The Union Ministry of Home Affairs has, for the first time, clearly specified the reasons for rejecting clearance under the Foreign Contribution Regulation Act (FCRA), which is required to receive foreign funds.
Overview of the Foreign Contribution (Regulation) Act, 2010 (FCRA):
The FCRA is legislation passed by the Indian Parliament to regulate foreign contributions, particularly monetary donations, provided by foreign sources to individuals, associations, and NGOs within India. Initially enacted in 1976, it was extensively amended in 2010, and is overseen by the Ministry of Home Affairs (MHA).
Under the FCRA, “foreign contribution” refers to any donation, delivery, or transfer from a foreign source of:
- Any article (excluding gifts valued under one lakh rupees for personal use),
- Any currency (Indian or foreign),
- Any securities, including foreign securities.
This also covers:
- Contributions from individuals who themselves received funds from foreign sources,
- Interest earned on foreign funds held in bank accounts.
The Act imposes requirements for registration and spending restrictions on Indian nonprofit organizations receiving foreign contributions. Its primary goal is to prevent foreign entities from unduly influencing India’s electoral, social, political, economic, or religious environment in ways that may harm public interest. Contributions by Indian citizens living abroad (such as NRIs) through their personal savings and regular banking channels are not classified as foreign contributions.
Eligibility to Receive Foreign Contributions:
Individuals or entities can receive foreign contributions if:
- They have a specific cultural, economic, educational, religious, or social program,
- They have FCRA registration or prior approval from the Central Government.
Eligible recipients include:
- Individuals,
- Hindu Undivided Families (HUFs),
- Associations,
- Companies registered under Section 8 of the Companies Act, 2013.
Foreign contributions must only be used for the purposes for which they were received, with a cap of 20% of funds allocated for administrative expenses per financial year.
FCRA also mandates NGOs to open a designated bank account in the State Bank of India, Delhi, for receiving foreign funds. All associations, groups, and NGOs wishing to receive foreign contributions must register under the FCRA. Registrants must be genuine (not fictitious or benami) and must not have been involved in forced or inducement-based religious conversions. Registration is valid for five years, with renewals available if the NGO meets compliance requirements.
Registered entities can use foreign contributions for social, educational, religious, economic, and cultural projects. However, registration can be canceled if an inquiry reveals false statements in the application, and canceled NGOs cannot reapply for three years. The ministry may also suspend an NGO’s registration for up to 180 days during an investigation, with the authority to freeze its funds. Government orders under the FCRA are subject to appeal in the High Court.
