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September 20, 2020

FCRA amendment bill proposes reduction of foreign funds for admin expenses to 20%, mandates use of Aadhaar as ID

by facelesscompliance in Compliance Law, Corporate Law

FCRA amendment bill proposes reduction of foreign funds for admin expenses to 20%, mandates use of Aadhaar as ID


Centre is all set to amend the Foreign Contribution (Regulation) Act. A draft of the Bill says that the amendment is required to enhance transparency and accountability in the receipt and utilisation of foreign contribution worth thousands of crores of rupees every year and facilitating “genuine” non-governmental organisations or associations who are working for the welfare of the society.

FCRA regulates foreign donations and ensures that such contributions do not adversely affect the internal security of the country. The Act, first enacted in 1976 was amended in the year 2010 when a slew of new measures were taken by the Union Home Ministry to regulate foreign donations.

The Statement of Objects and Reasons of the Bill further states, “The Foreign Contribution (Regulation) Act, 2010 was enacted to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto.”

The draft says that the said Act has come into force on May 1, 2011 and has been amended twice. The first amendment was made by section 236 of the Finance Act, 2016 and the second amendment was made by section 220 of the Finance Act, 2018.

“The annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilised the same for the purpose for which they were registered or granted prior permission under the said Act. Many of them were also found wanting in ensuring basic statutory compliances such as submission of annual returns and maintenance of proper accounts. This has led to a situation where the Central Government had to cancel certificates of registration of more than 19,000 recipient organisations, including non-Governmental organisations, during the period between 2011 and 2019. The criminal investigations also had to be initiated against dozens of such non-Governmental organisations which indulged in outright misappropriation or mis-utilisation of foreign contribution,” the draft said.

Know Key Changes Proposed The Foreign Contribution (Regulation) Amendment Bill, 2020

1) Until now the NGOs were permitted to utilise 50 per cent of their foreign funding to meet administrative expenses. The new FCRA amendment states that NGOs cannot use more than 20 per cent of the foreign contributions to meet their administrative expenses like paying salaries. It also bars any public servant from receiving any foreign funds. The definition of public servants would be laid out as per the Section 21 of the IPC.

2) Under the amendment any new FCRA registration and renewal of FCRA licence will require the Aadhaar number of all office bearers or a copy of passport or OCI card in case of a foreigner. The government further proposes to make Aadhaar cards a mandatory identification document for all office-bearers, directors and other key functionaries of NGOs or associations eligible to receive foreign donations.

3) The Bill proposes to include “public servant” and “corporation owned or controlled by the Government” among the list of entities who are not eligible to receive foreign donations, the draft says. “Amendment of clause (c) of sub-section (1) of section 3 to include “public servant” also within its ambit, to provide that no foreign contribution shall be accepted by any public servant,” the Bill says.

4) The new FCRA, if passed, will also “prohibit any transfer of foreign contribution to any association/person”.

5) A clause in the bill states that it will allow for the central government to hold a summary inquiry to direct bodies with FCRA approval to “not utilise the unutilised foreign contribution or receive the remaining portion of foreign contribution”.

The clause states: “Provided the central government, on the basis of any information or report, and after holding a summary inquiry, has reason to believe that a person who has been granted prior permission has contravened any of the provisions of this act, it may, pending any further inquiry, direct that such person shall not utilise the unutilised foreign contribution or receive the remaining portion of foreign contribution which has not been received or, as the case may be, any additional foreign contribution, without prior approval of the central government.”

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