Foreign Contribution (Regulation) Act, 2010 and NGOs

NGOs play a vital role in the upliftment of the downtrodden in any society. This is particularly true for countries such as India, where inequality is high, benefits reach only a handful of the population and a large section of the society lives below the poverty line. The Foreign Contribution (Regulation) Act, 2010 or FCRA, along with the rules framed under it, monitor and regulate the foreign aids that every Non-governmental Organisation in India receives.

Intent of the FCRA Act

The main idea of the FCRA is to uphold national interest and prevent foreign intrusion in matters that may be detrimental to it. It has a very broad scope such that it includes natural person, corporate body, other types of Indian entities along with NRIs and overseas branches/subsidiaries of Indian companies and any other entity formed or registered in India. It is enforced by the Ministry of External Affairs, India.

Details of the Act

FCRA prohibits acceptance and use of a foreign contribution, where foreign contribution includes currency, article other than a gift for personal use and securities received from a foreign source,  or foreign hospitality, where foreign hospitality is any offer from a foreign source to provide foreign travel, boarding, lodging, transportation or medical treatment cost, by a certain specified category of persons such as a candidate for election, judge, columnist, journalist, newspaper publication, cartoonist, etc.. It also regulates the inflow to and usage of foreign contributions by NGOs by enforcing a mechanism to accept, use and report usage of such funds.

Registration and Prior Approval

There are 3 criteria that an NGO must fulfill before applying to be registered under the FCRA – it must have been in existence for at least 3 years, it must have done considerable work in its field, and it must have spent at least ₹10,00,000 in over the 3 years before placing its application. The registration certificate is valid for 5 years and must be renewed thereafter. However, other NGOs which are yet not valid to be registered under FCRA may request prior approval to receive a foreign fund. The approval, if granted, is valid until the fund is received and fully utilized.

Conditions on the use of foreign funds

All funds that an NGO receives must be used only for the objective for which they were received and they must not be used for speculative activities as identified under the Act. Other than in the case of prior approval of the Authority, any such fund must not be given or transferred to any entity that is not registered under FCRA or does not have prior approval under the Act. Each asset purchased with this fund must be in the name of the NGO to which the fund was granted and not its office bearers or members.

Every fund must be reported

NGOs registered or those that have prior approval under FCRA must file an annual report with the Authority in the designated form. This report must be accompanied by 3 documents – income and expenditure statement, receipt and payment account, as well as a balance sheet for the relevant financial year. If during any financial year no foreign contribution is received, a ‘NIL’ report must still be filed with the Authority.

Conclusion

More recently, it was reported in November 2019 that over 1,800 NGOs and academic institutes were found to be in violation of laws pertaining to foreign funding. They have been banned by the government from further receiving foreign funds for the year. This shows that the government is serious about enforcing the Act, which in itself is comforting. With more awareness and perhaps putting penalties in place, we can further ensure that private entities don’t indulge in such misuse of the law.

Question for UPSC Mains:
NGOs play an important role in uplifting the poorest of the poor in India. However, foreign intrusion in national matters is a genuine threat when it comes to it. Discuss with reference to the Foreign Contribution (Regulation) Act, 2010.

Published: January 15, 2020 | Modified:January 15, 2020

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