The Foreign Contribution (Regulation) Act, 2010 and the rules made under it (FCRA 2010) primarily aim to regulate foreign contributions made to charitable and non-profit institutions in India. The predecessor to the FCRA 2010, the Foreign Contribution (Regulation) Act, 1976 (FCRA 1976), was enacted to check any kind of interference by a foreign state in the domestic affairs and democracy of India. However, with liberalization and the boom of foreign investment in India in the decades to follow, FCRA 2010 was enacted that repealed FCRA 1976 and changed this approach.
The Foreign Contribution (Regulation) Amendment Act, 2020 came into effect on 29 September 2020. Key amendments to the FCRA 2010 are:
- Persons who are registered, granted a certificate or obtained prior permission under FCRA 2010 and received foreign contribution:
a) are prohibited to transfer such foreign contribution to any other person;
b) can utilize only 20% (decreased from the earlier 50%) of the foreign contribution received in a financial year to meet their administrative expenses; and
c) can receive foreign contribution only in an account designated as “FCRA Account” that has to be opened in the New Delhi main branch of the State Bank of India situated at 11, Sansad Marg, New Delhi 110001 (SBI Bank). Any such foreign contribution can then be transferred to any other FCRA Account of such person in any scheduled bank.
- The government can prevent any usage of unutilized foreign contribution received by any person or receive the remaining portion of foreign contribution which has not been received by such person if, based on a summary inquiry, it believes that such person has contravened FCRA 2010. Key contraventions include not opening FCRA Account prior to receiving the foreign contribution, receiving foreign contribution without prior registration, non-renewal of certificate of registration, transferring foreign contribution to any person and utilizing more than 20% of foreign contribution received on administrative expenses without prior approval of the central government.
- Any person seeking for grant of certificate under FCRA 2010 or for renewal of such certificate, must provide Aadhar number of all its office bearers, directors or other key functionaries.
- The registration certificate granted under FCRA 2010 can be suspended for a maximum period of 360 days (increased from the earlier period of 180 days).
- The central government can now permit a person who is registered or granted a certificate under FCRA 2010 to voluntarily surrender its certificate, if the government is satisfied that such person has not contravened FCRA 2010, and the management of foreign contributions and assets, if any, created out of such contribution has been vested in the authority as prescribed under FCRA 2010.
- “Public servants” defined under Section 21 of the Indian Penal Code, 1860 are prohibited to receive foreign contribution. “Public servant” is a person falling under the following descriptions: judge, officers of court including liquidator, receiver and commissioner, juryman, assessor or member of panchayat, arbitrator, government officer, any person who is remunerated by government and commissioned officer in defence forces.
The key takeaways for payment gateways/payment aggregators and NGOs:
- Prohibition to sub-grant foreign contribution to other NGOs – Previously, an NGO who was registered under the FCRA 2010 could transfer foreign contributions received to another NGO who was also registered under the FCRA 2010 or if the NGO had obtained prior approval from the Central Government to transfer such foreign contribution to an NGO who was not registered under the FCRA 2010. Now, NGOs receiving foreign contributions or foreign grants cannot further sub-grant it to other NGOs.
- Opening an FCRA Account at Specified Bank – Earlier, prior to receiving any foreign contribution by an NGO, an FCRA Account could be opened with any bank. Post the FCRA Amendment, an NGO or charitable institution is now required to open an FCRA Account with the SBI Bank. NGOs who had an existing FCRA Account at any other bank that was opened or created prior to FCRA Amendment were also required to open an FCRA Account at the SBI Bank and make this transition by 31 June 2021. The standard operating procedure to open and operate the FCRA Account at the SBI Bank is provided at https://fcraonline.nic.in/home/index.aspx.
- Business continuity – To ensure compliance with this revised regulatory framework, Razorpay ensures that any foreign contributions received by our merchants are settled only in favour of the FCRA Account opened by such NGO merchant with the SBI Bank.
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