, shall not apply to an offence committed by an
individual or association or its officer or other employee within a period of three years from
the date on which a similar offence committed by it or him was compounded under this
section.
For the purposes of this section, any second or subsequent offence committed after the expiry
of a period of three years from the date on which the offence was previously compounded,
shall be deemed to be a first offence.
• Every officer or authority shall exercise the powers to compound an offence, subject to the
direction, control and supervision of the Central Government.
• Where any offence is compounded before the institution of any prosecution, no prosecution
shall be instituted in relation to such offence, against the offender in relation to whom the
offence is so compounded.
• Every officer or authority while dealing with a proposal for the compounding of an offence for
a default in compliance with any provision of this Act which requires by an individual or
association or its officer or other employee to obtain permission or file or register with, or
deliver or send to, the Central Government or any prescribed authority any return, account or
other document, may-
direct, by order, any individual or association or its officer or other employee to file or register
with, such return, account or other document within such time as may be specified in the
order.

9. MISCELLANEOUS
(I) Power to call of information or document and Investigation into cases under the
Act (Sections 42 & 43)
• Any inspecting officer, authorised by the Central Government may, during the course of any
inspection of any account or record maintained by any political party, person, organisation or
association in connection with the contravention of any provision of this Act,—
(a) call for information from any person for the purpose of satisfying himself whether there
has been any contravention of the provisions of this Act or rule or order made
thereunder;

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.39

(b) require any person to produce or deliver any document or thing useful or relevant to
such inspection;
(c) examine any person acquainted with the facts and circumstances of the case related
to the inspection.
• Investigation into cases under the Act: Any offence punishable under this Act may also be
investigated into by such authority as the Central Government may specify in this behalf and
the authority so specified shall have all the powers which an officer-in-charge of a police
station has while making an investigation into a cognizable offence.
(II) Power of Central Government to give directions and delegation of powers (Sections 46 & 47)
• The Central Government may give such directions as it may deem necessary to any other
authority or any person or class of persons regarding the carrying into execution of the
provisions of this Act, except power to make rule under section 48.
(III) Power to make rules (Section 48)
The Central Government may, by notification, make rules for carrying out the provisions of this Act.
(IV) Power to exempt in certain cases (Section 50)
If the Central Government is of opinion that it is necessary or expedient in the interests of the general
public so to do, it may-
• by order and subject to such conditions as may be specified in the order, exempt-
o any person or
o association or
o organisation (not being a political party), or
o any individual (not being a candidate for election)
• from the operation of all or any of the provisions of this Act and may, revoke or modify such
order.
(V) Act not to apply to certain Government transactions (Section 51)
Nothing contained in this Act shall apply to any transaction between-
• the Government of India, and
• the Government of any foreign country or territory.
(VI) Application of other laws not barred (Section 52)
The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other
law for the time being in force.

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4.40 CORPORATE AND ECONOMIC LAWS

TEST YOUR KNOWLEDGE


Questions
1. State under what circumstances Government can cancel the certificate of registration granted
to a person under FCRA?
2. X, an association having registration wishes to transfer the Foreign Contribution received by
it to another organization? Can it do so? Is there any restriction on transfer of funds to other
organisations?
3. Can foreign contribution be received in and utilised from multiple Bank Accounts?
4. Can capital assets purchased with the help of foreign contributions be acquired in the name
of the Mr Ram, an office bearer of the association?
5. Mr. X, an individual of Indian origin but currently a citizen of a foreign country gives a donation.
State whether the donation given by Mr. X will be treated as ‘foreign contribution’?
6. Mr. Rohit, a relative of Mr. Suman, who is residing in France remitted foreign contribution of
Rs. 2 lakhs to her for arrangement of religious programme for the believers of Gurudev.
Whether foreign remittances received from a relative are to be treated as foreign contribution
as per FCRA, 2010?
7. After giving a reasonable opportunity of being heard, Central Government cancelled the
certification of registration of Toastea Ltd, a company registered under FCRA on the ground
that such cancellation was in public interest. Two and a half years have passed since such
cancellation. Company has submitted its written declaration not to involve in such activities
again and requests restoration of the registration. Advise Toastea Ltd. on its eligibility for re-
registration or grant of prior permission.
8. In the light of the provisions of the Foreign Contribution (Regulation) Act, 2010 examine and
decide whether the following persons in India are permitted to receive the amount/articles in
the following situations:
(i) M/s KG & C; a partnership firm obtained loan from a club registered in London for its
business purpose.
(ii) Hello FM, a registered association, received funds from a foreign company for
establishing Frequency Model Radio Station to broadcast audio news.
(iii) Mr. Happy received a wrist watch as marriage anniversary gift from his uncle, a citizen
of USA. The market value of the wrist watch is Rs. 25,000.
9. Mr. Ramakant Hathi, an Indian Administrative Service (IAS) officer has received an invitation
to visit Germany for representing India in an Annual Summit programme. Mr. Ramakant Hathi,
on his visit has met with a sudden illness and received foreign hospitality of amount 65,000

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.41

in the form of emergent medical treatment. Under the given scenario, you are required to
advise Mr. Ramakant Hathi regarding his responsibility to intimate the receipt of Foreign
Hospitality as per the provisions of the Foreign Contribution (Regulation) Act, 2010 and rules
made thereunder.

10. XYZ Foundation, a society registered under the Societies Registration Act, 1860, has
received foreign contribution from a Mala Company LLC, a company incorporated in
Singapore. XYZ Foundation deposited the amount of foreign contribution in a bank and
earned interest on it. XYZ Foundation desires to invest maturity proceeds from deposits in
mutual funds. You are required to advise whether XYZ Foundation is allowed to make such
investment considering the provisions of the Foreign Contribution (Regulation) Act, 2010 (the
Act) (Note: XYZ Foundation has obtained certificate of registration under section 11 of the
Act).

Answer to Questions
1. Yes. As per section 14 of the FCRA, Central Government may cancel the certificate, after
carrying out an inquiry, on the following grounds –
(a) the holder of the certificate has made an incorrect/false statement in the application
for the grant of registration or renewal
(b) the holder of the certificate has violated any of the terms and conditions of the
certificate or renewal thereof
(c) in the opinion of the Central Government, it is necessary in the public interest to cancel
the certificate
(d) the holder of the certificate has violated any of the provisions of this Act or rules or
order made thereunder.
(e) 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.
Any person whose certificate has been cancelled under this section shall not be eligible for
registration or grant of prior permission for a period of three years from the date of
cancellation of such certificate.
2. Under the amended Section 7 of FCRA, 2011 No person who -
(a) is registered and granted a certificate or has obtained prior permission under this Act;
and
(b) receives any foreign contribution,
shall transfer such foreign contribution to any other person.

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4.42 CORPORATE AND ECONOMIC LAWS

Earlier, foreign contribution accepted with the permission of the Central Government could
be transferred to any other person who is registered under FCRA, 2010 or has obtained prior
permission. It can be seen that the legislature has placed a blanket prohibition on transfer of
foreign contribution received by any person to any other person. The intention is to prevent
recipients of foreign contribution acting as mere conduits or facilitating agents for obtaining
foreign contributions.
3. The foreign contribution should be received only in the exclusive single foreign contribution
account of a Bank (also called designated FC account), as mentioned in the order for
registration or prior permission granted and should be separately maintained by the
associations. However, one or more accounts (called Utilization Account) in one or more
banks may be opened by the association for ‘utilising’ the foreign contribution after it has
been received in the designated FCRA bank account, provided that no funds other than that
foreign contribution shall be received or deposited in such account or accounts and in all such
cases, intimation is to be given online within 15 days of opening of such account.
4. No. Every asset purchased with foreign contribution should be acquired and possessed in
the name of the association since an association has a separate legal entity distinct from its
members.
5. Yes. Donation from a Person of Indian origin who has acquired foreign citizenship is treated
as foreign contribution. This will also apply to Person of Indian Origin / Overseas Citizen of
India cardholders. However, this will not apply to 'Non-resident Indians', who still hold Indian
citizenship and they are not foreigners. Therefore, donation given by Mr. X, an individual of
Indian origin with foreign nationality will be treated as foreign contribution.
6. No. As per Section 4(e) of FCRA, 2010 and Rule 6 of FCRR, 2011, even the persons
prohibited under section 3, i.e., persons not permitted to accept foreign contribution, are
allowed to accept foreign contribution from their relatives. However, in terms of Rule 6 of
FCRR, 2011, any person receiving foreign contribution in excess of one lakh rupees or
equivalent thereto in a financial year from any of his relatives shall inform the Central
Government regarding the details of the foreign contribution received by him in electronic
form in Form FC-1 within thirty days from the date of receipt of such contribution.
Here in the given situation, since the amount remitted by Mr. Rohit is more than Rs. One lakh,
so Ms. Suman is required to inform the Central Government in Form FC-1 within thirty days
from the date of receipt of such contribution.
7. Restoration of Registration: As per section 14(3) of the Foreign Contribution (Regulation)
Act, 2010, any person whose certificate has been cancelled under this section shall not be
eligible for registration or grant of prior permission for a period of three years from the date of
cancellation of such certificate.
In the instant case, Toastea Ltd. is not eligible for re-registration or grant of prior permission as only two
and a half years have passed since such cancellation. So, restoration is not permissible as the

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THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.43

requirement of three years cooling period from the date of cancellation of such certificate for re-
registration is not complied with.
8. (i) As per section 2(1)(j) of the FCRA, 2010, “foreign source” includes a society, club or
other association or individuals formed or registered outside India. Accordingly in the
given case, amount (i.e., loan) received by M/s KG & Co., being a partnership firm not
covered under the above provisions, from club registered in London for its business
purpose, is permissible.
(ii) As per section 3 of the FCRA, 2010, no foreign contribution shall be accepted by any
association or company engaged in the production or broadcast of audio news or audio
visual news or current affairs programs through any electronic mode, or any other
electronic form as defined in the Information Technology Act, 2000 or any other mode
of mass communication; Accordingly, Hello FM is not permitted to receive any fund
from a foreign company.
(iii) As per the provisions of the Foreign Contribution (Regulation) Act, 2010, “foreign
contribution” means the donation, delivery or transfer made by any foreign source, of
any article, not being an article given to a person as a gift for his personal use, if the
market value, in India, of such article, on the date of such gift, is not more than such
sum as may be specified from time to time, by the Central Government by the rules
made by it in this behalf;(This sum has been specified as Rupees One lakh/-currently).
In the given situation, Mr. Happy received the wrist watch (market value Rs.25,000)
as marriage anniversary gift from his uncle, a citizen of USA. Since, the value of the
wrist watch is within the prescribed limit, hence, Mr. Happy is permitted to receive the
article.
9. As per section 6 of the Foreign Contribution (Regulation) Act, 2010, various categories of
persons are required to take prior permission of the Central Government before accepting
Foreign Hospitality, while visiting any country or territory outside India. Government servants
are one of such persons who are required to take prior permission. Provided it shall not be
necessary to obtain any such permission for an emergent medical aid needed on account of
sudden illness contracted during a visit outside India.
Further as per Rule 7 of Foreign Contribution Rules 2011 and amendments thereto, in case
of emergent medical treatment aid needed on account of sudden illness during a visit abroad,
the acceptance of foreign hospitality shall be required to be intimated to the Central
Government within one month of such receipt giving full details including the source,
approximate value in Indian rupees, and the purpose for which and the manner in which it
was utilised.
However, no such intimation is required if the value of such hospitality in emergent medical
aid is upto one lakh rupees or equivalent. Accordingly, Mr. Ramakant Hathi is not required to
intimate such details of acceptance of foreign hospitality as the value of such hospitality in

© The Institute of Chartered Accountants of India


4.44 CORPORATE AND ECONOMIC LAWS

emergent medical treatment is within the limits specified in Rule 7 of Foreign Contribution
(Regulation) Rules, 2011.
10. As per the explanation 2 to the definition of Foreign Contribution under the Act, the interest
accrued on the foreign contribution deposited in any bank referred to in section 17(1) or any
other income derived from the foreign contribution or interest thereon shall also be deemed
to be foreign contribution within the meaning of this clause.
Further as per section 8 of the Act, every person, who is registered and granted a certificate
or given prior permission under this Act and receives any foreign contribution, shall utilise
such contribution for the purpose for which the contribution has been received.
Further, any foreign contribution or any income arising out of it shall not be used for
speculative business, where speculative business includes investment in mutual fund.
Therefore, XYZ Foundation cannot use the contribution as well as the interest component for
the Investment in Mutual Fund.

© The Institute of Chartered Accountants of India

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