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The Foreign Contribution (Regulation) Act (“the Act” or “FCRA”) was first enacted in the year 1976 to regulate the utilisation of foreign contributions or hospitality to maintain strict control over voluntary organisations and political associations that received foreign funding. The Act aims to prevent foreign organisations from influencing electoral politics, social, political, economic, or religious discussions in India for wrong purposes and activities detrimental to the public interest. The Act falls under the purview of the Ministry of Home Affairs (MHA) since it is a law relating to internal security and not under the Reserve Bank of India (RBI) despite it being a financial legislation.

In 1984, an amendment was made to the Act requiring all non-governmental organisations to register themselves with the MHA. In 2010, the Act was repealed, and a new Act was enacted with stricter provisions. The Act was further amended in the year 2020 by the Foreign Contribution (Regulation) Amendment Act, 2020 (“FCRA Amendment Act”).

The FCRA is applicable to the whole of India and its citizens outside India and to the associated branches or subsidiaries outside India of companies or bodies corporate, registered or incorporated in India.

Prohibition on Accepting Foreign Contributions

The FCRA prohibits the following persons from accepting any foreign contributions:

However, the above-mentioned persons can accept foreign contributions in the following situations:

‘Foreign Contribution’ means the donation, delivery or transfer made by any foreign source of any:

Contributions made by a citizen of India living in another country (e.g. a Non-Resident Indian (NRI)) from his/her personal savings, through the normal banking channels, will not be treated as foreign contributions. However, it is advisable to obtain the passport details of such an NRI to ascertain that he/she is actually an Indian citizen.

Donations from an Indian-origin person who has acquired foreign citizenship will be treated as a foreign contribution. This will also apply to Person of Indian Origin [PIO]/ Overseas Citizen of India [OCI] cardholders as they are foreigners.

Foreign remittance received from a relative shall not be treated as a foreign contribution. However, any person receiving a foreign contribution in excess of ten lakh rupees or equivalent thereto in a financial year from any of his/her relatives is required to inform the Central Government on Form FC-1 within thirty days from the date of receipt of such contribution.

Who can Receive Foreign Contributions?

Any person* can receive foreign contribution provided:

There is a prohibition on the transfer of foreign contributions to any other person.

The foreign contribution received has to be utilised only for the purpose for which it has been received and not more than 20% of the foreign contribution received in a financial year can be utilised to defray administrative expenses.

Registration/Prior Permission under FCRA

Section 11 of FCRA mandates that unless a person having a definite cultural, economic, educational, religious or social program obtains a certificate of registration [COR] or prior permission from the Central Government, such person cannot accept any foreign contribution.

This means that a person should either obtain a COR or obtain prior permission before accepting any foreign contribution.

For grant of registration under FCRA, the association should:

Eligibility for Grant of Prior Permission

An association in its formative stages would not be eligible for COR. Such an association can apply for a grant of prior permission, which may be granted for the receipt of a specific amount from a specific donor, for the carrying out of specific activities/projects.

For this purpose, the association should:

Form of Application and Period of Validity of the Grant of Prior Permission

Every person who makes an application for the grant of COR or PP shall be required to open an ”FCRA Account” in a designated bank account with State Bank of India, – Main Branch, New Delhi [the designated FC account].

Recent Update: Noel Harper v. Union of India

The Hon’ble Supreme Court has, in the case of Noel Harper v. Union of India[1] upheld the constitutional validity of the Foreign Contribution (Regulation) Amendment Act, 2020 which had placed restrictions on the way foreign contributions are raised and used by organisations in India. It held that the amendments were intended to remedy the mischief of an endless chain of transfers of the foreign contributions that create a layered trail of money making it difficult to trace the flow and legitimate utilisation thereof. Further, the Hon’ble Delhi High Court in the case of Advantages India[2] had also held that provisions of FCRA do not violate Articles 14 and 21 of the constitution and are not arbitrary, unreasonable and ultra vires.

FCRA is an internal security law aimed at ensuring that foreign contributions/organisations do not affect the sovereignty of India and its public interest. The provisions under FCRA are quite strict and it is seen that the government is proactively monitoring the compliance relating to the acceptance and use of foreign contributions. It is therefore important for organisations covered under FCRA to follow the law in its true letter and spirit.

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