FCRA 2010 to 2020: Foreign Contribution (Regulation) Act evolution

In News: Recently, Foreign Contribution Regulation (Amendment) Bill 2020 was introduced in the Lok Sabha. The Bill amends the Foreign Contribution (Regulation) Act, 2010.

What is FCRA?

• Foreign Contribution (Regulation) Act: It is an act of Parliament enacted in 1976 and amended in 2010 to regulate foreign donations and to ensure that such contributions do not adversely affect internal security.
• Coverage: It is applicable to all associations, groups and NGOs which intend to receive foreign donations.
• Who cannot receive foreign donations?
  • Members of the legislature and political parties, government officials, judges and media persons are prohibited from receiving any foreign contribution.
  • However, in 2017 the FCRA was amended through the Finance Bill to allow political parties to receive funds from the Indian subsidiary of a foreign company or a foreign company in which an Indian holds 50% or more shares.
• Registration: It is mandatory for all such NGOs to register themselves under the FCRA. The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
• Purpose of Foreign contribution: Registered associations can receive foreign contributions for social, educational, religious, economic and cultural purposes. Filing of annual returns on the lines of Income Tax is compulsory.
• Ministry of Home Affairs (MHA) New Rules:
  • In 2015, the MHA notified new rules which required NGOs to give an undertaking that the acceptance of foreign funds is not likely to prejudicially affect the sovereignty and integrity of India or impact friendly relations with any foreign state and does not disrupt communal harmony.
  • It also said all such NGOs would have to operate accounts in either nationalised or private banks which have core banking facilities to allow security agencies access on a real time basis.

Key provisions of Foreign Contribution Regulation (Amendment) Bill 2020:

• Prohibition to accept foreign contribution:
  • Include certain public servants in the prohibited category for accepting foreign contribution: These include: election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties.
  • The Bill adds public servants to this list. Public servant includes any person who is in service or pay of the government, or remunerated by the government for the performance of any public duty.
• Transfer of foreign contribution: Under the Act, foreign contribution cannot be transferred to any other person unless such person is also registered to accept foreign contribution.
• FCRA account: The Bill states that foreign contribution must be received only in an account designated by the bank as FCRA account in such branches of the State Bank of India, New Delhi. No funds other than the foreign contribution should be received or deposited in this account.
• Definition of persons: The FCRA 2010 allows transfer of foreign contributions to persons registered to accept foreign contributions. The term ‘person’ under the Bill includes an individual, an association, or a registered company.
• Regulation: The Act states that a person may accept foreign contribution if they have obtained a certificate of registration from central government or obtained prior permission from the government to accept foreign contribution. The bill makes Aadhaar mandatory for registration.
• Restriction in utilisation of foreign contribution: The Bill gives government powers to stop utilisation of foreign funds by an organisation through a “summary enquiry”.
• Reduction in use of foreign contribution for administrative purposes: The bill decreases administrative expenses through foreign funds by an organisation to 20% from 50% earlier.
• Surrender of certificate: The Bill allows the central government to permit a person to surrender their registration certificate.

Need for such amendments:

• To monitor Misuse of funds: In Parliament, the government alleged that foreign money was being used for religious conversions. For instance, in 2017, the government barred American Christian charity, Compassion International.
• To prevent loss to the GDP: An official report quantifying the GDP losses allegedly caused by environmental NGOs was prepared during NPA period, indicating a foreign conspiracy against India.
• To enhance transparency and accountability: 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.
• To regulate NGO’s: Many persons were not adhering to statutory compliances such as submission of annual returns and maintenance of proper accounts.