FCRA Update: Key revisions for Foreign Contribution Recipients
Introduction
On 31 December 2024, the Ministry of Home Affairs, introduced the Foreign Contribution (Regulation) Amendment Rules, 2024 (“2024 Amendment”) to the Foreign Contribution (Regulation) Rules, 2011 (“FCRA Rules”). In this update, we discuss the 2024 Amendment, the applicability of Foreign Contribution Regulation Act, 2010 (“FCRA”), and the compliances under it.
Applicability of FCRA
The FCRA regulates the acceptance and utilization of ‘foreign contributions’ and ‘foreign hospitality’ received by certain individuals, associations and not for profit companies, from any foreign source. The FCRA defines ‘foreign contributions’ as “donation, delivery or transfer made by any foreign source” of any article, currency and security. Under the FCRA only the ‘persons’ having a definite cultural, economic, educational, religious or social programme are eligible to receive foreign contributions.
Further, FCRA prohibits certain persons from receiving foreign contributions such as, (a) candidates for election of any legislature; (b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a newspaper; (c) government servants, Judge, or employee of any corporation controlled or owned by the Government; (d) member of any Legislature; (e) political party or its office-bearer; (f) Association or company in electronic media, etc.
However, the above restrictions are not applicable if any consideration is received by such individuals (a) in lieu of salary, wages; (b) from their relatives; (c) in the ordinary course trade or commerce; (d) As per the provisions of Foreign Exchange Management Act, 1999; or (e) as a gift, provided the market value of gift does not exceed INR 100,000, etc.
Therefore, simply put, FCRA only applies in cases where any consideration (in the form of shares, services, cash, etc.) is not received in lieu of goods or services rendered by a person in India.
Compliances under FCRA
The FCRA provides for the following key compliances for recipient of foreign contributions:
- The person receiving foreign contributions must obtain registration or prior permission from the Ministry of Home Affairs by applying at https://fcraonline.nic.in
- The foreign contributions shall only be utilized for the purpose for which they have been received.
- The foreign contributions shall be received only in a designated bank account for the purpose of such remittance.
- The person receiving foreign contributions must submit an annual return within nine months of the end of each financial year to the Central Government along with details relating to amount of contributions received; copy of a duly certified bank statement where the exclusive bank account is maintained; copy of balance sheet, receipt and payment account, etc.
- The person receiving foreign contributions must maintain an account and record of the contributions received and the manner of their utilization.
- The person receiving foreign contributions shall only transfer such contribution for the purposes for which it was received.
- The foreign contributions shall not be used for ‘administrative purposes’ exceeding 20% of such contribution in a financial year, without the prior approval of the Central Government.
Key Changes in the 2024 Amendment
The following are the key amendments to the FCRA Rules:
- Carry forward of unspent of administrative expenses to the next financial year:
As mentioned above, the foreign contributions can only be used up to 20% for any administrative purposes. Prior to the 2024 Amendment, if any person spends less than 20% on administrative expenses, the unspent amount would lapse. However, the amendment now allows to carry forward such unspent amount of administrative expenses to the next financial year, and the reasons for the same are required to be stated in the annual report.
- Additional declaration by Chartered Accountant
The amendment provides for disclosure of the name, address, email address, etc., of the Chartered Accountants issuing the certificate under the annual return. Additionally, the Chartered Accountants are now required to certify whether the person receiving foreign contributions has violated any provisions of FCRA and the rules made thereunder along with the details of such violations, if any.
The amendment has come into force from 01 January 2025 and can be accessed here.
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