Preamble

The Foreign Contribution (Regulation) Act, 1976 (hereinafter referred as ‘FCRA’) was passed by the Indian Parliament and
received the assent of the President of India on 31st March, 1976. The preamble to the Act reads as follows :

An Act to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain persons and
associations, with a view to ensuring that parliamentary institutions, political associations and academic and other voluntary
organisations as well as individuals working in the important areas of national life may function in a manner consistent with
the values of a sovereign democratic republic, and for matters connected therewith or incidental thereto.

Genesis

The main purpose behind the enactment of FCRA was to curb the use of foreign funds and hospitality for nefarious and anti-
national activities or purposes. The idea was to regulate the acceptance and use of foreign contribution so that the recipient
institutions and individuals function in a manner consistent with the values of a sovereign democratic republic. The Ministry
of Home Affairs, Government of India was assigned the responsibility of implementing FCRA. The protection of sovereignty,
democracy and republican nature of the Indian Government forms the basis of FCRA.

The need for having such regulatory law was felt in the late sixties when foreign agencies including CIA were suspected of
having links with various trade unions, student bodies, youth organisations, political organisations etc. The then Home
Minister in 1969 raised this issue in both the Houses of Parliament and the need to regulate foreign funding was discussed.
It was agreed that the government would not allow foreigners or foreign money to dictate or influence the functioning of the
Government, Political Parties and Other Institutions of India.

Introduction of FCRA Bill - Finally the Foreign Contribution (Regulation) Bill, 1973 was introduced in Rajya Sabha on
24.12.1973. This bill was forwarded to the joint committee of the Parliament in 19.02.1974. The joint committee consisted of
20 members of Rajyasabha and 40 members of Loksabha with Shri Manubhai Saha as the Chairperson of the committee.
The joint committee held 33 meetings at different places. The committee also invited views and opinions from various state
governments, bar councils, political parties, trade unions, attorney general, universities etc. The committee presented its
report to the Parliament on 6-1-1976. The Bill was passed in the parliament and it came into force vide Notification No. GSR
755(E) dated 5th August 1976.

Amendments in year 1985 - In 1985, the FCRA was amended to remove some inadequacies and practical difficulties in
administration of the Act. For instance the fund received by the subsequent recipient were also brought within the purview
of the Act. Provisions were also made for prior permission, audit and penal provisions for offence under the Act. The Foreign
Contribution (Regulation) (Amendment) Ordinance 1984 was promulgated by the President of India on 20th October 1984
and the following amendments in the act were proposed :

i) The definition of “foreign contribution”, as contained in the Act, included only the donation, delivery or transfer made by
any foreign source. It did not include donation or contribution received by an organisation from another organisation from
out of foreign contribution received by the latter organisation. The definition was enlarged to include such contributions also
for the purpose of tracing the utilisation of foreign contribution down the line.

ii) The definition of “political party”, as contained in the Act, did not include political parties in the State of Jammu and
Kashmir and political parties which are not covered by the Election Symbols (Reservation and Allotment) Order, 1968, the
Ordinance amended this definition to include such political parties also.

iii) Section 6(1) of FCRA provided that every association having a definite cultural, economic, educational, religious or social
programmes, may receive foreign contributions. But it was required to send intimation regarding such receipt to the Central
Government within such time and in such manner to be prescribed by the rules made under FCRA. It had been observed
that a number of associations had not sent such intimation. In order to effectively monitor the receipt of foreign
contribution, this sub-section was amended to provide that associations referred to therein should accept foreign
contributions only after they were registered with the Central Government specifically for the purpose and should accept
such contributions only through a specified branch of a bank. They would, however, be required to give, within such time
and in such manner as may be prescribed, intimation to the Central Government as to the amount of foreign contribution
received by them, the source from which and the manner in which such foreign contribution was received by them etc.
Where any registered association does not accept foreign contribution through the specified branch of a specified bank or
does not submit intimations etc., in time, the Central Government has been empowered to direct that such association shall
not accept foreign contribution without the prior permission of the Central Government. A new sub-section (1-A) had also
been included in this section to provide that an association not so registered with the Central Government shall obtain prior
permission of the Central Government before accepting any foreign contribution and also give intimation to the Central
Government as to the amount of contribution received by it.

iv) FCRA only enabled the Central Government to inspect the accounts of certain persons or associations. It did not provide
for any power to audit the accounts of any organisation if it was considered necessary to do so. The Ordinance amended
FCRA by inserting a new Section 15-A, to take specific power to audit the accounts of certain persons, organisations or
associations, if the prescribed returns were not furnished in time by such persons, organisations or associations or the
returns so furnished by them were not in accordance with law or their scrutiny gives room for suspicion that the provisions
of the Act had been contravened.

v) A new Section 25-A had also been inserted in FCRA to provide that where any person is convicted of an offence relating to
the acceptance or utilisation of foreign contribution for a second time, he shall be prohibited from accepting any foreign
contribution for a period of three years from the date of the second conviction.

Some noteworthy statistics

In 1968 the foreign funding into India was only Rs. 24 crores and it has risen considerably over the years and in 2004-2005
the total contribution received was Rs. 6,256.68 crores. The total number of organizations registered as on 31st March, 2005
was 30,321 and subsequently during 2004-2005 another 369 organizations were granted prior permission. The following
data provide some insight about the foreign funding into India and the functioning of the FCRA :

i) 30,321 associations stood registered under the Foreign Contribution (Regulation) Act, 1976 as on 31st March 2005.
During the year 369 associations were granted prior permission.

ii) 8,673 associations were reverted to prior permission category to receive foreign contribution during November, 2005;
this was on account of their failure to furnish mandatory annual FC-3 returns.

iii) 18,540 associations filed returns for 2004-2005.

iv) The receipt of foreign contribution during 2004-2005 amounted to Rs. 6, 256.68 crores.

v) Among the districts in different States, Chennai (Rs 560.40 crores) reported the highest receipt of foreign contribution,
followed by Banglore (Rs. 376.97 crores) and Mumbai (Rs. 321.82).

vi) Among the States and Union Territories, Tamil Nadu reported the largest receipt (Rs. 1,190.64 crores), followed by Delhi
(Rs. 1,075.23 crores) and Andhra Pradesh (Rs.913.17crores).

vii) The United States of America (Rs. 1,926.95 crores) heads the list of donor countries, followed by the Germany
(Rs.930.92 crores), and UK (Rs.764.13 crores).

viii) The leading donor agency was Foundation Vicent E Ferrer, Spain (Rs.183.31 crores), followed by World Vision
International, USA (Rs.123.25crores), and Gospel for Asia, USA (Rs.110.12 crores).

ix) The largest recipient of foreign contribution was World Vision of India, Tamil Nadu (Rs. 133.57 crores), followed by
Rural Development Trust, Andhra Pradesh (Rs.118.75 crores) and Sri Sathya Sai Central Trust, Andhra Pradesh (Rs. 77.57
crores).

x) Among the purposes, the largest amount was received for Establishment expenses (Rs.948.20 crores) followed by
relief/rehabilitation of victims of natural calamities (Rs. 655.65 crores), and Rural Development (Rs. 582.48 crores).

Applicability of the Act

The provisions of the FCRA extends to the whole of India including the State of Jammu and Kashmir for which normally
separate laws are made according to article 370 of the Constitution of India.
The Act applies to all citizens of India residing in India and also citizens of India who may be outside India. It would also
apply to associates, branches or subsidiaries outside India of body corporate or companies incorporated or registered in
India. The Act commenced with effect from 5th August 1976 as per the notifications issued by the Central Government vide
GSR 755 (E), dated 5th August 1976.

Overall Summary

To sum up the discussions :

(i) FCRA was enacted in 1976. The main purpose was to curb the use of foreign funds and hospitality for nefarious and anti-
national purposes.

(ii) FCRA is an internal security legislation and is not regulated by RBI. It is regulated by the Ministry of Home Affairs,
Government of India.

(iii) In 1985, FCRA was amended and certain important changes were made:

(a) Funds received by subsequent recipient were brought under the purview of the act.
(b) Definition of political parties was enlarged.
(c) Section 6(1) was amended to ensure that foreign funds were received only after registration, and only through designated
bank accounts.
(d) Section 15A was inserted to empower Central Government to inspect and audit books of accounts of organisations.
(e) Section 25A was inserted to ensure that acceptance of foreign funds was prohibited for 3 years after second conviction.

(iv) The inflow of foreign contribution through FCRA has increased from Rs. 24 crores in 1968 to Rs. 4535.23 crores in 2001.

(v) The provisions of FCRA extends to the whole of India including the State of Jammu and Kashmir.

Meaning of ‘Association’

Section 2(1)(a) of FCRA defines the term association as :

“association” means an association of individuals, whether incorporated or not, having on office in India and includes a
society, whether registered under the Societies Registration Act, 1860 (21 of 1860), or not, and any other organisation, by
whatever name called ;

All types are covered- The term ‘association’ covers all types of associations in the widest possible sense. The Act does not
specify registration as a condition precedent for the purposes of this Act. It is not necessary for an association to be a
registered one but there must be some documentary evidence to establish the existence and activities of the association. All
types of conceivable associations of two or more individuals are covered under the definition of the Act. All charitable
organisations, educational, social, cultural, religious, political etc. organisations, societies, trusts, companies etc. are covered
under the Act. Organisations established for the promotion of science, research, literature, fine arts, libraries, museums,
hospitals, trade unions come within the purview of this Act. It also includes co-operative societies, companies registered
under the Partnership Act, 1932 and chit fund societies created under the Chit Fund Act, 1982 etc.

Association need not be charitable - Further it must be noted, it is not necessary that the objects of the association should be
charitable in nature. The organisations as aforesaid are covered under the Act irrespective of whether they are charitable in
nature or not.

Meaning of ‘Foreign Contribution’

The term ‘foreign contribution’ (hereinafter referred as ‘FC’) has been given a specified definition in FCRA.

The statutory definition-Section 2(1)(c) of FCRA defines ‘Foreign Contribution’ as follows

“ ‘foreign contribution’ means the donation, delivery or transfer made by any foreign source ; -

(i) of any article, not being on article given to a person as a gift for his personal use, if the market value in India, of such
article, on the date of such gift, does not exceed one thousand rupees,

ii) of any currency, whether Indian or foreign,

iii) of any foreign security as defined in clause (i) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973)

Explanation - A donation, delivery or transfer of any article, currency or foreign security referred to in this clause by any
person who has received it from any foreign source, either directly or through one or more persons, shall also be deemed to
be foreign contribution within the meaning of this clause;”

Being a specific definition, no item other than those mentioned in the definition can be brought under ‘foreign contribution’.

The three broad divisions - As is evident from the definition, the scope of foreign contribution has been broadly divided into
three parts i.e. (i) article or gift in excess of rupees one thousand, (ii) currency both Indian or foreign and (iii) foreign
security received from a foreign source.

Mode of receipt is wide - Again, the mode of receipt has been kept extensively wide so as to cover donation, delivery or
transfer made by any foreign source. In this regard it is important to understand the implication of the explanation to this
section which was inserted vide FCR (Amendment) Act 1985. The effect of this explanation has brought the subsequent
receivers of foreign funds within the scope of foreign contribution. Thus, organisations have been debarred from making
contribution to organisation not registered under the FCRA.

Contributions by Indian citizen - It may be noted that contribution made by a citizen of India living in another country, from
his personal savings, through the normal banking channels, is not treated as Foreign Contribution. It is advisable to obtain
the passport details of the concerned citizen of India before accepting such contributions.

Meaning of ‘foreign security’ - The term ‘foreign security’ has been defined under Section 2(o) of the Foreign Exchange
Management Act 1999 as-
“ Foreign Security” means any security, in the form of shares, stocks, bonds, debentures or any other instrument
denominated or expressed in foreign currency and includes securities expressed in foreign currency, but where redemption
or any other form of return such as interest or dividends is payable in Indian Currency ;

Meaning of ‘Foreign Source’

Unlike the term ‘foreign contribution’ which has been defined specifically, the term ‘foreign source’ is given only an inclusive
definition in FCRA.

As statutory definition - As per Section 2(1)(e) of FCRA, ‘foreign source’ is defined as follows :

“ foreign source” includes-

i) the government of any foreign country or territory and any agency of such Government,

ii) any international agency, not being the United Nations or any of its specialised agencies, the World Bank, International
Monetary Fund or such other agency as the Central Government may, by notification in the Official Gazette, specify in this
behalf,

iii) a foreign company within the meaning of Section 591 of the Companies Act, 1956 (1 of 1956), and also includes-

(a) a company which is a subsidiary of a foreign company, and

(b) a multi-national corporation within the meaning of this Act,

iv) a corporation, not being a foreign company, incorporated in a foreign country or territory,

v) a multi-national corporation within the meaning of this Act,

vi) a company within the meaning of the Companies Act, 1956 (1 of 1956), if more than one-half of the nominal value of its
share capital is held, either singly or in the aggregate, by one or more of the following, namely,-

(a) government of a foreign country or territory,

(b) citizens of a foreign country or territory,
(c) corporations incorporated in a foreign country or territory,
(d) trusts, societies or other associations of individuals (whether incorporated or not), formed or registered in a foreign
country or territory,

vii) a trade union in any foreign country or territory, whether or not registered in such foreign country or territory,

viii) a foreign trust by whatever name called, or a foreign foundation which is either in the nature of trust or is mainly
financed by a foreign country or territory,

ix) a society, club or other association of individuals formed or registered outside India,

x) a citizen of a foreign country,

but does not include any foreign institution which has been permitted by the Central Government, by notification in the
Official Gazette, to carry on its activities in India ;

As it is evident, the term “foreign source” has not been defined precisely or exhaustively. The act has given an inclusive
definition of the term ‘foreign source’ and that includes the sources mentioned in clauses (i) to (x).

Agencies of foreign government - Agencies of Foreign Government includes their embassies and consulates in India. They
are included within the purview of foreign source.

The Central Government has notified in the official gazette, the agencies of United Nations and other International
Organisations which shall not be treated as ‘foreign source’ for the purposes of this Act. The list of the organisations which
shall not be treated as foreign source vide Notification Number S.O. 1014(E), dated 13th November, 2000 is given as Annex.
02.1

Determination of company as foreign company - To determine whether a company is a foreign company or not, the
provisions of Section 591 of the Companies Act, 1956 are relevant. Basically the provisions consider any company as foreign
company, which has been incorporated outside India has a place of business within India. Provisions of Section 591 are
reproduced as under :

“ (1) Sections 592 to 602, both inclusive, shall apply to all foreign companies, that is to say, companies falling under the
following two classes, namely -

a) companies incorporated outside India which, after the commencement of this Act, establish a place of business within
India ; and
b) companies incorporated outside India which have, before the commencement of this Act, established a place of business
within India and continue to have an established place of business within India at the commencement of this Act.

(2) Not withstanding anything contained in sub-section (1), where not less than fifty per cent, of the paid-up share capital
(whether equity or preference or partly equity and partly preference) of a company incorporated outside India and having an
established place of business in India, is held by one or more citizens of India or by one or more bodies corporate
incorporated in India, or by one or more citizens of India and one or more bodies corporate incorporate in India, whether
singly or in the aggregate, such company shall comply with such of the provisions of this Act as may be prescribed with
regard to the business carried on by it in India, as if it were a company incorporated in India.”

Subsidiaries are also included -The subsidiary of foreign company even if it is an Indian company is also considered as
foreign source under FCRA. Again to determine whether a company is a subsidiary of a foreign company or not, the
provisions of Section 4 of Companies Act 1956 are relevant which are reproduced as under :
“ Meaning of “subsidiary company”

(1) For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of
another if, but only if,-
(a) that other controls the composition of its Board of directors ; or
(b) that other -

i) where the first-mentioned company is an existing company in respect of which the holders of preference shares issued
before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or
controls more than half of the total voting power of such company ;
ii) where the first-mentioned company is any other company, holds more than half in nominal value of its equity share
capital ; or
(c) the first-mentioned company is a subsidiary of any company which is that other’s subsidiary.

Illustration : Company B is subsidiary of Company A, and Company C is a subsidiary of Company B. Company C is a

subsidiary of Company A, by virtue of clause(c) above. If

Company D is a subsidiary of Company C, Company D will be a subsidiary of Company B and consequently also of Company
A, by virtue of clause (c) above, and so on.”

Meaning of ‘multinational corporation’ - Multinational corporation has also been defined under FCRA by virtue of
Explanation in Section 2(1)(k). A corporation could be considered as multinational if it has a subsidiary or a branch in two or
more countries or carries on business in two or more countries. The provisions under FCRA are reproduced are as under :

“ Explanation : For the purposes of this Act, a corporation incorporated in a foreign country or territory shall be deemed to
be a multinational corporation if such corporation—

a) has a subsidiary or a branch or a place of business in two or more countries or territories ; or

b) carries on business, or otherwise operates, in two or more countries of territories. Over and above all, it may be noted
that, the Central Government may permit foreign institutions by notification in the official gazette and consequently they
will not be considered as foreign source. Such institutions can give contributions into India without violating the provisions
of the FCRA”.

Eligible / Ineligible recipients

Foreign contribution cannot be accepted by a candidate for election ; correspondent, columnist, cartoonist, editor, owner,
printer or publisher of a registered newspaper ; judge, government servant or employee of any corporation ; member of any
legislature ; political party or office bearer thereof ;

The organisation which can receive Foreign Contribution should have a definite cultural, economic, educational, religious or
social programme. Further it has to obtain the prior permission of the Central Government or get itself, registered with the
Central Government, to receive foreign contribution.

Organisation of a Political Nature

Organisations of political nature, not being a political party, cannot accept foreign contribution without the prior approval of
the Central Government.

The statutory provision - Section 5 which specifies the provisions is as under :

“Organisation of a political nature not to accept foreign contribution except with the prior permission of the Central
Government .

5. (1) No organisation of a political nature, not being a political party, shall, accept any foreign contribution except with the
prior permission of the Central Government.
Explanation — For the purposes of this section, “organisation of a political nature, not being a political party” means such
organisation as the Central Government may, having regard to the activities of the organisation or the ideology propagated
by the organisation or the programme of the organisation or the association of the organisation with the activities of any
political party, by an order published in the Official Gazette, specify in this behalf.

(2) (a) Except with the prior permission of the Central Government, no person, resident in India, and no citizen of India,
resident outside India, shall accept any foreign contribution, or acquire or agree to acquire any foreign currency, on behalf of
an organisation referred to in sub-section (1).

(b) Except with the prior permission of the Central Government, no person, resident in India, shall deliver any foreign
currency to any person if he knows or has reasonable cause to believe that such other person intends, or is likely, to deliver
such currency to an organisation referred to in sub-section (1).

(c) Except with the prior approval of the Central Government no citizen of India, resident outside India, shall deliver any
currency, whether Indian or foreign, which has been accepted from any foreign source, to —

(i) any organisation referred 3to in sub-section (1),

(ii) any person, if he knows or has reasonable cause to believe that such person intends, or is likely, to deliver such currency
to an organisation referred to in sub-section (1).”

The main purpose of this section is to ensure that the provisions of this Act are not misused by the political parties through
their sister concerns or front organisation.

Political parties are not covered - From the language of the section, it is very clear that political parties are not included
within the purview of this section. A political party has been defined by section 2(g) of the Act as -
“ political party” means —

(i) an association or body of the individual citizens of India —

1. which is, or is deemed to be, registered with the Election Commission of India as a political party under the Election
Symbols (Reservation and Allotment) Order, 1968, as in force time being; or

2. which has set up candidates for election to any Legislature, but is not so registered or deemed to be registered under the
Election Symbols (Reservation and Allotment) Order, 1968;

(ii) a political party mentioned in Column 1 of table 1 to the notification of the Election Commission of India No.
56/J&K/84, dated the 27th September, 1984, as in force for the time being ;]

An organisation of political nature, on the other hand, is an organisation having links with other political parties or is
associated with the activities of such parties. The Central Government may declare by an official gazette notification, any
organisation to be an organisation of political nature and consequently it would be debarred from accepting foreign
contribution without the permission of Central Government. The implication of such regulatory measure is to give the
Central Government an effective control over the receipt and utilisation of foreign contribution by such organisations.

Relevant criteria to be applied - The criteria for judging whether an organisation is of political nature or not are as follows :-

i) The nature of the programmes of the organisation, whether the programmes are such so as to directly or indirectly relate
or are in consonance with the programs or activities of political parties.

ii) The ideology propagated by the organisation, whether it is of political nature or not. The vision and mission of the
organisations are carefully studied in order to judge whether it has camouflaged its political agenda under the garb of other
acceptable forms of objectives and missions.

iii) Its link with the activities and programs of any political party.

Powers of Central Government - The Central Government has the power to notify any such organisation as an organisation
of political nature, consequently the organisation will be restricted from receiving foreign funds. The provisions of the act
are not very clear whether opportunity of being heard could be provided or not to the concerned organisation because by
virtue of notification the organisation will face financial hardship and adverse impact on its activities and existence. An
organisation which enjoyed the status of an social organisation suddenly should not be notified as an organisation of
political nature without getting an opportunity of being heard. It was so held by Andhra Pradesh High Court in Kul-Hind
(All India) Majlis-e-Tamir-e-Millat, Hyderabad vs. Union of India (W.P. No. 7657 on 19.9.1986).

Meaning of ‘Legislature’

As per section 2(1)(f) of FCRA ‘legislature’ is defined as follows :

“ Legislature” means -

i) either House of Parliament,

ii) the Legislative Assembly of a State, or in the case of a State having a Legislative Council, either House of the Legislature of
that State,

iii) Legislative assembly of a Union territory constituted under the Government of Union Territories Act, 1963 (20 of 1963),

iv) the Metropolitan Council of Delhi constituted under Section 3 of the Delhi Administration Act, 1966 (19 of 1966).

v) Municipal Corporations in metropolitan areas as defined in the Code of Criminal Procedure 1973 (2 of 1974).

vi) District Councils and Regional Councils in the States of Assam and Meghalaya and in the Union Territory of Mizoram as
provided in the VIth Schedule to the Constitution, or

vii) Any other elective body as may be notified by the Central Government, as the case may be ;

Controlling Office

The implementation of FCRA is looked into in a centralised manner by the Ministry of Home Affairs, though, as and when
required, interaction with State Intelligence Bureau is made by the Ministry of Home Affairs. The address of the concerned
authority is The Secretary, Government of India, Ministry of Home Affairs, Internal Security Wing-FCRA, 4th Floor, Lok
Nayak Bhawan, Near Khan Market, New Delhi - 110003.

Annexure - 2.1

The list of Organisation not considered as Foreign Source

I. Secretariat

1. Office of Internal Oversight Services, New York.

2. Office of Legal Affairs, New York.
3. Department for Political Affairs, New York.
4. Department for Disarmament Affairs, New York.
5. Department of Peacekeeping Operations, New York.
6. Office for the Coordination of Humanitarian Affairs, New York.
7. Department of Economic and Social Affairs, New York.
8. Department for General Assembly Affairs and Conference Services, New York.
9. Department of Public Information, New York.
10. Department of Management, New York.
11. United Nations Office at Geneva.
12. United Nations Office at Vienna.
13. United Nations Office at Nairobi.

II. Bodies of the United Nations

14. International Research and Training Institute for the Advancement of Women (INSTRAW), Santo Domingo, Dominican
Republic.
15. Joint United Nations Programme on HIV/AIDS (UNAIDS) Geneva.
16. Office of the UN High Commissioner for Human Rights (OHCHR), Geneva.
17. Office of the UN High Commissioner for Refugees (UNHCR), Geneva.
18. United Nations Capital Developmental Fund (UNCDF), New York.
19. United Nations Conference on Trade and Development (UNCTAD), Geneva.
20. United Nations Development Fund for Women (UNIFEM), New York.
21. United Nations Institute for Disarmament Research (UNIDIR) Geneva.
22. United Nations Institute for Training and Research (UNITAR), Geneva.
23. United Nations Interregional Crime and Justice Research Institute (UNICRI), Rome.
24. United Nations Office for Project Services (UNOPS) New York.
25. United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), Gaza and Aman.
26. United Nations Research Institute for Social Development (UNRISD), Geneva.
27. United Nations University (UNU), Tokyo.
28. United Nations Volunteers (UNV), Bonn.

III. Funds and Programmes

29. United Nations Children’ Fund (UNICFF), New York

30. United Nations Development Programme (UNDP), New York.
31. United Nations Environment Programme (UNEP), Nairobi.
32. United Nations International Drug Control Programme (UNDCP), Vienna.
33. United Nations Population Fund (UNFPA), New York.
34. World Food Programme (WFP), Rome.

IV. Regional Commissions

35. Economic Commission for Africa (ECA), Addis Ababa, Ethiopia.

36. Economic Commission for Asia and the Pacific (ESCAP), Bangkok, Thailand.
37. Economic Commission for Europe (ECE), Geneva.
38. Economic Commission for Latin America and the Caribbean (ECLAC), Santiago, Chile.
39. Economic Commission for Western Asia (ESCWA), Beirut, Lebanon.

V. Law of the Sea Treaty Bodies

40. International Seabed Authority, Kingston.

41. International Tribunal for the Law of the Sea, Hamburg.
42. Commission on the Limits of the Continental Shelf, United Nations Divisions for Ocean Affairs and the Law of the Sea,
New York.

VI. Environmental Bodies

43. Secretariat of the United Nations Framework Convention on Climate Change (UNFCCC), Bonn.
44. Inter governmental Panel on Climate Change (IPCC), Geneva.
45. Ozone Secretariat to the Vienna Convention for the Protection of the Ozone Layer and the Montreal Protocol on
Substance that Deplete the Ozone Layer, Nairobi
46. Secretariat of the Convention on Biological Diversity (CBD), Montreal.
47. Secretariat of the Convention on International Trade in Engangered Species of Wild Fauna and Flora (CITES), Geneva.
48. UNEP/CMS Secretariat of the Convention on the Conservation of Migratory Species of Wild Animals (CMS or Bonn
Convention), Bonn.
49. Secretariat of the Basel Convention on the Control of Trans boundary Movements of Hazardous Wastes and their
Disposal, Geneva.
50. Secretariat of the United Nations Convention to Combat Desertification in Countries Experiencing Serious Drought/or
Desertification, Especially in Africa (CCD), Bonn.
51. Global Environment Facility, Washington D.C.
52. Bureau (Secretariat) of the Convention on Wetlands (Ramsar), Gland, Switzerland.

VII. Specialised Agencies

53. International Labour Organisation (ILO), Geneva.

54. Food and Agriculture Organisation (FAO), Rome.
55. United Nations Educational, Scientific and Cultural Organisation (UNESCO), Paris.
56. International Civil Aviation Organisation (ICAO), Montreal.
57. World Health Organisation (WHO), Geneva.
58. Universal Postal Union (UPO), Berne, Switzerland.
59. International Telecommunication Union (ITU), Geneva.
60. World Meteorological Organization (WMO), Geneva.
61. International Maritime Organization (IMO), London.
62. World Intellectual Property Organization (WIPO), Geneva.
63. International Fund for Agricultural Development (IFAD), Rome.
64. United Nations Industrial Development Organization (UNIDO), Vienna.

VIII. The World Bank Group

65. International Bank for Reconstruction and Development (IBRD), Washington D.C.
66. International Development Association (IDA), Washington D.C.
67. International Monetory Fund (IMF), Washington D.C.
68. International Finance Corporation (IFC), Washington D.C.
69. Associated Organisations of World Bank Group :
A. International Centre for the settlement of Investment Disputes (ICSID), Washington D.C.
B. Multilateral Investment Guarantee Agency (MIGA), Washington D.C.
C. Consultative Group on International Agricultural Research (CGIAR), Washington D.C. (It has 16 Research Centres).
i) International Plant Genetic Resource Institute, (IPGRI), Rome.
ii) International Wheat and Maize Improvement Centre, (CIMMYT), Mexico.
iii) International Centre for Living Aquatic Resource Management (ICLARM), Phillipines.
iv) International Irrigation Management Institute, (IIMI), Colombo.
v) International Food Policy Research Institute (IFPRI), Washington, D.C.
vi) International Centre of Research in Agroforestry (ICRAF), Nairobi.
vii) International Centre for Agricultural Research in Dry Areas (ICARDA), Syria.
viii) International Centre for Tropical Agriculture (CIAT), Columbia.
ix) International Livestock Research Institute (ILRI), Nairobi.
x) West Africa Development Association (WARDA), Abidjan.
xi) International Service of National Agricultural Research, (ISNAR), The Netherlands.
xii) International Crops Research Institute for the Semi-Arid Tropics (ICRISAT), Hyderabad.
xiii) International Rice Research Institute, Manila, Phillipines.
xiv) International Potato Centre, Peru.
xv) Centre for International Forestry Research (CIFOR), Indonesia.
xvi) International Institute of Tropical Agriculture (IITA),Nigeria.

IX. Regional Development Banks

70. African Development Bank (ADB), Abidjan.

71. Inter-American Development Bank (IDB), Washington D.C.
72. Asian Development Bank (ADB), Manila.
73. Caribbean Development Bank (CDB), ST Michael, Barbados.

X. Other Bodies Related to United Nations

74. International Atomic Energy Agency (IAEA), Vienna.

75. Organisation for the Prohibition of Chemical Weapons (OPCW), The Hague.
76. Provisional Technical Secretariat (PTS) for the Comprehensive Nuclear Test Ban Treaty Organization (CTBTO), Vienna.
77. International Consultative Group on Food Irradiation (ICGFI), Vienna.
78. International Narcotics Control Board (INCB), Vienna.
79. International Trade Centre UNCTAD/WTO (ITC), Geneva.
80. International Union for the Protection of New Varieties of Plants (UPOV), Geneva.
81. World Tourism Organisation (WTO/OMT), Madrid.
82. World Food Council (WFC).
83 United Nations Social Defence Research Institute (UNSDRI).
84. United Nations Statistical Office (UNSCO).
Other International Organisation

85. United Nations Outer Space Committee.

86. International Sugar Organisation, London.
87. Asian Productivity Organisation, Tokyo.
88. Asian and Pacific Devlopment Administration, Kualalumpur.
89. Asian African Legal Consultative Committee, New Delhi.
90. European Community (EC).
91. Asia/Pacific Cultural Centre for UNESCO (ACCU)/Japan.
92. Commonwealth Secretariat, London.
93. Afro-Asian Rural Reconstruction Organisation (AARRO), New Delhi.
94. Centre on Integrated Rural Development for Asia and the Pacific, (CIRDAP), Dhaka.
95. International Centre for Genetic Engineering and Bio-technology(ICGEB), New Delhi.
96. Asia and Pacific Centre of Transfer of Technology (APCTT), New Delhi.
97. Centre for Science and Technology of the Non-Aligned and Other Developing Countries (NAMS & T Centre), New Delhi.
98. Commonwealth Agricultural Bureaux Internaltional (CABI), UK.
99. The Asia Pacific Association of Agricultural Research Institution (APAARI), Bangkok.
100. The Regional Co-ordination centre for Research and Development of coarse Grains, Pulses, Roots and Tubercrops in
the Humid Tropics of Asia and the Pacific (CGPRT Centre), Indonesia.
101. The Regional Network for Agriculture Machinery, (RNAM), Bangkok.
102. Commission on Genetic Resources for Food and Agriculture (CGRFA), Rome.
103. The International Seeds Testing Association (ISTA), Zurich.
104. International Water Management Institute (IMI), Srilanka.

The statutory provision

Under Section 6 of FCRA, it is clearly provided that any organisation having a definite cultural/ social/ educational/
religious/ economic object shall only accept foreign contribution after satisfying two conditions :

(i) It must registers itself with the Central Government.

(ii) It must agrees to receive foreign contribution only through one specific bank account.

The statutory provision

Provisions under section 6(1) and 6(1-A) are as under :

“Certain associations and persons receiving foreign contribution to give intimation to the Central Government : (1) No
association [other than an organisation referred to in sub-section (1) of section 5] having a definite cultural, economic,
educational, religious or social programme shall accept foreign contribution unless such association—

(a) registers itself with the Central Government in accordance with the rules made under this Act ; and

(b) agrees to receive such foreign contributions only through such one of the branches of a bank as it may specify in its
application for such registration,

and every association so registered shall give, within such time and in such manner as may be prescribed, an intimation to
the Central Government as to the amount of each foreign contribution received by it, the source from which and the manner
in which such foreign contribution was received and the purposes for which and the manner in which such foreign
contribution was utilised by it :

Provided that where such association obtains any foreign contribution through any branch other than the branch of the bank
through which it has agreed to receive foreign contribution or fails to give such intimation within the prescribed time or in
the prescribed manner, or gives any intimation which is false, the Central Government may, by notification in the Official
Gazette, direct that such association shall not, after the date of issue of such notification, accept any foreign contribution
without the prior permission of the Central Government. (I-A) Every association referred to in sub-section (1) may, if it is
not registered with the Central Government under that sub-section, accept any foreign contribution only after obtaining the
prior permission of the Central Government and shall also give, within such time and in such manner as may be prescribed,
an intimation to the Central Government as to the amount of foreign contribution received by it, the source from which and
the manner in which such foreign contribution was received and the purposes for which and the manner in which such
foreign contribution was utilised by it.”

As per the provisions of Section 6 no association is entitled to receive foreign contribution unless it has either registered
itself or has obtained prior permission.

Organisation must already be registered - Only those organisations are eligible for registration under FCRA, which are
registered under Society Registration Act, 1860, the companies Act, 1956, the Bombay Public Trust Act, 1950 or as a public
trust under general law. Though FCRA does not distinguish between registered and unregistered organisations, but the
implications of section 6(1) virtually ensures that only register organisations would be able to get themselves registered as a
legal entity under FCRA. Section 6(1) categorically specifies that organisation having a definite cultural, economic,
educational, religious or social programme shall only accept foreign contribution. In the absence of registration and written
documentation, it may not be possible for an organisation to prove definiteness of its aims and objectives.

Specification of bank branch - Sub-section (1)(b) of section 6 of FCRA further specifies that the foreign contribution should
only be received from one of the branches of a bank as specified in the application. It is necessary to open a bank account
designated for receipt of foreign contribution. The account can be opened with Indian funds before applying for registration.
It may be noted that, subsequently, this account should exclusively remain for crediting foreign contribution only. Under no
circumstance domestic contribution should be mixed in this account. This foreign contribution does not necessarily mean
foreign currency or exchange, and therefore an organisation may receive foreign contribution in Indian currency as
subsequently receivable or otherwise, within the scope of FCRA

Preventing acceptance of contributions - The proviso to section 6(1) states the circumstances under which the Central
Government may prevent the organisation from accepting foreign contribution without prior permission. The circumstances
are :

(i) the organisation receives foreign funds from an account other that the branch of the bank through which it had agreed to
receive at the time of registration.
(ii) the organisation fails to give intimation within the prescribed time or in the prescribed manner.
(iii) the organisation gives any intimation which is false.

If the organisation commits any of the above-mentioned violations, then the Central Government may by notification, direct
such organisation to receive foreign funds only after taking prior permission. It may be noted that the proviso to section 6(1)
uses the word “may” thereby implying it to be a discretionary power in the lands of the Central Government which it has to
exercise in a just and fair manner, keeping in view the facts and circumstances of each case.

Form for registration - Organisations desirous of registering themselves with the FCRA department are required to apply in
Form FC-8 along with various documents.

Checklist of documents to be filed

The following documents must be filed for obtaining registration :

i) Form FC-8 duly filled up in triplicate.

ii) Audited statement of accounts of past three years.
iii) Annual Report specifying activities of past 5 years.
iv) Detail of the beneficiaries and detail of the socio-economic factors of the region in which the NGO is working.
v) List and geographical detail of the state, and districts proposed for work.
vi) Certified copy of the Registration Certificate.
vii) Certified copy of the Bye-laws and Memorandum and Article of Association whichever is applicable.
viii) Copy of certificates of exemption or registration issued by the Income Tax Department u/s. 80G and 12A.
ix) Copy of any prior permission granted to the organisation.
x) Copy of resolution of Governing Body of the organisation, authorising the registration under FCRA.
xi) Copy of Power of Attorney or the resolution of Governing Body by which the Chief Functionary is authorised to submit
FC-8.
xii) List of present members of the Governing Body of the organisation and the office bearers.
xiii) Copy of any Journal or other publication of the organisation.
xiv) If the association is having any parent or sister or subsidiary organisation, which is registered under the FCRA then the
registration number along with Ministry of Home Affairs file number should be mentioned.
xv) If the association has submitted any application earlier then its reference number should be mentioned.
xvi) If the association has received any foreign contribution with or without the prior approval of the Central Government,
then the detail should be given.
It may be noted that the onus of getting registered under FCRA lies on the association and therefore before accepting foreign
contribution, it is the responsibility of association to ensure all the requisite formalities are complied with and registration is
granted before accepting any foreign exchange.

Time limit for making application for registration

No specific time limit has been provided under FCRA for making an application, unlike Income Tax Act, which requires an
organisation to apply within one year from its creation or registration under section 12A. Normally FCRA is granted after 3
years of active existence, therefore, the application should be made after three years though nothing in the Act prevents from
making such application earlier.

Relevance of three years’ audited statement : In the absence of any time limit provided in FCRA, reliance is normally made
on clause 7 of Form FC-8, which provides for submission of past three years audited statement. On the basis of the
requirement of form FC-8, it is normally understood that application for registration under FCRA can only be after 3 years
of the creation of the organisation. But, in our opinion, under FCRA laws, there is no such restriction, which prohibits
application before completion of three years.

The requirement of submission of 3 years audited statements under Form FC-8, is only directory in nature and there is no
reason to make an implicit presumption of a 3years waiting period before applying for registration. Incidentally, Form FC-
‘1A’, which is the application form for seeking, prior permission also requires submission of last 3 years audited statements.
Therefore, if this submission of 3 years statements is assumed to be a mandatory pre-condition, then an organisation cannot
even apply for prior permission before completion of three years.

Rule does not specify any time limit - Rule 3A of the Foreign Contribution (Regulation) 1976, provides that an application
for registration of an association under section 6, shall be made in Form FC-8. Rule 3A, does not provides for any period of
restriction only after which the application can be made. It is only the Form FC- ‘1A’ and Form FC-8, which require as a part
of enclosures, 3years audited statements and detail of activities. As far as Form FC- ‘1A’ is concerned it is a foregone
conclusion that if 3 years audited statements are not available, lesser number of years audited statements could be enclosed.
But, somehow a confusion in practice as well as understanding seemed to have crept in that application for registration can
only be made after the completion of 3 years.

Supreme court’s view - In this regard, it is pertinent to refer the Supreme Court decision in STO vs. K.I. Abraham [1967] 20
STC 367, where is was held that the rule making authority had no power to prescribe any time restriction. Infact, the FCRA
rules also do not provide any restrictive time limit. It is only the requirement of Form FC- ‘1A’ as well as Form FC-8, which
requires 3 years audited statements and activity reports. Such requirements are directory and general in nature and
therefore, should not be construed as a mandatory requirement of the FCRA.

Application can be filed at any time - Consequently, in our opinion, application for registration under FCRA can be filed any
time after the registration of the organisation. But, the organisation with a considerable past history of activities have a
greater chance of convincing the FCRA authorities with regard to the genuiness and the relevance of their purpose.

Field Enquiry

The FCRA department may ask the intelligence bureau for a report. Some authorities from the intelligence bureau may visit
the office and the project area of the organisation and inspect the books of account and other records available. On the basis
of the reports submitted by the intelligence bureau the FCRA department decides whether to accept or reject the application.

The FCRA department issues a registration certificate and provides a permanent registration number. This registration
number is required to be quoted in all future correspondences and filling of returns and forms.

Time limit for granting registration

There is no time limit mentioned under the FCRA either for granting or rejecting the application. Normally, the application
is expected to be processed within a period of six months but it is found that applications for registration are delayed for
even two to three years. The FCRA guidelines available on the website of the Ministry of Home Affairs, provide that the
certificates from recommending activities (District Collector, etc.) are very important and help in expending the process of
registration. In the absence of a prescribed time limit, it is expected that the authority should dispose of the application
within a reasonable time. The duration of such reasonable time will depend upon the prevailing facts and circumstances.

Undertaking by the Chief Functionary

The application form which is FC-8, was amended vide Foreign Contribution (Regulation) (Amendment) Rules, 1996[GSR
592(E), dt. 27.12.1996]. After the amendment an undertaking has to be given by the Chief Functionary, affirming that the
informations are correct and the organisations would undertake to abide by the following :

(i) Inform within 30days regarding change of name, address, objects, etc. with evidence.
(ii) Not to accept any foreign contribution without prior permission, if more that 50% of the office bearers as were
mentioned in the application for registration are changed or replaced.
(iii) Not to change the bank account or branch of the bank without prior permission.
(iv) Not to accept foreign contribution before the registration is granted or with prior permission only.

Text of the undertaking : The text of the undertaking is a follows :

“ The Association named hereinabove affirms that the information furnished above is correct and undertakes :

i) to inform the Central Government (Ministry of Home Affairs) within thirty days, if any, change takes place in regard to the
name of the Association, its address, its registration, its nature, its aims and objects with documentary evidence effecting the
change ;
ii) to obtain prior permission for change of office bearer(s), if at any point of time such change causes replacement of 50% or
more of the office bearers as were mentioned in the application for registration under the Foreign Contribution (Regulation)
Act, 1976 and undertakes further not to accept any foreign contribution except with prior permission till the permission to
replace the office bearer(s) has been granted.
iii) not to change the bank or branch of the bank without prior permission of the Central Government. The reasons for
change of bank or branch of the bank shall have to be relevant and justifiable ; and
iv) not to accept any foreign contribution unless it has obtained either the registration number, as applied for hereinabove,
or prior permission of the Central Government under sub-section (1-A) of Sec. 6 of the Foreign Contribution (Regulation)
Act, 1976.”

Nature and implication of the undertaking : It is important that the nature and implication of this undertaking is properly
understood by the functionaries of the applicant organisation. The following analysis is made in brief :

i) If there is any change in the name, address, the nature of registration, aims and objectives at any time after the submission
of the application, then the FCRA authorities are required to be intimated within a period of 30 days.
ii) The office bearers of the association are required to continue in the office and any change which causes more than 50% of
the office bearers as were mentioned in the application for registration, automatically debars the organisation from
accepting foreign contribution. So in case where more than 50% of the office bearers are changed then it is required that the
FCRA authorities are informed and due approval is taken. During the period between the date of change and the approval
from FCRA authorities, the FCRA registration will remain suspended and the association cannot receive any foreign
contribution. If it wants to receive foreign contribution it can do with prior permission only. This provision has been
introduced to prevent the misuse and sale of FCRA registered associations.
iii) Under FCRA only one bank account is permissible for the purpose of receiving foreign contribution. Therefore, for the
change in bank account, due information should be given to the FCRA authorities and the change should be effected only
after receiving the permission for same.

50% Change in Board of Organisations who applied prior to 27.12.1996

As discussed above, that after 27.12.1996, all organisations applying or registration are required to give an undertaking
which, among other conditions, specifies that foreign contributions, specifies that foreign contribution should not be
accepted if more than 50% of office bearers, as were mentioned in the application for registration are changed or replaced.
But the organisations who had applied before 27.12.1996 and were registered, are not bound by any such undertaking. The
undertaking is a part of Form FC-8 and nothing in this regard has been mentioned in the FCRA. Therefore, those
organisations who are not signatory to such undertaking are legally not bound by the clauses of the undertaking.The
undertaking in the earlier form did not have the clause of change in more than 50% of office bearers. In the absence of any
specific provision in the FCRA, the undertaking given in Form FC-8, does not create any mandatory obligation on the older
organisations. But, the intent of the statute is very clear that it does not appreciate comprehensive changes in the governing
structure. Therefore, it is desirable that, even the organisations who applied and were registered prior to the coming into
effect of new Form FC-8 should also inform the FCRA authorities regarding the changes in excess of 50% of the office
bearers. But, the new organisations are bound under a legal obligation and therefore, should not under any circumstances
accept foreign funds without prior permission.
Whether form can provide for a limitation

It has been debated in several case laws whether direction by virtue of a Form can create legally mandatory obligation on the
assessee. Many High Courts held that a limitation provided under a Form was beyond the scope of the Act and therefore not
tenable. But, recently the Supreme Court in CIT v. Nagpur Hotel Owners Association (2001)247 ITR 201, discussed this
issue in context of filing of Form 10, under Income Tax Rules for accumulation under section 11(2) of the IT Act. The Court
reversed the order of the High Court holding that condition prescribed in a Form can also be of mandatory and binding in
nature, if the purpose and the scheme of the pertaining Act is threatened to be defeated. Some observations of the Court are
as under :

“Therefore, even assuming that there is no valid limitation prescribed under the Act and Rules even then, in our opinion, it
is reasonable to presume that the intimation required under section 11 has to be furnished before the assessing authority
completes the concerned assessment because such requirement is mandatory and without the particulars of this income, the
assessing authority cannot entertain the claim of the assessee under section 11 of the Act, therefore, compliance with the
requirement of the Act will have to be any time before the assessment proceedings. Further, any claim for giving the benefit
of section 11 on the basis of information supplied subsequent to the completion of assessment would mean that the
assessment order will have to be reopened. In our opinion, the Act does not contemplate such re-opening of the assessment.
In the case in hand it is evident from the records of the case that the respondent did not furnish the required information till
after the assessments for the relevant years were completed.”

Whether registration under Income Tax Act necessary

The FCRA does not specify registration under Income Tax Act as a pre-condition for getting registration under the FCRA.
There are instances where FCRA registration has been provided without section 12A registration under the Income Tax Act.
But, since FCRA registration is normally provided after satisfying the existence of activities and genuineness of the
objectives, which may take sometime and for Income Tax purposes, the organisation has to apply within one year of its
creation. Therefore, it is expected of an NGO to have completed its Income Tax registrations prior to applying for
registration under FCRA.

Foreigners on Board at the time of registration

The FCRA does not distinguish between registered and unregistered organisations, but the implications of section 6(1)
virtually ensures that only already registered organisations would be able to get themselves registered under FCRA. Section
6(1), categorically specifies that organisations having a definite cultural, economic, educational, religious or social
programme shall only accept foreign contribution. In the absence of registration and written documentation, it may not be
possible for an organisation to prove definiteness of its aims and objectives. Therefore only those organisations will be
eligible for registration under FCRA, which are registered under Societies Registration Act, 1860, the Companies Act, 1956,
the Bombay Public Trust Act, 1950 or as a public trust under general law.

In the light of the above discussion, under FCRA, an organisation registered in India, having a definite cultural, economic,
educational, religious or social programme is entitled to apply for registration. In India legally valid charitable organisations
can be registered as society or trust with foreigners as board members/trustees. Therefore, there is no legal bar on such
organisation in making an application to the FCRA. FCRA authorities may exercise greater vigil and caution in processing
such application. But as a matter of internal practice FCRA is not granting registration to organisation with foreigners on
board. Such registration are given only in exceptional circumstances, very few instances are available.

NGOs bringing out newspapers/newsletters

NGOs engaged in publishing newspaper registered under the Press Registration of Books Act, 1867 are required to furnish
details regarding such newspaper and also give a declaration in Form X (enclosed in Annex. 3.1). The Government Of India
issued a notification in 1987 allowing NGOs which have publications other than newspaper as defined in section 1(1) of Press
and Registration of Books Act, 1867. Further, a certificate is also required to be obtained from the Registrar of Newspapers
of India, that the publication of the NGOs does not form in the category of newspaper as per section 1(1) and falls in the
category B, which is permissible. The text of the notification is as under :

“S.O.760(E), Dated August 3, 1987 [F.No.II/21022/14(5)/87-FCRA-I], published in the Gazette of India.

In exercise of the powers conferred by Section 31 of the Foreign Contribution(Regulation) Act,1976(49 of 1976), the Central
Government hereby exempts from the operation of the provisions of section 4(1)(b) any association(not being a political
party), organisation or individual (not being a candidate for election) whoso printed work is -

(i) not a newspaper as defined in section 1(1) of the Press and Registration of Books Act, 1867 (25 of 1867); or
(ii) not required to be registered under Party V-A of the said Act, though it may, in fact, be registered by the Registrar of
Newspapers of India under the Part :
subject to the condition that such Association (not being a political party), organisation or individual (not being a candidate
for election) whosoever claim exemption under this order shall furnish a declaration in the Form annexed here to the
Central Government and such declaration shall subsequently be furnished in each calendar year by 31st January.”

Certificate of Recommendation

Foreign Contribution Amendment Rules, 2000, inserted clause 10A in Form FC-1A, requiring the insertion of a certificate
from a competent authority. This certificate can be given by any one of the following :

(1) Collector of District

(2) Department of the Statement Government
(3) Ministry or Department of the Government of India

In this certificate the competent authority certifies the address and the field of activities in which the organisation is
working. It also states that there are no adverse antecedents of the organisation, the proposed activities will be beneficial to
the people living in that area and the detail of prior permission if taken earlier.

Refusal to grant registration

As far as the rejection or refusal of an application for registration is concerned, section 6 does not state anything clearly.
Section 6(1) is completely silent about the grounds or the reasons on the basis of which an application can be rejected. In the
case of MARPU, Hyderabad v. Union of India, Andhra Pradesh High Court, WP No. 756, dated 1987 it was held that the
scope of section 6(1) was confined to registration of an organisation having a definite cultural, economic, educational,
religious or social programme. There was no indication in section 6 regarding the grounds on which an application for
registration could be declined. However some indications in this regard are available from section 10 which talks about the
power of Central Government to prohibit receipt of foreign contribution if it believes that it may effect the sovereignty and
integrity of India or the public interest.

Any authority possessing the power to register has an implicit power to reject or refuse to register, as well, but the power of
refusal should not be arbitrary, ambiguous and unreasonable and should be in consonance with the purpose and intent of
section10 of the Act. If the application of an association is refused, then the authorities have to communicate the reasons for
refusal to the applicant. It is necessary that the order of rejection must contain the reason on the basis of which the refusal
has been made, so that in case of an appeal the court could study the tenability of such reasons. The principles of “audi
alteram partem” are very much applicable during the rejection of an application as basic principle of natural justice.

Powers of Government to prohibit acceptance of contributions

In the light of the powers conferred on the Central Government under section10, it is abundantly clear that any association
applying for registration may not automatically get registration. Precaution and discretion can be exercised by the Central
Government in order to ensure that the purposes of FCRA are safeguarded. The Central Government may prohibit
acceptance of foreign contribution, if it is satisfied that such acceptance is likely to affect the following :
(i) the sovereignty and integrity of India; or
(ii) the public interest; or
(iii) freedom or fairness of election to any Legislature; or
(iv) friendly relation with any foreign State; or
(v) harmony between religious, racial, linguistic or regional groups, castes or communities.

Measures likely to be adopted - In the likelihood of the above mentioned eventualities the Central Government may resort to
any of the following measures :

(i) It may even prohibit persons and association not specifically prohibited under section 4. In other words, it may also
prohibit persons and associations other than specified in section 4, from accepting foreign contribution. The persons
prohibited under section 4 are the following :

(a) candidate for election,

(b) correspondent, columnist, editor, owner, printer or publisher of a registered newspaper
(c) [Judge], Government servant or employee of any corporation,
(d) member of any legislature,
(e) political party or office-bearer thereof.

(ii) It may require association specified under section 6 to accept foreign contribution after obtaining prior permission only.
In other words, even the associations which are registered under FCRA, can be asked to accept foreign contribution after
taking prior permission.

(iii) It may require persons or associations specified under section 6 to furnish intimation/information regarding foreign
contribution received and utilised by them within such time as may be prescribed by the Central Government.

(iv) It may require persons other than those specified under section 9 not to accept any foreign hospitality without obtaining
prior permission. It may be noted that section9 restricts acceptance of foreign hospitality except with prior permission by

- member of a Legislature
- office, bearer of a political party
- judge
- Government servant or employee of any corporation
while visiting any country or territory outside India, and accepting except with the prior permission of the Central
Government, any foreign hospitality.

(v) Further, the Central Government may require any person or class of persons, not specified in section 9 to furnish
intimation/information regarding receipt of any foreign hospitality, within such time as may be prescribed.

Text if satisfactory provision - The provisions of section10 are as under :

“Power of Central Government to prohibit receipt of foreign contribution, etc. in certain cases. - The Central Government
may —

(a) prohibit any association, not specified in section 4, or any person, from accepting any foreign contribution;
(b) without prejudice to the provisions of sub-section (1) of section 6, require any association specified in that sub-section, to
obtain prior permission of the Central Government before accepting any foreign contribution;
(c) require any person or class of persons, or any association, not being an association specified in section 6, to furnish
intimation within such time and in such manner as may be prescribed as to the amount of any foreign contribution received
by such person or class of persons or association, as the case may be, and the source from which and the manner in which
such contribution was received and the purpose for which and the manner in which such foreign contribution was utilised;
(d) require any person or class of persons, not specified in section 9, to obtain prior permission of the Central Government
before accepting any foreign hospitality;
(e) require any person or class of persons, not specified in section 9, to furnish intimation, within such time and in such
manner as may prescribed, as to the receipt of any foreign hospitality, the source from which and the manner in which such
hospitality was received :

Provided that no such prohibition or requirement shall be made unless the Central Government is satisfied that the
acceptance of foreign contribution by such association or person or class of persons, as the case may be, the acceptance of
foreign hospitality by such person, is likely to affect prejudicially-

(i) the sovereignty and integrity of India ; or

(ii) the public interest; or
(iii) freedom or fairness of election to any Legislature ; or
(iv) friendly relations with any foreign state ; or
(v) harmony between religious, racial, linguistic or regional groups, castes or communities.

Appellate remedies

If an application is rejected and the applicant believes that an unjust order was passed against him, then he can appeal to
High Court within a period of sixty days from the date of the order of rejection. The period of sixty days should be counted
from the date of the order and not the date of receipt of the order.

The statutory provision - The provision for appeal is provided as per section 21(2) & (3) which is an under :
(2) Any organisation referred to in section 5, or any person or association referred to in section - 9 or section 10, aggrieved
by an order made in pursuance of the Explanation to sub-section (1) of section 5 or by an order to the Central Government
refusing to give permission, or by any order made by the Central Government, under section 5, or section 9 or section 10, as
the case may be, may within sixty days from the date of such order prefer an appeal against such order to the High Court
within the local limits of whose jurisdiction the appellant ordinarily resides or carries on business or personally works for
gain, or, whether the appellant is an organisation or association, the principal office of such organisation or association is
located.

(3) Every appeal preferred under this section shall be deemed to be an appeal from an original decree and the provisions of
Order XLI of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908), shall, as far as may be, apply thereto as they
apply to an appeal from an original decree.

Appeal against prohibition to receive contribution - It may be noted that by FCR(Amendment) Act, 1985, the scope of
section 6 was enlarged and penalty for non-compliance of certain provisions of section 6 was provided vide the proviso to
sub-section (1). It would have been proper if section 21(2) had also been suitably amended thus allowing the aggrieved
organisation to appeal against an order passed under section 6 of FCRA. However the power to prohibit an organisation
from receiving foreign contribution is rejected, therefore, can go for an appeal within 60 days from the date of the order to
the High Court within the local limit of whose jurisdiction the appellant organisation’s office is located. The appeal shall be
made as per the provisions of Order XLI of the First Schedule to the Code of Civil Procedure, 1908.

Overall Summary

To sum up the discussions :

(i) Under section 6 of FCRA, organisations having a definite cultural/social/educational religious/economic object shall
accept foreign contribution only after registering itself with the Central Government as per the provision of FCRA.
(ii) It should receive foreign contribution only through one designated Bank account.
(iii) Although FCRA does not distinguish between registered and unregistered organisations, normally organisations
registered under Society Registration Act, 1860, the Companies Act, 1956, the Bombay Public Trust Act, 1950 or as a public
trust are only eligible for registration.
(iv) It is necessary to open and designate one specific bank account for receipt of foreign contribution. This bank account
should be only for foreign contribution, and domestic contribution should not be mixed into this account.
(v) To apply for registration, Form FC-8 along with enclosures is required to be filed in duplicate to the Secretary,
Government of India, Ministry of Home Affairs, Internal Security Wing-FCRA, 4th Floor, Lok Nayak Bhawan, Near Khan
Market, New Delhi-110003.
(vi) The time limit for making an application for registration has not been prescribed in the Act. Therefore, an application
for registering under FCRA can be made any time after the legal constitution of an organisation.
(vii) Form FC-8 and Form FC-‘1A’, requires three years audited statements to be enclosed with the application forms. This is
a directory provision and the organisations can submit the audited statements for lesser number of years as are available.
(viii) It may be difficult for an absolutely new organisation to get FCRA registration because certain past activities and
records help the FCRA authorities to determine the genuineness and relevance of the organisation.
(ix) Form FC- ‘1A’, also requires enclosures of three years audited statements, but, normally even a new organisation having
a confirmed commitment from the donor is entitled to apply for prior permission. And the requirement of three years
audited statements is waived accordingly.
(x) After the application is made, the FCRA department may make field inquiry with the help of Intelligence Bureau. On the
basis of the report submitted by the Intelligence Bureau, the application would be processed and accordingly accepted or
rejected.
(xi) There is no time limit provided under FCRA for processing of the application. Normally, six months should be taken to
process an application for registration. At times, application are delayed. It is important to ensure that the recommendation
certificate of the appropriate authority under clause 10A in Form FC-8 is enclosed. It will help in expediting the application.
(xii) The Chief functionary is required to give an undertaking regarding the following :

(i) Inform within 30days regarding change of name, address, objects, etc., with evidence.
(ii) Not to accept any foreign contribution without prior permission, if more than 50% of the office bearers as are mentioned
in the application for registration are changed or replaced.
(iii) Not to change the bank account or branch of the bank without prior permission.
(iv) Not to accept foreign contribution before the registration is granted or with prior permission only.
(xiii) The undertaking given by the Chief functionaries was amended vide notification dt.27.12.1996. Therefore, it can be
argued that all organisation registered prior to 27.12.96 are not bound by the undertaking which they have not given. In such
circumstances, only those organisations who applied on or after 27.12.1996 are debarred from accepting foreign
contribution, in case of a change of more that 50% of the Office bearers.
(xiv) It is not necessary for an organisation to possess registration under section 12A of the Income Tax Act before applying
for registration under FCRA. But, it is desirable that 12A registration is availed before applying for FCRA registration.
(xv) Under Indian laws, a valid charitable organisation can be registered with a foreigner on its Board. Therefore,
application for registration can be made by such society having foreigner as its member. The presence of a foreigner may
make the FCRA authorities more vigilant and circumspect while processing the application. FCRA authorities normally do
not grant registration in such cases.
(xvi) Charitable organisations engaged in publishing newspaper are not eligible for registration unless the publication falls
in category B of publication under Press Registration of Books Act, 1867.
(xvii) A certificate of recommendations from the following authorities is required to be enclosed :

(a) Collector of District

(b) Department of the State Government
(c) Ministry or Department of the Government of India
(xviii) If the application is rejected, an appeal within 60 days from the date of the order can be made to the High Court.
(xix) The reasons for refusal are not explicitly, provided in section 6, but the refusal for registration could be on the basis of
any of the reason specified in section 10 :
(i) the sovereignty and integrity of India; or
(ii) the public interest; or
(iii) freedom or fairness of election to any Legislature; or
(iv) friendly relations with any foreign State; or
(v) harmony between religious, racial, linguistic or regional groups, castes or communities.

Annexure - 3.1

FORM X - Declaration

I, on behalf of the association named hereinafter declare that the printed work/publication of which the association is the
owner/editor/printer/publisher and whose details have been furnished hereafter, is not a ‘Newpaper’ as per definition of
Section 1(1) of Press and Registration of Books Act, 1867 and/or is not required to be registered under part 6(a) of the said
Act (a copy of certificate issued by Registrar of Newspapers for India to the effect that the said printed work falls within the
category ‘B’ of publication as per classification made by Rergistrar of Newpaper for India to be attached).

(i) Name of the Association

(ii) Address of the Association
(iii) (a) Whether required to obtain prior permission, is so, Ministry of Home Affairs Order Number and date.
(b) Whether prohibited from acceptance of any Foreign Contribution, if so, Ministry of Home Affairs Order Number and
date.
(iv) Title of publication.
(v) Periodicity of publication.
(vi) If registered under the Press and Registration of Books Act, 1867, Registration No.
(vii) Date of first publication.
I further undertake to abide by the following conditions in respect of the above printed work/publication :

(1) That it does not and shall not in future contain any political news, views or comments thereon and will be absolutely non-
political.
(2) That it does not and shall not in future contain any article or reference criticising or commenting on any religion, faith,
ritual, practice which may hurt the sentiments of the particular religious group or sect directly or indirectly.
(3) That it does not and shall not in future contain any objectionable material to affect prejudicially :-
(a) the sovereignty and integrity of India, or
(b) the public interest; or
(c) freedom or fairness of election to any Legislature; or
(d) friendly relations with any foreign State; or
(e) harmony between religious, racial, linguistic or regional groups, castes or communities.

(Chief Functionary)
Name :
Place : Seal of the Association
Date :

PRIOR PERMISSION UNDER FCRA

Understanding ‘prior permission’ under FCRA

An association or an organisation can receive foreign contribution even without registration with prior permission
from the FCRA department. Foreign funds and materials can only be received under two circumstances-

i) the organisation has obtained permanent registration from the FCRA department.

ii) the association or the organisation obtains prior permission from the FCRA department on case to case basis.

The relevant circumstance - Reference to the term prior permission is made in Section 5 and 6 of the FCRA. Prior
permission is given on case-to-case basis and separate permission would be necessary for any subsequent receipt
and separate transactions. Generally prior permission will be required under the following circumstances :

i) the organisation does not have permanent FCRA registration number.

ii) the FCRA registration number has been cancelled by the Government .

iii) the association is instructed by the Central Government to take prior permission under the provisions of Section
10 where power have been provided to prohibit any organisation from receiving foreign funds.

iv) the FCRA number is suspended due to violation of the provisions and conditions specified under the FCRA.

v) the organisation is of political nature, not being a political party.

vi) any person resident in India or any citizen of India resident outside India, receiving foreign funds on behalf of
an organisation of political nature.

The relevant statutory provisions - The expression of prior permission appears in Section 5(2)(a)(b)(c) and Section
6(1-A). The relevant extract of Section 5 and 6 is reproduced as under :

“ Section 5(2) (a) Except with the prior permission of the Central Government, no person, resident in India, and no
citizen of India, resident outside India, shall accept any foreign contribution, or acquire or agree to acquire any
foreign currency, on behalf of an organisation referred to in sub-section (1).

(b) Except with the prior permission of the Central Government, no person, resident in India, shall deliver any
foreign currency to any person if he knows or has reasonable cause to believe that such other person intends, or is
likely, to deliver such currency to an organisation referred to in sub-section (1).

c) Except with the prior approval of the Central Government no citizen of India, resident outside India, shall
deliver any currency, whether Indian or foreign, which has been accepted from any foreign source, to -

i) Any organisation referred to in sub-section (1),

ii) Any person, if he knows or has reasonable cause to believe that such person intends, or is likely, to deliver such
currency to an organisation referred to in sub-section (1).

Section 6(1-A) : Every association referred to in sub-section (1) may, if it is not registered with the Central
Government under that sub section, accept any foreign contribution only after obtaining the prior permission of the
Central Government and shall also give, within such time and in such manner as may be prescribed, an intimation
to the Central Government as to the amount of foreign contribution received by it, the source from which and the
manner in which such foreign contribution was received and the purposes for which and the manner in which such
foreign contribution was utilised by it.

Scope of the term “Prior permission” - The mention of the term “prior permission” time and again in various
provisions of the FCRA reflect the delicate balance of ensuring that the foreign funds are vigilantly monitored and
at the same time the country does not loose the valuable inflow of genuine foreign exchange. The Act has not
closed the doors for even organisations of political nature by virtue of the term “prior permission”. The word
“prior” implies that there can be no ex post facto approval permissible. The concerned organisation or the entity
has to possess prior permission before receiving any foreign funds, which effectively provides an opportunity to
the Central Government to judge and consider the merit and genuinity of a transaction on case-to-case basis before
it takes place.

Procedure for obtaining ‘prior permission’

The Organisation is required to apply in Form FC-1A for prior approval to the FCRA department along with the
required documents.

The statutory provision - Section 11 which governs the provision of prior permission is as under :

Application to be made in prescribed form for obtaining prior permission to accept foreign contribution or
hospitality - (1) Every individual, association, organisation or other person, who is required by or under this Act to
obtain the prior permission of the Central Government to accept any foreign contribution or foreign hospitality,
shall, before the acceptance of any such contribution or hospitality, make an application for such permission to the
Central Government in such form and in such manner as may be prescribed.

(2) If an application referred to in sub-section (1) is not disposed of within ninety days from the date of receipt of
such application, the permission prayed for in such application shall, on the expiry of the said period of ninety
days, be deemed to have been granted by the Central Government :
Provided that, where, in relation to an application, the Central Government has informed the applicant the special
difficulties by reason of which his application cannot disposed of within the said period of ninety days, such
application shall not, until the expiry of the further period of thirty days, be deemed to have been granted by the
Central Government.”

Form of application - Rule 3 of the Foreign Contribution (Regulation) Rules 1976, which specifies the various
forms as are required for obtaining prior permission under various provisions of the Act, reads as follows :
“ Application for obtaining prior permission to receive foreign contribution or foreign hospitality : (3) An
application for obtaining prior permission of the Central Government to —

(a) receive foreign contribution under sub-section (1) of Section 5, or clause. (a) of sub-section (2) of that section,
shall be made in Form FC-1 ;

(aa) receive foreign contribution under provision to sub-section (1) of Section 6, or under sub-section (1-A) of that
section or clause (b) of section 10, shall be made in Form FC-1A ;

(b) accept foreign hospitality under Sec. 9 or CI. (d) of Sec. 10, shall be made in Form FC -2.”

As is evident from the aforesaid, prior permission is required to be taken under various provisions of FCRA and
the concerned organisation has to apply in the prescribed form. The organisation which are desirous of getting
prior permission under section 6(1) should apply in Form FC-1A along with the requisite documents to the
Secretary, Government of India, Ministry of Home Affairs, New Delhi. Such application can be sent by registered
post. Submission of proper documents and information’s would ensure quick processing of the application.

Documents to be furnished - The organisation should take care in providing important documents/information such
as (i) details of the designated bank account through which foreign contribution is to be received (ii) A copy of the
letter of commitment received from the donor (iii) extensive details of the proposed project (iv) In certain cases,
clearance from other Government departments and ministries may also be required, such clearances should be
obtained before applying for prior permission. A complete checklist of the documents required to be submitted is
provided in Para 4.3.

The application organisation should carefully retain the evidence of submission of Form FC-1A i.e. the receipt of
registered post and the acknowledgement of the FCRA department.

Checklist of Documents to be submitted

i) Form FC 1A, duly filled up in triplicate.

ii) Audited statement of accounts of past three years.

iii) Annual Report specifying activities of past 3 years.

iv) Details of the beneficiaries and details of the project for which foreign contribution
is expected. The detail should include narrative as well as financial details.

v) Letter of commitment from the foreign donor agreeing in principle to provide funds.

vi) Certified copy of the registration certificate under the Societies Act/ Companies Act.
vii) Certified copy of the Bye-laws and Memorandum and Article of Association whichever is applicable.

viii) Copy of certificates of exemption or registration issued by the Income Tax Department under sections 80G or
12A.

ix) Copy of any prior permission granted to the organisation.

x) Copy of resolution of governing body of the organisation, authorising the prior permission.

xi) Copy of power of attorney or the resolution of governing body by which the Chief Functionary is authorised to
submit FC-1A.

xii) List of present members of the governing body of the organisation and the office bearers.

xiii) Copy of any journal or other publication of the organisation.

Time Limit for making application

An application for prior permission under Form FC-1A can be made any time after the legal constitution of an
organisation. Though clause 7 of Form FC-1A requires submission of three years audited statements and details of
activities of past three years. Where the organisation is less than three years old, it can submit the documents for
lesser number of years as may be available.

Receipt of Funds before getting prior permission

If the funds are credited in the bank account prior to the receipt of approval from the FCRA authorities, then the
funds should not be applied for the purposes for which they are received i.e. it should be kept intact and should be
spent only after getting prior permission.

If the application is rejected then the funds have to be refunded back to the respective donors. The refund of fund
back to the foreign agencies may involve legal formalities under Foreign Exchange Management Act, depending
on the quantum of contribution received.

Prior Permission by Organisation of Political nature

The organisations which are of political nature under section 5 can also apply for prior permission to receive
foreign funds. Such organisation should apply in Form FC-1. It may be noted that such prior permission can be
obtained by organisation of political nature but not political parties. The application has to provide the reference
number of the order published by the Central Government in the Official Gazette specifying the object as an
“Organisation of Political nature, not being Political Party”, section 5 and rule 3(a) are relevant in this regard.

Prior Permission for receiving Foreign Hospitality

Under FCRA, the following are prohibited from accepting foreign hospitality except with prior permission :

- member of a legislature
- office; bearer of a political party
- Judge
- Government servant or employee of any corporation
The above-mentioned persons are required to apply in Form FC-2 for availing any foreign hospitality. In this Form,
details regarding the nature of hospitality, the approximate amount of expenses, the specific dates and countries is
required to be provided.

4.7-1 The exceptional situation - Further, it has been provided that no such prior permission would be necessary in
case of an emergency medical aid on account of a sudden illness. In such cases, the person receiving such
hospitality can give, within one month from the date of receipt of such hospitality, an intimation to the Central
Government, regarding the receipt of such hospitality and the source and the manner in which such hospitality was
received. Section 9 and rule 3(b) are relevant in this regard.

Certificate of Recommendation

4.8 Foreign Contribution Amendment Rules, 2000, inserted clause 10A in Form FC-1A, requiring the insertion of a
certificate from a competent authority. This certificate can be given by any one of the following :

(1) Collector of District

(2) Department of the State Government
(3) Ministry or Department of the Government of India

In this certificate the competent authority certifies the address and the field of activities in which the organisation is
working. It also states that, there are no adverse antecedents of the organisation, the proposed activities will be
beneficial to the people living in that area and the detail of prior permission if taken earlier.

Field Enquiry

4.9 After receipt of the application, the FCRA department writes to the Intelligence Bureau of the Government of
India, to assess the background and the credibility of the applicant organisation. The Intelligence Bureau may also
assess the objective and activities ; whether the activities are sensitive to any particular religion, community,
people of backward class such as SC and ST and whether the activities are anti-national in nature.

The Intelligence Bureau may visit the office of the organisation and verify the books of accounts and other records
available. Enquiries may also be made through the local Police Station and neighborhood people and organisations.

Time limit for granting ‘prior permission’

4.10 Sub-section (2) of Section 11 provides the time limit of 90 days for disposal of application for prior
permission. By virtue of the proviso to Section 11(2) the FCRA department may avail a further period of 30 days
to dispose of the application for prior permission. Normally the department should inform the applicant about the
delay in processing of the application. In total a prior permission application is required to be processed within 120
days. The period of 120 days will be counted from the date of receipt of the application by the FCRA department.
The FCRA department does not have the obligation to inform the applicant within these 120 days which implies
that any unforeseen postal delay in communication has to be added to these 120 days. Once the FCRA department
has taken a decision within the said 120 days and has dispatched the communication to the association, its
obligation is over.

Deemed permission

4.11 The proviso to Section 11 provides that if the prior permission is not granted within the prescribed time limit,
then the applicant can assume that the prior permission is deemed to have been granted. The deeming provision
provides an automatic right for receiving foreign funds to the applicant organisation even in the absence of any
written communication from the FCRA department.

Before invoking the deeming provisions, the recipient organisation should wait for a reasonable period from the
end of 120 days to ensure that the communication is not in postal transit.

By virtue of the deeming provision the applicant organisation can receive foreign funds through a bank account
which was intimated in Form FC-1A. The organisation should also keep documentary proof of having submitted an
application for prior permission to the FCRA department.

Refusal and appeal

4.12 While processing an application for prior permission, the FCRA department acts as a quasi-judicial authority,
therefore it is it statutory duty to provide reasonable grounds for refusal of the application. If the refusal order is
not properly substantiated with authentic reasons and if the applicant organisation believes that an unjust decision
was taken against it, than it can go in for an appeal to the High Court against such order within sixty days from the
date of such letter of refusal. The procedure for appeal is similar as has already been discussed in para 3.13

Overall Summary

4.13 To sum up the discussions :

(i) Under FCRA, prior permission is required to be taken when the organisation is not registered or has been
directed by the Central Government to do so.

(ii) Prior permission may be required under the following circumstances :

(a) the organisation does not have permanent FCRA registration number
(b) the FCRA registration number has been cancelled by the Government
(c) the association is instructed by the Central Government to take prior permission under the provisions of section
10 where power have been provided to prohibit any organisation from receiving foreign funds.
(d) the FCRA number is suspended due to violation of the provisions and conditions specified under the FCRA.
(e) the organisation is of political nature not being a political party
(f) any person resident in India or any citizen of India resident outside India, receiving foreign funds on behalf of
an organisation of political nature.

(iii) To obtain prior permission an application in Form FC-1A, is required to be made along with the requisite
enclosures.

(iv) A certificate of recommendation is also required to be enclosed. This certificate has to be obtained from any of
the following :

(a) Collector of District

(b) Department of the State Government
(c) Ministry or Department of the Government of India

(v) After receipt of application the FCRA department may make a field inquiry through Intelligence Bureau. The
purpose of such inquiry is to assess the background, credibility and the activities of the applicant organisation.

(vi) Under section 11 of the FCRA, time limit for processing an application for prior permission is 90 days. If the
application is not disposed off within 90 days, then the department may take another 30 days. In total 120 days
period is prescribed for processing application for prior permission.

(vii) Section 11 further provides that if the application is not processed within 120 days, then the applicant
organisation can assume that the prior permission is deemed to have been granted.

(viii) The applicant organisation should wait for some days even after the completion of 120 days in order to
provide for postal delay.

(ix) Prior permission to receive foreign funds can also be obtained for organisation of political nature. Some
organisations have to apply in Form FC-1A along with requisites enclosures.

(x) Prior permission to receive foreign funds can also be obtained for organisation of political nature. Some
organisations have to apply in Form FC-1 A along with requisites enclosures.

(x) Prior permission has to be taken by certain restricted persons in order to receive foreign hospitality. Such
persons are required to apply in Form FC-2, along with requisites enclosures.

(xi) The following persons are required to obtain prior permission in order to receive foreign hospitality :

(a) member of a Legislature

(b) office, bearer of a political party
(c) Judge
(d) Government servant or employee of any corporation

(xii) No prior permission would be necessary in case of an emergency medical aid on account of a sudden illness.
In such cases, the person receiving such hospitality can give within one month from the date of receipt of such
hospitality, an intimation to the Central Government, regarding the receipt of such hospitality and the source and
the manner in which such hospitality was received. Section 9 and rule 3(b) are relevant in this regard.

(xiii) The FCRA authority may also refuse/reject the application within 120 days. In such circumstances, the
applicant, if aggrieved, may appeal to the High Court within 60 days from the date of the order of such rejection.
 BANK ACCOUNT, INVESTMENT
& FIXED ASSETS
Opening of Bank Account

As per Section 6(1)(b), every organisation, which has either registered itself with the Central Government in accordance with
the FCRA rules or has obtained prior permission, shall receive foreign contribution only through one such bank account as
specified in its application for registration for prior permission.

Form FC-8 and Form FC-1A which deals with the application for registration and prior permission respectively, require the
mention of separate bank account number and the branch of the bank.

Change of Bank Account

Further, Form FC-8 requires an undertaking from the chief functionary of the organisation. The relevant text of the
undertaking is as follows, “not to change the bank or branch of the bank without prior permission of the Central
Government. The reasons for change of bank or branch of bank shall have to be relevant and justifiable”. In the light of
aforesaid, it seems that there can be only one bank account of the association for receipt of foreign contributions and there
should not be any change in the bank or branch of the bank without prior permission of the Central Government.

If an organisation has various projects at different places, it may feel the necessity of opening project area bank account at
different places for utilisation of funds. The Act is not very clear in this regard, in the undertaking specified to be given by
the chief functionary in Form FC-8 uses the phrase “relevant and justifiable”. The intent of the statute seems to be in favour
of allowing opening/change of bank accounts if the reasons are relevant and justifiable. In this regard one has to remember
that even if the reasons are relevant and justifiable, changes cannot be made without the prior permission of the Central
Government. Relevant and justifiable reasons for the change in bank account could be for the following:

- Change of office from one place to another

- Lack of requisite/efficient services provided by the bank, etc.

Procedure for change of Bank Account

When a change of bank account becomes a necessity by virtue of relevant and justifiable reasons the following procedure
may be followed :

(i) A new bank account which is proposed to be designated bank account should be opened by depositing the minimum
amount required for opening of the account.

(ii) The proposed account, since it is subject to approval, should not be opened with foreign funds.

(iii) An application to the FCRA authorities should be made by citing the relevant and justifiable reasons for such change
along with complete details of the old account as well as the new account should be provided in the application.

(iv) After receiving the permission from FCRA authorities, the entire balance from the old designated account should be
transferred to the new account.

(v) It is not necessary to close the old account. Therefore, the organisation may use the old account as a domestic account.
But it is desirable to close the old account, to ensure that even by mistake the foreign funds are not credited to the old
account.
The FCRA department has given a correction form for the change in bank account, which is given in Annex. 6.1

Change in signatory of bank account

Change in signatories of bank accounts is a routine procedural issue and therefore need not be informed to the FCRA
authorities. The undertaking given by the Chief functionary in the form FC-8 for informing the changes in the bank account
is only about change of the bank or branch of the bank. Any procedural changes in the same bank account do not require an
approval of the FCRA authorities.

Change in account number due to computerisation

Many designated FC bank account number have been changed due to computerisation. In such cases, it is advisable to
inform the FCRA authorities about such changes. The new account number should be used for all subsequent reporting and
correspondence purposes.

Separate Bank Account for Separate Donors

It has been seen that some donors insist of maintenance of separate bank account specifically for their grant and utilisation
thereof. But under FCRA, all foreign contribution should be received in one designated bank account only. Therefore, under
no circumstances, separate bank account should be opened for receiving funds from various donors.

Having more than one account for project purposes

An organisation may have more than one Bank Account for project purposes but for all Foreign Contribution received from
any Foreign source there should be only one bank account as has been specified in its application for registration by the
organisation. The foreign contributions so received shall be appropriated for such purposes for which it was received
through such bank account only.

Interest Earned is part of foreign contribution

As already discussed an organisation under FCRA can only have one designated bank account for receipt and utilisation of
foreign funds. There is no mention made in the Act or the Rules regarding the treatment of interest earned from the
designated bank account. In the absence of any clear cut provisions, the normal practice is to consider interest earned on
FCRA funds as foreign contribution only. Thus any interest earned should be disclosed in FC-3 and also the FCRA receipt
and payment account.

The amended Form FC-3 (w.e.f. 26.07.2001), also requires reporting of interest earned on FCRA funds. Thus, the intent of
FCRA authorities is clearly in favour of considering interest as a part of foreign contribution.

There are few arguments, which contend against the inclusion of interest as part of foreign contribution. Few instances of
such contention are as under:

(i) It has been debated that earning out of foreign contributions inside India should not be considered as foreign income. It
is like a child born to a foreign couple residing in India, the child would become an Indian citizen. Similarly, income earned
from foreign funds should also be treated as Indian money even though it is generated out of foreign funds.

(ii) The Act or the Rules are silent with regard to the inclusion of interest into foreign contribution. Only Form FC-3, clearly
specifies that interest should be included atleast for the purposes of reporting. Now the question is whether a form can
create a statutory law/obligation. In the light of several cases held in various High Courts and Supreme Court, it has been
observed that the provisions of a form can only be directory in nature and not mandatory unless, they serve a purpose of
facilitating an existing provision of the Act. Therefore, it can be argued that the requirement under Form FC-3, of disclosing
interest is only for reporting purposes and interest earned can still be considered as domestic income. The above discussion
elaborates the intricacies involved in considering interest as foreign contribution and therefore, this controversy can be
resolved conclusively only through an amendment in Foreign Contribution Act. For the time being, the safer way would be
to consider interest as a part of foreign contribution.

Creation of fixed deposits

As far as the creation of fixed deposits of FCRA funds is concerned, there does not seem to be any bar on it. All the funds are
required to be received in the designated bank account but any temporary surplus funds may be placed in fixed deposits
with the bank, pending utilisation for the objects for which they were received. Care should be taken that the investment are
in compliance with the section 11(5) of the Income Tax Act.
In this context, it may further be noted that, since, the interest earned is considered as FC receipts such interest earning
should be deposited in the designated bank account.

Creation of Fixed Assets

Any asset created out of foreign funds should be recorded in the FC books of account only. And FC asset will continue to
remain an FC asset irrespective of time factor or closure of the project. At times it may so happen that a portion of the asset
is funded from domestic sources.

For instance, a building constructed on a land purchased from domestic sources. In such cases, the cost of the land should
be reflected in the domestic books of account and the cost of the building should be shown in the FC books of account. Only
the consolidated, statement will show the total cost of land and building together.

Sale of fixed assets

If an asset purchased out of FCRA funds is sold, then the amount received on sales of such asset should be shown as foreign
receipts. There might be circumstances where assets are created out of both FCRA as well as domestic funds. In such cases,
apportionment of the sale receipts should be made on a suitable and reasonable basis out of the sale consideration receipt
and the amount, pertaining to foreign contribution portion of the asset should be considered as foreign contribution receipt.

The funds generated from a FC asset being a FC receipt should be deposited in the designated bank account.

Overall Summary

To sum up the discussions :

(i) A organisation can change bank account, if the reasons are relevant and justifiable. But, it has to obtain prior permission
for such change from the Central Government.

(ii) Minor changes in bank account such as change in signatory may not be reported to FCRA authority.

(iii) Change in bank accounts due to computerization should be reported but no prior approval is required.

(iv) Separate bank accounts for receiving funds from different donors should not be maintained.

(v) There should be only one FCRA designated bank account in which all the foreign contribution should be received and
utilised.

(vi) Interest earned from foreign funds and investments should also be considered as foreign contribution, though there is
no specific provision under FCRA in this regard.

(vii) FCRA funds can be invested in fixed deposits and other investments. But, care should be taken regarding compliance
under section 11(5) of the Income Tax Act.

(viii) FCRA funds cannot be transferred to another organisation not possessing FCRA registration. In other words, the
second or subsequent recipient is also required to have FCRA registration.

(ix) If a asset is created from domestic as well as foreign funds then only the foreign component should be reflected in FC
books of account

(x) Sale proceed from FC asset should be deposited in the designated bank account.

Annexure 1

Correction Form
I - Association details

Registration Number under FC(R) Act, 1976 : ……………………………….

Name : ……………………………….……………………………….…….
Address : ……………………………….……………………………….…….
……………………………….……………………………….……..............
……………………………….……………………………….……..............

Pin Code : ………………….

Association Nature :

Religious Cultural Economic Educational Social

Religion (if having a religious nature) :

Hindu Sikh Muslim Christian Buddhist Others

* Mark the relevant box.

II - Bank Details

Name of Bank : ……………………………….………………

Address : ……………………………….……………………………….…….
……………………………….……………………………….……..............

Account No. : …………………….

(CHIEF FUNCTIONARY)

To,
The Secretary to the Government of India,
Ministry of Home Affairs, (Foreigners Division),
Lok Nayak Bhawan, Khan Market,
New Delhi - 110003

LOAN FROM DOMESTIC SOURCES

Issues involved in availing Domestic Loans

In an ongoing project, at times, if the receipt of foreign fund is delayed then an organisation may have to borrow from local
sources to continue the project. It is understandable for an organisation to face such circumstances and there is no specific
bar against such transaction under FCRA. But in this context the following may be noted:

i) If funds from local sources are used for FC projects then they have to be reflected in the FC books of account. Separate
books of account for FC purposes do not imply that there cannot be any transactions from the domestic sources.

ii) A loan from domestic sources is not a receipt from foreign source. Therefore, it should not be received in the designated
bank account. The expenditure can be directly made from the domestic bank account and booked as expenditure in the FC
books of account. A corresponding liability should also be shown in the FC books of account.

iii) When the funds are received from foreign sources the liability can be repaid to the domestic books of account.

iv) The issue arising here is whether such loan taken from domestic funds should be reflected in FC-3 return. In this context,
we have to understand that FC-3 return wants us to submit only the analysis of receipt and utilisation of foreign
contribution. Any loan from domestic sources is apparently not a foreign contribution. Therefore, it should not be reflected
in Form FC-3.

Illustration

For example, an organisation receives 1,00,000.00 in the year 2001-02 from foreign sources. It spends Rs.1,50,000.00 on
FC projects. It borrows Rs.50,000.00 from domestic sources. In the year 2002-03, it receives Rs. 1,00,000.00 from foreign
sources. It spends Rs. 50,000.00 on FC projects and repays Rs. 50,000.00 to domestic account.

In the above case, in the year 2001-02, the organisation’s FC books of account should show Rs. 1,50,000.00 as application of
funds. Rs. 50,000.00 should be shown as liability in the FC Balance Sheet. But, in the FC-3 statement, only Rs. 1,00,000.00
should be shown as foreign receipts and application to the extent of Rs. 1,00,000.00 only. Because Form FC-3 requires a
summary of the FC receipts and utilisation of those receipts. Rs. 50,000.00 may have been utilised for a FC project but it is
not an utilisation of FC receipts.

In the year 2002-03, Rs.1,00,000.00 should be shown as foreign receipts and Rs.50,000.00 should be repaid to the
domestic books of account and remaining Rs. 50,000.00 should be shown as utilisation. In FC-3 return, Rs. 1,00,000.00
should be shown as utilisation.

The above illustration may raise some confusion regarding non-reflection of Rs. 50,000.00 as utilisation in the FC-3 return,
in the year 2001-02. Here we have to understand that FC-3 is not a statement to be prepared on accounting principles rather
it is a statement declaring certain specific facts as per the requirement of FCRA. The requirement is specifically to mention
inflow and utilisation of foreign funds in a particular year. Therefore, the expenditure of Rs. 50,000.00 from domestic
sources should not be considered for FC-3 purposes till the foreign funds are received against it. Suppose, the organisation
does not receive any foreign funds in future then such reflection would not be correct. Therefore, any expenditure on
expectation of a future receipt cannot be considered as an application of foreign funds because it is a contingent upon a
future event.

The other issue pertinent is repayment of Rs. 50,000.00 in the year 2002-03 being shown as utilisation in 2002-03 for FC-3
purposes. Though, the actual expenditure was incurred in the year 2001-02. In this context, it may be noted that, firstly, for
FCRA purposes, the foreign funds were received and utilized in the year 2002-03. Till the receipt of foreign funds, utilisation
was made from domestic sources, therefore, not within the purview of FCRA. Secondly, for the purposes of understanding
the legal sanctity of such transactions. Because, under the prevailing laws repayment of loan for earlier year expenditures
are considered as valid utilisation in the current year. Finally, we should always remember that Form FC-3 is prepared for
reporting purposes on the specific and statutory requirement of FCRA.

A loan from domestic sources is not a FC receipt, therefore, it should not be shown in the FC receipt and payment account
also. The loan should be directly shown as a liability in the balance sheet and the FC income and expenditure account should
show excess of expenditure over income to that extent. To sum up, a loan from domestic source will not be reflected in the
FC-3 as well as FC receipt and payment account and the procedure as discussed above should be followed.

Overall Summary

To sum up the discussions :

(i) An organisation may use funds from domestic sources for FC projects.

(ii) A loan from domestic sources is not a receipt from foreign source. Therefore, it should not be received in the designated
bank account. The expenditure can be directly made from the domestic bank account and booked as expenditure in the FC
books of account. A corresponding liability should also be shown in the FC books of account.
(iii) When the funds are received from foreign sources the liability can be repaid to the domestic books of account.

(iv) Any loan from domestic sources is apparently not a foreign contribution. Therefore, it should not be reflected in Form
FC-3 and FC receipt and payment account.

Accounting for foreign contribution received in kind

As per rule 8(1)(a), account has to be maintained for foreign contribution received in kind. Form FC-6 provided the format
and the manner in which the receipt as well as the utilisation of contributions received in kind. The entries made in FC-6
should correspond with entries made in Form FC-3.

Maintenance of form FC-6 - An organisation may keep the Form FC-6 in a book form. Form FC-6 requires the following
information to be recorded in case of receipt :

(i) Date
(ii) Name and Address of the Donor
(iii) Mode of receipt
(iv) Purpose of receipt
(v) Quantity received
(vi) Approximate value
(vii) Date of intimation send to Central Government

Recording of specified information - With regard to utilisation and disposal of contributions received in kind, Form FC-6
requires the following information to be recorded :

(i) Date
(ii) Name and Address of the Donee
(iii) Purpose
(iv) Quantity utilised by the organisation
(v) Quantity sold
(vi) Quantity otherwise transferred
(vii) Quantity, if sold, the amount for which sold
(viii) Reference to entry in FCRA account
(ix) Quantity in stock

It may be noted that it is not necessary to file Form FC-6 with FCRA return in Form FC-3. In case when article is sold and
some revenue is generated in Indian currency, such amount should be shown as receipt in Form FC-3 as well as the FCRA
cash book.

Approximate value of Contribution received in kind :- Form FC-6 is like a stock register, where the receipt movement and
closing balance of all goods received in kinds are maintained in quantitative term. But, column-6, of the Form requires
approximate value of the goods to be specified.

In this context, it may be further noted that, the approximate or the estimated value of contribution received in kind is
required to be reported in Form FC-3, column 6&8. Therefore, for reporting purposes of contribution received in kind,
column 6 & 8 of the Form FC-3 are relevant and Form FC-6 is just a format for preparing the books of accounts with regard to
contribution received in kind.

Does FCRA prescribe ‘Cash Basis’ of method of accounting

There is a commonly prevailing understanding that FCRA prescribes ‘Cash Basis’ of method of accounting. Such presumption
has resulted due to the requirement of furnishing receipt and payment account along with Form FC-3 as per Rule 8(2). But,
there is no specific mention of the method of accounting to be followed by the organisation for FCRA purposes. Section 13,
talks about the maintenance of accounts, but there is no reference to the method of accounting to be followed by the
organisation. The text of section 13 is reproduced as under:

“Recipients of foreign contribution to maintain accounts etc.

Every association, referred to in section 6, shall maintain, in such form and in such manner as may be prescribed,-

(a) an account of any foreign contribution received by it, and

(b) a record as to the manner in which such contribution has been utilised by it.

As it is evident from Section 13 that no specific method of accounting has been prescribed. But the intent and requirement of
FCRA in this regard are to some extent clarified in Rule 8 of FCR Rules, 1976. The text of Rule 8 is reproduced as under:

“Maintenance of Accounts-

(1) A separate set of accounts and records shall be maintained, exclusively for foreign contribution received and utilised-

(a) In Form FC-6, where the foreign contribution relates only to articles as referred to in item (I) of sub-clause(c) of clause (1)
of section 2;

(b) In the cashbook and ledger account on double entry basis, where the foreign contribution relates to currency received and
utilised, and a separate bank account shall be maintained in respect of such contribution;

(c) In Form FC-7, where the foreign contribution relates to foreign securities.

(2) Every account specified in sub-rule (1) shall be maintained on an yearly basis, commencing on the 1st day of April each
year and every such yearly account, duly certified by a chartered accountant in Form FC-3 along with a Balance Sheet and
statement of Receipts and Payments, shall be furnished, in duplicate, to the Secretary to the Government of India, in the
Ministry of Home Affairs, New Delhi, within four months of the closure of the year”.

From the above, it can be seen that as per Rule 8(1)(b), all organisations are required to maintain separate books of account
for foreign contribution received and utilised. The books of accounts required are ledger and cash book maintained on the
principles of double entry. Further Rule 8(2), specifies that Balance Sheet and Receipts & Payments Account should be
submitted. There is no mention of the specific method of accounting to be followed by the organisation.

Press note issued by Central Government

The Ministry of Home Affairs (FCRA division) issued a press note dated 09.01.98, where some clarification with regard to
books of account and annual return are given. Press Note issued by The Ministry of Home Affairs has been annexed in
Annexure 10.1. The relevant extract of the press note is as under :

“You must maintain a separate set of accounts and records exclusively meant for the foreign contribution received and
utilized by you as indicated below :

(a) in Form FC-6, where the foreign contribution is in the form of an article.

(b) in the cash book and ledger account on double entry basis, receipt and utilization, where the foreign contribution is in the
form of currency, (a separate Bank account is also to be maintained in respect of such foreign contribution); and

(c) in Form-7, where the foreign contribution is in the form of foreign securities.
Every account, as indicated above, must be maintained on an yearly basis, commencing on the 1st day of April each year.
Every yearly account, duly certified by a Chartered Accountant, in Form FC-3, along with a balance sheet and a statement of
receipt and payment, must be furnished, in duplicate, to the Secretary to the Govt. of India, in the Ministry of Home Affairs,
FCRA Division, Lok Nayak Bhavan, New Delhi-110003 by 31st July of the succeeding year.”

In the light of Section 13, Rule 8 and press note dated 09.01.98, it seems that FCRA require maintenance of separate cash
book and ledger on double entry basis for the receipt and utilisation of foreign funds. None of the above three legislations
specify the method of accounting to be followed.

Should one shift from ‘Accrual’ to ‘Cash Basis’ after FCRA registration

It has to be appreciated that books of account and method of accounting is not a post FCRA registration phenomenon. An
organisation applying for FCRA registration is expected to have domestic transaction. And it is also expected to maintain
books of account on the basis of permissible methods of accounting. Suppose an organisation prior to FCRA registration is
following ‘Accrual Basis’ of accounting, will FCRA registration imply shift to ‘Cash Basis’ of accounting specifically for FCRA
purpose? In our opinion, there is nothing in FCR Act or Rules to suggest that an organisation has to maintain books of
account for Cash Basis Only. The FCRA is completely non-interfering in this regard. But as far as reporting requirements are
concerned FCRA is very clear about submission of receipt and payment account and Form FC-3. The Form FC-3 should be on
the basis of actual receipt and utilisation thereof. It is very clear that the FCR Act and Rules require detailed submission of FC
receipt and payment during the year, irrespective of the method of accounting. Therefore, organisation following Accrual
Basis of accounting can continue with the same method of accounting

The legal intent of FCRA could not have been against Accrual Basis of accounting. The very fact that the FCR Rules require
the submission of the Receipts & Payments Account, itself signifies that both the method of accounting are permissible.
Because specific mention of Receipts & Payments Account becomes relevant only when an organisation follows Accrual Basis
of accounting otherwise for an organisation following Cash Basis of accounting, even the Income & Expenditure Account is
like a Receipts & Payments Account, particularly incase of NGOs were capital expenditure are also advisable.

Does FC-3 necessitate ‘Cash Basis’ of accounting

From the reporting requirement of FCRA, it is evident that the authorities are interested in the actual receipts and utilisation
of FCRA funds. If we see the Form FC-3, we find that the reporting is to be made for the receipts and utilisation of FC. FCRA
also requires submission of receipt and payment account along with FC-3 return. The intent of FCRA is very clear that it
wants the organisation to report all the FC transactions on cash basis. In other words, the organisation should report the
actual receipt and payment of foreign funds during the previous year irrespective of the method of accounting followed. The
organisation which are following accrual basis of accounting should not prepare the FC-3 statement on the basis of their
income and expenditure account. The FC-3 return should be based on the receipt and payment account. As long as the
organisation is complying with the reporting requirements of FCRA, it does not seem necessary to change the method of
accounting only for the purposes of FCRA.

Concluding remark

In the light of the above discussions, we believe that there is no necessity to deviate from normal method of accounting for
FCRA purposes. Only care which should be taken is that, separate books of accounts for FC should be maintained and the
organisation should be in a position to provide the details of all the FC and the utilisation of such FC during the previous year.
Further, the organisation should also produce a receipt and payment account. The remaining statements such as income and
expenditure account, Balance Sheet, may be prepared both for FC and domestic purposes separately on the basis of method of
accounting followed by that organisation. The FC-3 return should be based on the receipt and payment account, in other
words, for reporting purposes the computation of FC receipts and utilisation should be done on cash basis only.

Overall Summary

To sum up the discussions :

(i) All associations, which have received foreign contributions are required to maintain separate books of accounts

(ii) FCRA specifies that the books of account should be maintained on the principles of double-entry book keeping on yearly
basis from 1st April to 31st March of the year.

(iii) Every year Balance Sheet and Receipts and Payments accounts are required to be prepared and certified by a Chartered
Accountant
(iv) Record of contribution received in kind is required to maintained as per Proforma provided in FC-6

(v) Where organisation has received foreign securities, Form FC-7 is required to be followed to maintain the records of such
securities

(vi) It may be noted that separate books of accounts specifically for foreign contribution are required to be maintained.

(vii) Under no circumstances, domestic contributions should be mixed up with foreign contributions

(viii) In case of contributions received in kind, the approximate value is required to be mentioned in Form 6 and is also
required to be reported in Form FC-3

(ix) FCRA does not specifically prescribe any method of accounting. Therefore, an organisation should continue to maintain
its account on the method of accounting it has been following prior to FCRA registration

(x) The FC-3 statement should be prepared on cash basis, based upon the receipt and payment account.

Annexure 10.1

Press note, dated 09.01.1998

issued by Government of India, Ministry of Home Affairs,

Foreign Contribution and (Regulation) Act, 1976 and Rules Framed there under

1. Associations registered/permitted to accept foreign contribution.

2. Chartered Accountants.

1. All associations registered / permitted to accept foreign contribution are reminded that they are required to submit an
annual return in the revised Form FC-3. This includes details of the amount of foreign contribution received by them during
the year, its source, the manner of its receipt, its purpose and the manner in which it was utilized by them. The annual returns
for the year 1997-98 must be submitted by 31-07-1998. Please note that if even no foreign contribution was received by you
during the year, it is mandatory to file a ‘Nil’ return.

2. You must maintain a separate set of accounts and records exclusively meant for the foreign contribution received and
utilized by you as indicated below :

(a) in Form FC-6, where the foreign contribution is in the form of an article.

(b) in the cash book and ledger account on double entry basis, receipt and utilization, where the foreign contribution is in the
form of currency, (a separate Bank account is also to be maintained in respect of such foreign contribution); and

(c) in Form-7, where the foreign contribution is in the form of foreign securities.

Every account, as indicated above, must be maintained on an yearly basis, commencing on the 1st day of April each year.
Every yearly account, duly certified by a Chartered Accountant, in Form FC-3, along with a balance sheet and a statement of
receipt and payment, must be furnished, in duplicate, to the Secretary to the Govt. of India, in the Ministry of Home Affairs,
FCRA Division, Lok Nayak Bhavan, New Delhi-110003 by 31st July of the succeeding year.

3. Chartered Accountants, before certifying the accounts in Form FC-3, must ensure that these have been prepared in
accordance with the provisions contained in the Foreign Contribution (Regulation) Act, 1976 and the Rules framed
thereunder.

4. Non-submission of the return in time; furnishing of false information; mis-utilisation or diversion of foreign contribution
for purposes other than those for which such contribution was received; transfer of contribution to any other organisation
who have not been permitted to receive foreign contribution either by way of registration or prior permission, constitute a
violation of the provisions of the Act and attract penal action.

AUDIT & FILING OF RETURN

Audit by Chartered Accountant

Every organisation which receives foreign contributions is required to furnish a certificate from a chartered accountant. The
proforma of the certificate to be given by the chartered accountant is provided in Form FC-3. Along with this certificate,
audited balance sheet and the statement of receipt and payment account should also be submitted. On the basis of the
relevant books and vouchers, the chartered accountant is required to certify the following :

(i) the brought forward balance of the foreign contribution at the beginning of the year.
(ii) the foreign contribution received during the year.
(iii the unutilised balance of foreign contribution at the end of the year
)
(iv) certify that the association has maintained the account of foreign contribution and records relating thereto in the
manner specified in section 13 of the Foreign Contribution (Regulation) Act, 1976, read with sub-rule(1) of rule 8 of
the Foreign Contribution (Regulation) Rules, 1976.
(v) the information furnished in the certificate and in the enclosed balance sheet and statement of receipt and payment
are correct.

Filing of Annual Returns

Every organisation which receives foreign contributions shall file an annual return in Form FC-3 under rule 8(2) within 120
days of the closure of the year. The following should be submitted in duplicate duly signed by the chief functionary and
certified by the chartered accountant :

i) Form FC-3,

ii) Balance Sheet and statement of Receipt and Payment exclusively for foreign contribution received and utilised during the
year.

The FC-3 form was amended in the year 2001. In the new form, in addition to the total contribution received during the year
and the interest earned on foreign contributions, details of the purposes for which such fund were received and utilised is also
required to be given. The Form specifies 55 different kinds of purposes for which foreign contribution might have been
received. Details regarding Corpus Fund, purchase of land, constructions etc. are also required to be given. The details such as
name, address, purpose, amount etc. are required to be given of all institutional donors and individual donors above Rs. one
lakh. Details of country wise receipt of foreign funds is also required to be specified in FC-3.

# It may further be noted that Balance Sheet and Statement of Receipt and Payment Account, are also required to be
submitted along with the annual return in Form FC-3. For the purposes of FCRA, the receipt and payment account
and the balance sheet should be separately prepared, it is not necessary to submit the general receipt and payment
account and the general balance sheet to the FCRA department. Both the statement should reflect the movement
and treatment of foreign contribution only. Preparation of a FCRA balance sheet may create some confusion, for
instance, if an organisation has invested Rs. 10lakhs in creation of some asset out of which only 6 lakhs has been
spent out of foreign contribution and the remaining 4 lakhs has been met out of domestic contributions and loans.
 Under such circumstances, the FCRA balance sheet should only reflect Rs. 6,00,000 and not the entire cost of the
asset. The entire cost can be shown in the consolidated balance sheet of the organisation. The consolidated balance
sheet is not required to be submitted along with Form FC-3.
# The main purpose behind preparation of FCRA balance sheet seems to regulate the acquisition and disposal of
capital assets created out of foreign contribution.

Filing of Nil Return

If an organisation having FCRA Registration does not receive any foreign contribution, even then it should file nil returns. It
is mandatory to file for FC-3 every year as long as the organisation wants to validly retain its registration. The Ministry of
Home Affairs (FCRA division) in its press note dated 09.01.1998 has specifically clarified that even if no foreign contribution
is received, filing of nil return is mandatory. In the same press note it has been clarified that non-submission of return in time
or furnishing of false submission would constitute violation of the provision of the Act and attract penal consequences. Press
note, dt.09.01.1998 issued by The Ministry of Home Affairs has been annexed in Annex. 10.1

Declaration and authentication

The FC-3 form is required to be signed by the Chief Functionary of the organisation and a certificate is also required to be
given by a Chartered Accountant giving a brief summary of the FCRA funds movement and the opening & closing balances of
FCRA Funds.

The Term “Chief Functionary” has not been defined in the FCRA Act or Rules. Normally the head of the organisation should
be construed as the Chief Functionary. The organisation may also designate any office bearer as the Chief Functionary
through a General Body/Governing Body resolution, for the purposes of filing the FCRA returns, Forms etc.

Delay in Filing FC-3

FCRA is silent about consequences for delay in filing FC-3. It can be constructed that an NGO would stand the risk of losing
the FCRA registration if it does not file returns properly but whenever an NGO is not able to file FC-3 by 31st December, it
should write a letter to the FCRA office explaining the circumstances causing the delay. Normally FCRA authorities condone
such delay in filing of returns.

Audit by Central Government

The Central government has a right to appoint a “Group A” gazetted officer to audit the accounts of an association or
organisation. The relevant sections in this regard is reproduced as under —

“ Section 15 - A : Audit of account : Where any organisation or association fails to furnish any returns under this Act within
the time specified therefore or the returns so furnished are not in accordance with law or if, after inspection of such returns,
the Central Government has any reasonable cause to believe that any provision of this Act has been, or is being contravened,
that Government may, by general or special order authorise such gazetted officer, holding a group A post, as it may think fit,
to audit any books of account kept or maintained by such organisation or association, as the case may be, and thereupon
every such officer shall have the right to enter in or upon any premises at any reasonable hour, before sunset and after
sunrise, for the purpose of auditing the said books of account :

Provided that any information obtained from such audit shall be kept confidential and shall not be disclosed except for the
purposes of this Act.”

The relevant circumstances - This provision was not there in the original Act, it was inserted vide Section 8 of FCR
(Amendment) Act, 1985 with effect from 20-10.1984. The Central Government has the power to initiate such audit under the
following circumstances :

i) if the organisation or the association fails to file any returns within the time limit specified.

ii) the returns submitted by the organisation are not in accordance with the law.
iii) if during the inspection/scrutiny of the returns submitted the Central Government comes across any evidence or
information which provides reasonable cause to believe that any provisions of the Act has been violated.

11.6-2 Power is discretionary - The powers conferred to the Central Government under Section 15A are discretionary in nature
and therefore, it is important that are exercised in a just and transparent manner. Any capricious or arbitrary order under this
section without any authentic reason would defeat the purpose of the Section.

Time schedule for audit - Further under section 14 the audit of any books of account has to be carried during reasonable
hours. The authorised officer shall not have authority to enter into the premises during odd hours i.e. after sunset and before
sunrise. The provisions of section 14 are reproduced below :

“Section - 14 : Inspection of accounts or records : If the Central Government has, for any reason, to be recorded in writing, any
ground to suspect that any provision of this Act has been, or is being, contravened by —

a) any political party, or

b) any person, or

c) any organisation, or

d) any association,

it may, by general or special order, authorise such gazetted officer, holding a (Group A post) as it may think fit (hereinafter
referred to as the authorised officer), to inspect any account or record maintained by such political party, person, organisation
or association, as the case may be, and thereupon every such authorised officer shall have the right to enter in or upon any
premises at any reasonable hour, before sunset and after sunrise, for the purpose of inspecting the said account or record :

Provided that no gazetted officer shall be authorised to inspect the account or record maintained by a political party, unless he
has been holding a in connection with the affairs of the Union, or a State, for not less than ten years.

Seizure of Documents - During the cause of inspection of books of accounts, if the authorised officer has reasons to believe
that violation of FCRA has been done, than he has the authority to seize such accounts and records and issue a seizure memo
in the presence of two independent witnesses. Whenever records and accounts are seized, they are required to be produced
before the court within six months. After seizure if no proceedings is brought within six months of the seizure, then the
authorised officer shall return such accounts and records to the organisation from which it was seized. It is the responsibility
of the authorised officer to ensure that all the information obtained during such audit are kept secret and confidential and are
not disclosed to anybody except for the purposes of this Act.

Overall Summary

To sum up the discussions :

(i) Form FC-3 is required to be filed by 31st December every year. Along with Form FC-3 certified Balance Sheet and
statement of Receipts & Payment accounts exclusively pertaining to foreign contributions received and utilised during the
year is required to be enclosed.

(ii) A certificate as per the proforma provided in Form FC-3 also required to be given by a Chartered Accountant.

(iii) The Central Government has the power to initiates audit under the following circumstances:

(a) if the organisation or the association or the association fails to file any returns within the time limit specified.

(b) the returns submitted by the organisation are not in accordance with the law.

(c) if during the inspection/scrutiny of the returns submitted, the Central Government comes across any evidence or
information which provides reasonable cause to believe that any provisions of the Act has been violated.
(iv) During the course of audit and inspection of books of accounts, the authorised officer also has the power to seize the
accounts and records in the presence of two independent witnesses.

(v) Whenever accounts are seized, they have to be produced before the court within six months. If not the accounts and
records are to be returned to the organisation from which it was seized.

(vii) If an organisation having FCRA Registration does not receive any foreign contribution, even then it should file nil
returns. It is mandatory to file for FC-3 every year as long as the organisation wants to validly retain its registration.

(viii) The FC-3 form is required to be signed by the Chief Functionary of the organisation and a certificate is also required to
be given by a Chartered Accountants giving a brief summary of the FCRA funds movement and the opening and closing
balances of FCRA Funds.

(ix) FCRA is silent regarding the consequences for delay in filing FC-3. Therefore, it can be constructed that an NGO would
stand the risk of losing the FCRA registration if it does not file returns properly but whenever an NGO is not able to file FC-3
by 31st December, it should write a letter to the FCRA office to the FCRA office explaining the circumstances causing the
delay.

OFFENCES & PENALTIES

UNDER FCRA
Common offences subject to severe penalty

NGO’s receiving foreign contributions should guard against violating the provisions of FCRA. The following
are a few common offences, which are subject to severe penalty and punishment:

(i) NGO’s accepting foreign contribution without registration or prior permission.

(ii) NGO’s having FCRA registration but receiving foreign contribution in different bank accounts.
(iii) NGO’s having FCRA registration and not filing annual return in FC-3 Form.
(iv) NGO’s having FCRA registration filing false information in the annual return.
(v) NGO’s with FCRA registration or prior permission not maintaining the required books of account.
(vi) NGO’s receiving foreign contribution on behalf of other NGO’s not having FCRA registration.
(vii) Not filing nil return in the year when foreign contribution is received.
(viii) Diversion of funds for the purposes other than for which they were received.

Press note dated 09.01.1998 issued by Ministry of Home Affairs : Ministry of Home Affairs (FCRA division) in
its press note dated 09.01.1998 [refer Annex. 44.1] has clarify that the above mentioned offences would be
treated as violation of FCRA attracting severe penalties. The relevant extract of the press note is as under:

“Non-submission of the return in time; furnishing of false information; mis-utilisation or diversion of foreign
contribution for purposes other than those for which such contribution was received; transfer of contribution
to any other organisation who have not been permitted to receive foreign contribution either by way of
registration or prior permission, constitute a violation of the provisions of the Act and attract penal action”.

Seizure and confiscation

Under FCRA the Central Government has the power of seizing and confiscating articles and currency if held
in contravention.
The statutory provisions : The relevant sections are as under :

“Section 16 : Seizure of article or currency received in contravention of the Act : If any gazetted officer,
authorised in this behalf by the Central Government, by general or special order, has any reason to believe
that any person has in his possession or control any article exceeding rupees one thousand in value, or
currency, whether Indian or foreign, in relation to which any provision of this Act has been, or is being
contravened, he may seize such article or currency.

Section 17 : Seizure to be made in accordance with the Code of Criminal Procedure, 1973 : Every seizure
made under this Act shall be made in accordance with the provision of section 100 of the Code of Criminal
Procedure, 1973 (2 of 1974).

Section 18 : Confiscation of article or currency obtained in contravention of the Act : Any article or currency
which is seized under section 16 shall be liable to confiscation if such article or currency has been adjudged
under section 19 to have been received or obtained in contravention of this Act.

Section 19 : Adjudication of confiscation : Any confiscation referred to in section 18 may by adjudged :

(a) without limit, by the Court of Session within the local limits of whose jurisdiction the seizure was made;
and
(b) subject to such limit as may be prescribed, by such officer not below the rank of an Assistant Sessions
Judge, as the Central Governments may, by notification in the Official Gazette, specify in this behalf.

Section 20 : Opportunity to be given before adjudication of confiscation : No order of adjudication of

confiscation shall be made unless a reasonable opportunity of making a representation against such
confiscation has been given to the person fro whom any article or currency has been seized.”

Seizure during audit inspection - Normally officers appointed by the Central Government to carryout
inspection of accounts and record under section 14 are also authorised with the powers under section 16.
Therefore while inspecting records under section 14, an authorised officer may make seizure of currency or
article if he has reasonable cause to believe that the organisation/person is in possession of currency/article
in contravention of FCRA. For instance if an organisation receives foreign contribution without having
registration or prior permission, then even if the amount is kept in bank, it will be deemed to be in the
possession of the organisation and consequently seizure can be made.

Procedure for seizure - The provisions of section 17 require that the seizure has to be made in
accordance with section 100 of the Code of Criminal Procedure where extensive powers have been provided
to the authorised officer including the power of searching a premises, carrying out physical search, if
required, break open any door or window etc. All searches have to be made in presence of two or more local
inhabitants and two independent witnesses should also be there as signatories to the seizure list.
Confiscation of seized articles - The articles or currency seized is liable to be confiscated if it is adjudged to
have been received in contravention of FCRA by the Court of Session within the local limit of whose
jurisdiction the seizure was made. There is no monetary limit set to the powers of the court of session under
section 19. The confiscation proceedings are criminal proceedings by nature. However by virtue of section
20 the accused organisation/person in entitled to a reasonable opportunity of being heard before any order
against it is made. In case of confiscation of seized article under section 19, the organisation can appeal
within one month of receiving the confiscation order, in the Court of Session within the local limits under
whose jurisdiction such order of adjudication of confiscation was made or to the High Court.

Persons liable for punishments under FCRA

The following persons may be liable to penalties and punishments depending on the nature of the offences:
 - NGO
- Chief Functionary
- Governing body members
- Other officers
- Other persons who indulge.

Penalties and punishments

12.4 Under FCRA laws, severe penalties and punishments are specified which can be invoked depending on
the nature and quantum of the offence and the persons involved.

The following are the possible penalties under FCRA:

(i) seizure and confiscation of foreign contribution receipts.

(ii) find up to 5 times the value of the foreign contribution spent.
(iii) inspection and seizure of accounts and records.
(iv) compulsory prior permission requirement even if the NGO is registered under FCRA.

Overall Summary

12.5 To sum up the discussions :

(i) Violation of FCRA can attract severe penalties which could be as under :

(a) seizure and confiscation of foreign contribution receipts.

(b) fine upto 5 times the value of the foreign contribution spent.
(c) inspection and seizure of accounts and records.
(d) compulsory prior permission requirement even if the NGO is registered under FCRA.
(e) imprisonment upto 5 years and/or fine.
(f) prohibition on accepting foreign contribution for 3 years for persons convicted twice.