Introduction

The Foreign Contribution (Regulation) Amendment Bill, 2020 passed by the Parliament received assent of the President on 28 September 2020 and it came into force on 29th day of September, 2020.

It aims to amend the Foreign Contribution(Regulation) Act, 2010.

The three factors behind Foreign Contribution (Regulation) Amendment Act, 2020 seem to be;

Firstly, to strengthen compliance mechanisms and to make them uniform;

Secondly, to enhance transparency and accountability in the receipt and utilisation of foreign contributions , and ;

Thirdly , to ensure that the funds so received are actually defrayed for the purposes for which they have been received.

Salient Features

The salient features of the Foreign Contribution (Regulation) Amendment Act, 2020 inter alia, are as under:—

A. Prohibition to Accept Foreign Contribution by “Public Servants”

Section 3 of Foreign Contribution (Regulation) Amendment Act, 2020 has been amended and provides that no foreign contribution shall be accepted by any public servant (as defined in section 21 of the Indian Penal Code of 1860).
This will prohibit persons in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government, from receiving foreign contributions.

B. Prohibition to Transfer Foreign Contribution to Other Person

Section 7 of Foreign Contribution (Regulation) Amendment Act, 2020 has been amended to prohibit the transfer of Foreign Contribution by any person who is registered or has obtained prior permission under this Act, to any other person who is also registered or obtained the prior permission under this Act.
i.e. the amount of foreign contribution which could be transferred from one registered person to another registered person has now been done away with, as was previously allowed under the Act.

C. Reduction in Administrative Expenses Limit

Section 8 of the Foreign Contribution (Regulation) Amendment Act, 2020, has been amended providing that every person, who is registered and granted a certificate or given prior permission under the Act and receives any foreign contribution, shall not defray such sum, not exceeding 20% (Previously limit was 50%) of such contribution, received in a financial year, to meet administrative expenses:
If the administrative expenses exceed twenty per cent. of such contribution prior approval of the Central Government will have to be sought.

Meaning of Administrative Expenses

As per Rule 5 of Foreign Contribution (Regulation) Rules, 2011, the following shall constitute administrative expenses:-

(i) Salaries, wages, travel expenses or any remuneration realized 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 organization 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

(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;

Exclusions:

Provided that the 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 shall not be counted towards administrative expenses.

Provided further that the expenses incurred directly in furtherance of the stated objectives of the welfare-oriented organization shall be excluded from the administrative expenses such as salaries to doctors of hospital, salaries to teachers of school etc.

D. Prohibition & Restriction by Central Government

At present, under the Act, if a person accepting foreign contributions is found guilty of violating any provisions of the Act, the unutilised or unreceived foreign contribution could be utilised or received, only with the prior approval of the Government.

The Amendment Act has now added a proviso to section 11 to provide that the Government may also restrict usage of unutilized foreign contribution if, on the basis of any information or report, and after holding a summary inquiry, the Government believes that such person has contravened provisions of the Act.

E. Opening of FCRA Bank Account in SBI

Receiving Account : Section 17 of the Act has been amended to provide that 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’’ which shall be opened by him in such branch of the State Bank of India which is New Delhi Main Branch of the State Bank of India, 11 Sansad Marg, New Delhi-110001

Utilisation Account : Such person may also open another ‘‘FCRA Account’’ in any of the scheduled bank of his choice for the purpose of keeping or utilizing the foreign contribution which has been received from his ‘‘FCRA Account’’ in the specified branch of State Bank of India at New Delhi:

It may be noted that no funds other than foreign contribution shall be received or deposited in any such account.

“Extension of Time limit for Opening of “FCRA Account”

“Ministry of Home Affairs vide its Public Notice dated 18.05.2021 extended the date of Opening “FCRA Account” in the New Delhi Main Branch of the State Bank of India, 11 Sansad Marg, New Delhi-110001 up to 30th day of June, 2021 due to exigencies arising out of COVID-19”.

F. Mandatory identification proof of ALL Office Bearers/Key Functionaries

A new Section 12A has been inserted, which provides that notwithstanding anything contained in the Act, the Central Government may require that any person who seeks prior permission or prior approval under section 11, or makes an application for grant of certificate under section 12, or, as the case may be, for renewal of certificate under section 16, shall provide as identification document, the Aadhaar number of all its office bearers or Directors or other key functionary or a copy of the Passport or Overseas Citizen of India Card, in case of a foreigner.

G. Time period of Suspension of Certificate increased

Section 13 of the Act has been amended to give the Government the power to suspend the registration certificate where the Central Government, for reasons to be recorded in writing, is satisfied that it is necessary so to do suspend the certificate for a period of one hundred and eighty days, or such further period,,not exceeding one hundred and eighty days, as may be specified in the order;
i.e. the certificate can be suspended upto three hundred and sixty days (which currently is 180 days).

H. Voluntary Surrender of Certificate

A new Section 14A has been inserted which provides that on a request being made in this behalf, the Central Government may permit any person to voluntarily surrender the certificate granted under this Act, if, after making such inquiry as it deems fit, it is satisfied 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 section 15.

Conclusion

The Foreign Contribution (Regulation) Amendment Act, 2020 is definitely aimed to strengthen the compliance mechanism, enhancing transparency and accountability in the receipt and utilisation of foreign contribution and facilitate smooth functioning of genuine organisations or associations who are working for the welfare of the society.

It will however be very important for the organisations already registered under FCRA to understand the amendments clearly and to have systems and procedures in place to adhere to the new working methodologies. They should design the required SOPs (Standard Operating Practices) so as to ensure that gradually, “what may appear to be complicated today, becomes accepted working norm soon”.

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Posted on: May 25th, 2021