Recent Amendment of Foreign Contribution Act, 2010
Recent Amendment of Foreign Contribution (Regulation) Act, 2010
The foreign contribution regulation Act was enacted during the emergency in 1979, in the atmosphere of the apprehension that foreign powers were interfering in the India’s affairs by pumping in funds through the independent organisation. This law sought to regulate foreign donations to individuals and associations so that they function in a manner consistent with the values of a sovereign democratic and republic. It was amended in 2010 to consolidate the law on utilisation of foreign funds and to prohibit their use for any activities detrimental to national. Recently the amendment has been made by the current government in 2020, with the aim to increase transparency by giving the government tighter control and scrutiny over the receipt and utilisation of foreign funds by the NGOs.
Requirement for change in the law
Between 2010 and 2019 the annual inflow of the foreign contribution nearly doubled. However, receptions did not used these funds for their intended purposes and failed to comply with statutory requirement such as submitting annual returns and maintaining proper accounts, which in turn led to the cancellation of registration certificates for over 19000 organisation including NGOs. Further criminal investigation was initiated against them for misappropriation or misuse of foreign contribution [0]. Therefore, there was need for amendment of FCRA, 2010 which addresses several issues related to the utilization of foreign contribution by recipients.
Key changes to the FCRA, 2010 [0]
1) Prohibition to accept foreign contribution (Section 3)
Under section 3(c) of the Act, certain persons are prohibited to accept any foreign contribution. These include election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties, among others. The Bill adds public servants (as defined under section 21 the Indian Penal Code) to this list. Public servant includes any person who is in service or pay of the government or remunerated by the government for the performance of any public duty.
2) Transfer of foreign contribution (section 7)
Under section 7 of the FCRA, foreign contribution cannot be transferred to any other person unless such person is also registered to accept foreign contribution (or has obtained prior permission under the Act to obtain foreign contribution). The Bill amends this to prohibit the transfer of foreign contribution to any other person. The term ‘person’ under the Act includes an individual, an association, or a registered company.
3) Reduction in the use of foreign contribution for administrative purposes (section 8)
Under section 8 of the Act, a person who receives foreign contribution must use it only for the purpose for which the contribution is received. Further, they must not use more than 50% of the contribution for meeting administrative expenses. The Bill reduces this limit to 20%.
4) Requirement of Aadhar for office bearers (section 12A)
The Act states that a person may accept foreign contribution if they have:
(i) obtained a certificate of registration from central government, or
(ii) not registered but obtained prior permission from the government to accept foreign contribution.
Any person seeking registration (or renewal of such registration) or prior permission for receiving foreign contribution must make an application to the central government in the prescribed manner. The Bill adds that any person seeking prior permission, registration or renewal of registration must provide the Aadhaar number of all its office bearers, directors or key functionaries, as an identification document. In case of a foreigner, they must provide a copy of the passport or the Overseas Citizen of India card for identification.
5) Mandatory FCRA Account (section 17)
Under the Act, a registered person must accept foreign contribution only in a single branch of a scheduled bank specified by them. However, they may open more accounts in other banks for utilisation of the contribution. The Bill amends this to state that foreign contribution must be received only in an account designated by the bank as “FCRA account” in such branch of the State Bank of India, New Delhi, as notified by the central government. No funds other than the foreign contribution should be received or deposited in this account. The person may open another FCRA account in any scheduled bank of their choice for keeping or utilising the received contribution.
6) Surrender of certificate (section14A)
The Foreign Contribution (Regulation) Amendment Act, 2020, introduced a provision under Section 14A allowing the central government to permit a person to surrender their registration certificate. The government may grant this permission if, after an inquiry, it is satisfied that the person has not violated any provisions of the Act and that the management of their foreign contribution, and related assets has been vested in an authority prescribed by the government.
7) Suspension of registration (section 13)
Under the Foreign Contribution (Regulation) Act, the government may suspend the registration of a person for a period not exceeding 180 days. The Foreign Contribution (Regulation) Amendment Bill, 2020, adds that such suspension may be extended for an additional period of up to 180 days. This provision is covered under Section 13 of the Act.
8) Restriction in utilisation of foreign contribution (section11)
Under the FCRA, if a person accepting foreign contribution is found guilty of violating any provisions of the Act or the Foreign Contribution (Regulation) Act, 1976, the unutilised or unreceived foreign contribution may be utilised or received, only with the prior approval of the central government. The FCRA (amendment) Bill adds that the government may also restrict usage of unutilised foreign contribution for persons who have been granted prior permission to receive such contribution. This restriction may be imposed, based on a summary inquiry, and pending any further inquiry, the government believes that such person has contravened provisions of the Act.
9)Renewal of license(section16)
Under the Act, every person who has been given a certificate of registration must renew the certificate within six months of expiration. The Bill provides that the government may conduct an inquiry before renewing the certificate to ensure that the person making the application:
(i) is not fictitious or benami,
(ii) has not been prosecuted or convicted for creating communal tension or indulging in activities aimed at religious conversion, and
(iii) has not been found guilty of diversion or misutilisation of funds, among other conditions.
Conclusion
The recent amendment to the foreign contribution (Regulation) Act, 2010, introduced in 2020, reflects government’s commitment to prevent the misuse of foreign contributions and ensure that support genuine and lawful activities. By doing so government aims to foster a more responsible and transparent environment for organisation receiving foreign funds.
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