FCRA regulation

What is the FCRA? 

• Foreign Contribution Regulation Act (FCRA) was enacted in 1976 to regulate foreign donations, which ensures that they do not jeopardise national security
• It was updated in 2010 to include a raft of new regulations governing foreign donations. 

Who needs to comply with FCRA?

All associations, groups, and non-governmental organisations (NGOs) who want to receive foreign donations must comply with the FCRA.

Major provisions of FCRA

• Registration under the FCRA is required of all such NGOs. 
• The registration is valid for five years at first, after which it can be renewed if all requirements are met. 
• Foreign contributions for social, educational, religious, economic, and cultural reasons are permitted for registered organisations. 
• Annual returns, similar to those filed with the Internal Revenue Service, are required to be filed.

New guidelines under FCRA

In 2015, the Ministry of Home Affairs (MHA) issued new guidelines requiring NGOs 

• To certify that accepting foreign funding will not jeopardise India’s sovereignty and integrity, have a negative influence on friendly relations with other countries, or undermine communal harmony.
• It further stated that all such NGOs would be required to have accounts in either nationalised or private banks with core banking services in order to provide security agencies with real-time access.

Who is ineligible to receive foreign donations? 

• Originally Foreign contributions are illegal for members of the legislature and political parties, as well as government officials, judges, and journalists. 
• However, the MHA in 2017 allowed political parties to receive contributions from a foreign firm’s Indian affiliate or a foreign company in which an Indian owns 50% or more shares.

What other options are there for obtaining foreign funding? 

• The alternative option is to request prior authorisation to receive foreign contributions. It is given in exchange for receiving a specified amount from a specific donor in order to carry out certain activities or initiatives. 
• However, statutes such as the Societies Registration Act of 1860, the Indian Trusts Act of 1882, or Section 25 of the Companies Act of 1956 should be used to register the association. A letter of commitment from the overseas donor is also necessary, outlining the amount and purpose.

What happens if a registration is cancelled or suspended? 

• The MHA can temporarily revoke an association’s FCRA registration after inspecting its books and obtaining any negative feedback about its operations. Until a decision is made, the association is unable to accept new donations or use more than 25% of the funds in the designated bank account without approval from the MHA.
• The MHA has the authority to cancel an organisation’s registration, after which it will be ineligible for registration or granting of ‘prior authorization’ for three years. 
• When an audit uncovers problems in an NGO’s finances, such as misappropriation of foreign cash, registrations are also revoked. 
• According to the FCRA, no certificate cancellation order can be granted until the person or NGO in question has had a reasonable opportunity to be heard. An NGO’s registration is cancelled after three years, and it is not eligible for re-registration.
• The government can also suspend an NGO’s registration for 180 days while an investigation is conducted, as well as freeze its funds. 
• The government’s instructions can be overturned in the High Court. 
• The majority of those whose registrations have been cancelled have been suspected of financial issues or “political activities.” 
• Following an inquiry into Amnesty’s financial practices by the Enforcement Directorate in 2018, the organisation was forced to close its operations in India in 2020.