FCRA Compliance for NGOs: A Complete Guide

FCRA Compliance for NGOs: A Complete Guide

Introduction

The Foreign Contribution (Regulation) Act (FCRA), 2010 regulates the acceptance and use of foreign contributions or foreign hospitality by NGOs, associations, and companies in India. Enforced by the Ministry of Home Affairs (MHA), the Act ensures funds are used for legitimate purposes and not detrimental to national interest. Non-compliance can lead to fines, suspension or cancellation of registration, legal action, and reputational damage.

 

What Constitutes “Foreign Contribution”?

Definition (Section 2(1)(h))

Foreign contribution includes:

• Any donation, delivery, or transfer from a foreign source of articles, currency (Indian or foreign), or securities.
• Indirect contributions received via intermediaries are also deemed foreign contribution.
• Interest or income earned from foreign contribution is part of the contribution.

Exclusions:

• Fees or cost for goods/services in the ordinary course of business
• Personal gifts from relatives or friends
• Contributions from Non-Resident Indians (NRIs) with Indian citizenship

Special Notes:

• Contributions from Indian-origin persons with foreign citizenship (PIO/OCI) are treated as foreign contribution.
• Remittances from relatives exceeding ₹10 lakh/year must be reported to MHA via Form FC-1.

 

Who Can Receive Foreign Contribution?

Any “person” can receive foreign contribution if they:

1. Have a definite cultural, economic, educational, religious, or social program
2. Obtain FCRA registration or prior permission from MHA
3. Are not prohibited under Section 3 of FCRA

Who Cannot Receive Foreign Contribution (Section 3(1))

• Election candidates
• Journalists, editors, newspaper owners
• Public servants, judges, government employees
• Members of legislature
• Political parties or office bearers
• Organizations of political nature or media broadcasting news
• Individuals or associations prohibited by MHA

 

Mandatory FCRA Registration

Types of Approval:

1. FCRA Registration
• For NGOs active ≥3 years
• Minimum ₹15 lakh expenditure on core activities in past 3 years
• Apply via Form FC-3C online
2. Prior Permission (PP)
• For new NGOs or specific projects
• NGO must be registered under:
• Societies Registration Act, 1860
• Indian Trusts Act, 1882
• Section 8 of Companies Act, 2013

Renewal:

• Validity: 5 years
• Submit Form FC-3C at least 6 months before expiry

Financial Regulations

1. Designated Bank Account:
• All foreign contributions must be received in SBI, New Delhi
• Separate utilization accounts can be opened elsewhere
• Domestic and foreign funds must not be mixed
2. Annual Returns:
• Form FC-4 online by Dec 31 for preceding financial year
• Include audited statements
• “Nil” returns are mandatory even if no funds were received
3. Fund Utilization:
• Use funds only for approved purposes
• Administrative expenses capped at 20% of foreign contributions
4. Record-Keeping & Transparency:
• Maintain separate accounts for foreign/domestic funds
• Retain records ≥6 years
• Display foreign funding details on the NGO website

 

Key Insights from FAQ

• Donations in rupees from foreign sources are considered foreign contribution.
• Interest/income from foreign contributions is not treated as fresh receipt but included in annual return.
• NRIs with Indian citizenship are exempt; foreign-citizen individuals of Indian origin are treated as foreign contributors.
• Contributions from relatives above ₹10 lakh must be reported to MHA (Form FC-1).

 

Dos and Don’ts for NGOs

Dos:

• Obtain registration or prior permission before receiving foreign contributions
• Use designated SBI account exclusively
• Keep separate accounts and proper records
• File online annual returns (Form FC-4) on time
• Use funds only for approved purposes
• Administrative expenses ≤20%
• Renew registration timely
• Notify MHA of organizational changes
• Retain all financial documents for ≥6 years

Don’ts:

• Do not accept foreign contributions without valid registration
• Do not mix foreign and domestic funds
• Do not transfer foreign funds to others
• Do not exceed 20% administrative expenses without approval
• Do not use funds if registration is suspended or expired
• Do not provide false information
• Do not withdraw funds in cash; use banking channels
• Do not invest FCRA funds in speculative ventures

 

Consequences of Non-Compliance

• Suspension/cancellation of FCRA registration
• Freezing of bank accounts
• Monetary penalties and fines
• Prosecution and imprisonment
• Reputational damage affecting future funding

 

Conclusion

FCRA compliance is mandatory for NGOs receiving foreign funds. Understanding the definitions, registration requirements, financial rules, and reporting obligations ensures transparency, credibility, and uninterrupted social impact work.

Reference: FCRA FAQ – Ministry of Home Affairs (2022)

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