What is foreign hospitality?

Foreign Hospitality means any offer, not being a purely casual one, made in cash or kind by a foreign source for providing a person with the costs of travel to any foreign country or territory or with free board, lodging, transport or medical treatment.

Who requires prior approval from Ministry of Home Affairs before accepting Foreign Hospitality?

The following categories of persons require prior approval from Ministry of Home Affairs before accepting Foreign Hospitality:-

1) Members of a Legislature

2) office bearers of political parties

3) Judges

4) Government servants

5) Employees of any corporation or any other body owned or controlled by the Government.

Provided that it shall not be necessary to obtain any such permission for an emergent medical aide needed on account of sudden illness contracted during a visit outside India.But, where such foreign hospitality has been received, the person receiving such hospitality shall give an intimation to the Central Government as to the receipt of such hospitality within one month from the date of receipt of such hospitality, and the source from which, and the manner in which, such hospitality was received.

Whether approval of the Ministry of Home Affairs is required in cases where the proposed foreign visit is being undertaken by a person in his/her personal capacity and the entire expenditure thereon is being met by the person concerned?

No.

How one can seek permission of the Government for receiving foreign hospitality. Which is the relevant form?

The applicant should submit application in Form FC-2 online.

What documents are to be uploaded with FC-2 form for seeking prior permission for Foreign Hospitality?

Following documents are to be uploaded with FC-2 form (as mentioned under Rule 7 of FCRR, 2011):-

1) Signature of the applicant (maximum 50 KB allowed in JPG/ JPEG format)

2) An invitation letter from the host or the host country, as the case may be (maximum 1 MB allowed in PDF format)

3) Administrative clearance of the Ministry or department concerned in case of visits sponsored by a Ministry or department of the Government (maximum 1 MB allowed in PDF format).

When should the application for filing the FC-2 form be filled?

The application for grant of permission to accept foreign hospitality should be filed online ordinarily two weeks before the proposed date of onward journey. In case of emergent medical aid needed on account of sudden illness during a visit abroad, the acceptance of foreign hospitality shall be required to be intimated to the Central Government within sixty days of such receipt giving full details including the source, approximate value in Indian Rupees, and the purpose for which and the manner in which it was utilized. Provided that no such intimation is required if the value of such hospitality in emergent medical aid is up to one lakh rupees or equivalent thereto.

What are the offences and penalties under FCRA, 2010? Ans. Under section 41, the government has issued a gazette notification dated 5.06.2018 and 27.07.2018, which is highlighted as below

The amount of penalty computed under column (3) of the Table in respect of any offence or offences referred to in column (2) thereof shall not be more than the value of the foreign contribution involved.

How to apply for compounding of an offence under FCRA, 2010?

An application for the compounding of an offence under section 41 of FCRA, 2010 is to be made to the Secretary, Ministry of Home Affairs, New Delhi on a plain paper along with a fee of Rs.1000/- (One Thousand only) in the form of a demand draft or a banker’s cheque in favour of the “Pay and Accounts Officer, Ministry of Home Affairs”, payable at New Delhi.

What if the person is unwilling or unable to pay the penalty imposed?

In the event of failure to pay the penalty, for whatever reason, necessary action for prosecution of the person shall be initiated.

Which are the investigating agencies for investigating and prosecuting a person for violation of FCRA?

The Central Bureau of Investigation or the investigating agencies (Crime Branch) of the State Governments, cause of action of which arises in their respective States, are the designated agencies for investigating and prosecuting a person for violation of FCRA.

Suspension and Cancellation of Registration under Foreign Contribution Regulation Act 2010

Can the Government cancel the certificate of registration granted to a person under FCRA?

Yes. Central Government may cancel the certificate as per the provisions of section 14 of the FCRA, 2010. NOTE – Any person whose certificate has been cancelled under this section shall not be eligible for registration or grant of prior permission for a period of three years from the date of cancellation of such certificate

Can the Government suspend the certificate of registration granted to person under FCRA?

Yes. Central Government may suspend the certificate as per the provisions of section 13 of the FCRA, 2010 for a period not exceeding one hundred and eighty days.

What are the consequences of suspension of the registration certificate granted to a person under FCRA?

A person whose FCRA registration certificate has been suspended shall:-

(a) not receive any foreign contribution during the period of suspension of certificate; provided that the central government specifically approves it on a case by case basis

(b) not utilize the unutilized FC in his custody without the prior approval of the Central Government. Even in this case, only up to twenty-five per cent of the unutilised amount may be spent, with the prior approval of the Central Government, for the declared aims and objects for which the foreign contribution was received. The remaining seventyfive per cent of the unutilised foreign contribution shall be utilised only after revocation of suspension of the certificate of registration.

Are there any specified banks for the purpose of FCRA 2010?

Ans. Yes, It should be a PFMS integrated Bank. List of banks integrated with PFMS is available at https://fcraonline.nic.in/fc_bank_list.aspx

Whether an association needs to open an exclusive FC A/c before submission of an application for registration or prior permission?

Yes. Since the FC A/c through which foreign contribution is proposed to be received and utilised is to be mentioned in the application seeking registration or prior permission, as the case may be, the association should open such an exclusive FC A/c with a Bank. This A/c number would be mentioned in the letter granting registration or prior permission to the association.

Whether Banks should allow an association which is applying for registration or prior permission under FCRA, 2010 to open an exclusive FC A/c with INR?

Yes. However, the Banks should not allow any foreign inward remittance in that A/c till such time the association is granted registration or prior permission, as the case may be.

Should the Banks report transactions pertaining to foreign contributions which are returned to the remitter by the beneficiary Association for want of registration/prior permission from MHA?

It is not necessary for the bank to report such foreign contribution that is returned to the donor without crediting in the account of the recipient.

Whether reporting by Banks is also applicable for transfer of funds between FCRA accounts of two or more associations?

Yes. Reporting by Banks is also applicable to transfer of funds from one FCRA registered Association to another.

Minimum Balance requirements in FC Accounts? Ans. There is no such requirement under FCRA, 2010.

There is no such requirement under FCRA, 2010.

Accounts to be maintained on annual basis from April to March. All details of FC received shall be maintained. Income and Expenditure and Balances heet are to be prepared exclusively for FC received. Accounts and records relating to receiving and utilization of foreign contribution are to be maintained exclusively/ separately only in designated bank accounts.

Is online submission of annual returns mandatory?

Yes. Annual returns are to be filed online at fcraonlineservice.nic.in. No hard copy of the returns shall be accepted in FCRA Wing of Ministry of Home Affairs.

What is the last date for online filing of returns?

Ans. The return is to be filed online for every financial year (1st April to 31st March) within a period of nine months from the closure of the year i.e. by 31st December each year.

What is the procedure for filing Annual Returns?

Ans. The Annual return is to be submitted online at fcraonline.nic.in in prescribed Form FC-4, duly accompanied balance sheet and statement of receipt and payment, which is certified by a Chartered Accountant. Submission of a ‘NIL’ return, even if there is no receipt/utilization of foreign contribution during the year, is also mandatory. However, in such case, certificate from Chartered Accountant, audited statement of accounts is not required to be uploaded.  Annual Return are to be filed online at fcraonline.nic.in For further details, please refer to Rule 17 of the foreign contribution (Regulation) Rules, 2011 (FCRR, 2011) 

For how many years an association which has been granted prior permission to receive foreign contribution should file the mandatory annual return?

Ans. The association should fill the mandatory annual return on a yearly basis, till the amount of foreign contribution is fully utilized. Even if no transaction takes place during a year, a NIL return should be submitted.

What are the consequences of not filling the annual returns on time?

Ans. An association not filing annual return on time may face the following consequences:

(1) Imposition of penalty for late submission of return.

(2) Cancellation of registration

When Audit is required?

The audit report has to be uploaded by Chartered Accountant in FC 04 Form. This to be uploaded before due date of 31 December annually. FC04 forms shall provide details of FC received, utilised, purpose, and manner of utilisation. Even NIL report need to submitted though Chartered Accountant certificate may not be required for NIL report

Can an association having registration or prior permission transfer the FC received by it to another organization?

 If yes, then what is the process to do so? Is there any restriction on transfer of funds to other organisations? Ans. Yes. Section 7 of FCRA, 2010 states:- 

“No person who –

(a) is registered and granted a certificate or has obtained prior permission under this Act; and

(b) receives any foreign contribution, shall transfer such foreign contribution to any other person unless such other person is also registered and had been granted the certificate or obtained the prior permission under this Act: Provided that such person may transfer, with the prior approval of the Central Government, a part of such foreign contribution to any other person who has not been granted a certificate or obtained permission under this Act in accordance with the rules made by the Central Government.” Rule 24 of FCRR, 2011, as amended vide the Foreign Contribution (Regulation) Amendment Rules, 2012 [G.S.R. 292 (E) dated 12th April, 2012] prescribes the procedure for transferring foreign contribution as under: “24. Procedure for transferring foreign contribution to any unregistered person. ─

(1) A person who has been granted a certificate of registration or prior permission under section 11 and intends to transfer part of the foreign contribution received by him to a person who has not been granted a certificate of registration or prior permission under the Act, may transfer such foreign contribution to an extent not exceeding ten per cent of the total value thereof and for this purpose, make an application to the Central Government in Form FC-5.

(2) Every application made under sub-rule (1) shall be accompanied by a declaration to the effect that- (a) the amount proposed to be transferred during the financial year is less than ten per cent of the total value of the foreign contribution received by him during the financial year;  (b) the transferor shall not transfer any amount of foreign contribution until the Central Government approves such transfer.

(3) A person who has been granted a certificate of registration or prior permission under section 11 shall not be required to seek the prior approval of the Central Government for transferring the foreign contribution received by him to another person who has been granted a certificate of registration or prior permission under the Act provided that the recipient has not been proceeded against under any of the provisions of the Act.

(4) Both the transferor and the recipient shall be responsible for ensuring proper utilisation of the foreign contribution so transferred and such transfer of foreign contribution shall be reflected in the returns in Form FC-4 to be submitted by both the transferor and the recipient.”

Whether inter-account funds transfer shall be allowed within the multiple accounts that an Association is now permitted to open for the purpose of utilizing the foreign contributions and the level of diligence required on the part of the Banks in this regard?

No. Transfer of funds is allowed from the designated FC account of an Association to the multiple account or accounts opened for its utilization. However, no funds other than the funds (FC) received in the designated FC account shall be received or deposited in such multiple account or accounts. There in no bar in transferring foreign contribution between the utilisation accounts. However, Association should preferably avoid such practice for keeping the accounting process simple. The banks should apply full diligence to keep track of the transfers.

How would an organisation that is registered or has obtained prior permission under FCRA and intends to transfer a part of the foreign contribution received by it to another organisation would know whether the recipient organisation has been proceeded against under FCRA?

Where any organisation is proceeded against under FCRA, it is done with due intimation to the organisation concerned. Therefore, the donor organisation is advised to insist on a written undertaking from the intending recipient organisation.

Can foreign contribution be mixed with local receipts?

Ans. No. Accounts and records relating to receiving and utilization of foreign contribution are to be maintained exclusively/ separately.

From whom an association registered/granted prior permission under FCRA, 2010 can accept the foreign contribution?

Associations registered or granted prior permission under FCRA, 2010 should ensure that they received foreign contribution only from a legitimate source and for activities as prescribed under the Act.

Are there any banned organisations from whom foreign contribution should not be accepted?

Yes. FCRA is meant to ensure that foreign contribution is received from legitimate sources and utilised for legitimate purposes by any person.

Whether the amount of foreign contribution for which prior permission has been granted can be received by an association in instalments?

Yes. There is no bar on receiving such foreign contribution in instalments. However, the aggregate amount should not exceed the specified amount for which prior permission has been granted.

The association shall have to submit the mandatory online return in FC-4 form for receipt and utilization of the foreign contribution on a yearly basis, till the amount of foreign contribution is fully utilized. Even if no transaction takes place during a year, a NIL return should be submitted.

What are restriction on Administrative Expenses as per FCRA?

Every person, registered or having prior permission, shall not incur administrative expenses in excess of 50% of the Foreign Contribution received in that financial year. 

What are the administrative expenses as per FCRA, 2010?

Rule 5 of FCRR, 2011 defines that administrative expenses constitute the following :

(i) Salaries, wages, travel expenses or any remuneration realised by the Members of the Executive Committee or Governing Council of the person;

(ii) all expenses towards hiring of personnel for management of the activities of the person and salaries, wages or any kind of remuneration paid, including cost of travel, to such personnel;

(iii) all expenses related to consumables like electricity and water charges, telephone charges, postal charges, repairs to premise(s) from where the organisation or Association is functioning, stationery and printing charges, transport and travel charges by the Members of the Executive Committee or Governing Council and expenditure on office equipment;

(iv) cost of accounting for and administering funds;

(v) expenses towards running and maintenance of vehicles;

(vi) cost of writing and filing reports;

(vii) legal and professional charges; and

(viii) rent of premises, repairs to premises and expenses on other utilities;

Provided that the expenditure incurred on salaries or remuneration of personnel engaged in training or for collection or analysis of field data of an association primarily engaged in research or training shall not be counted towards administrative expenses

Provided further that the expenses incurred directly in furtherance of the stated objectives of the welfare oriented organisation shall be excluded from the administrative expenses such as salaries to doctors of hospital, salaries to teachers of school etc.

Can foreign contributions be invested in Mutual Funds or other speculative investments?

No. Speculative activities have been defined in Rule 4 of FCRR, 2011 as under:-

(a) any activity or investment that has an element of risk of appreciation or depreciation of the original investment, linked to market forces, including investment in mutual funds or in shares;

(b) participation in any scheme that promises high returns like investment in chits or land or similar assets not directly linked to the declared aims and objectives of the organization or association. Every association shall maintain a separate register of investments. Every such register of investments maintained under sub-rule (3) shall be submitted for audit.

Can capital assets purchased with the help of foreign contributions be acquired in the name of the office bearers of the association??

No. Every asset purchased with foreign contribution should be acquired and possessed in the name of the association since an association has a separate legal entity distinct from its members

Can an association invest the foreign contribution received by it in profitable ventures and proceeds can be utilized for welfare activities?

No.The associations are granted registration/Prior Permission under the FCRA Act 2010 for receiving FC for certain purpose/objectives. Accordingly FC should be utilized for the purpose only for which it is received.

Can foreign contribution be received in and utilised from multiple Bank Accounts?

The foreign contribution should be received only in the exclusive single FC account of a Bank (also called designated FC account), as mentioned in the order for registration or prior permission granted and should be separately maintained by the associations. However, one or more accounts (called Utilization Account) in one or more banks may be opened by the association for ‘utilising’ the foreign contribution after it has been received in the designated FCRA bank account, provided that no funds other than that foreign contribution shall be received or deposited in such account or accounts and in all such cases, intimation in FC-6Dis to be given online within 15 days of opening of such account

Can an association transfer foreign contribution from one utilization account to another utilization account?

As such there is no bar for transferring FC from one uc a/c to another uc a/c. However, the same be preferably avoided to keep the accounting process simple.