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FOREIGN CONTRIBUTION (REGULATION) ACT, 2010

FOREIGN CONTRIBUTION (REGULATION) ACT, 2010. Go. 1. HAS BECOME EFFECTIVE FROM 1 ST MAY, 2011. 2. COMPARATIVE STATUS :. FOREIGN CONTRIBUTION REGULATION ACT, 2010. Previous. Next.

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FOREIGN CONTRIBUTION (REGULATION) ACT, 2010

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  1. FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 Go

  2. 1. HAS BECOME EFFECTIVE FROM 1ST MAY, 2011.2. COMPARATIVE STATUS : FOREIGN CONTRIBUTION REGULATION ACT, 2010 Previous Next

  3. DEFINITION & APPLICABILTYPROHIBITIONREGISTRATIONOPERATIONAL REQUIREMENTSRESTRICTIONSCONSEQUENCESISSUES NEED CLARITYIMMEDIATE ACTION POINTS COVERAGE Previous Next

  4. DEFINITION & COVERAGE Previous Next

  5. DEFINITION “FOREIGN CONTRIBUTION” Means the donation, delivery or transfer, made by any foreignsource of :-a) currency, whether Indian or foreignInclusions :a) Interest accrued on foreign contribution.b) Any other income derived from foreign contribution.Exclusions :a) Amount received by way of fees or towards cost in lieu of goods & servicerendered in the ordinary course of business. Previous Next

  6. DEFINITION “FOREIGN SOURCE” includes : a) government of any foreign country or territory b) international agency c) foreign company d) citizen of a foreign country e) Company with more than 50 % foreign shareholding. f) some of the sources appear to be foreign but are exempted from the definition of foreign source, e.g. Agencies of the United Nations, World Bank and other International agencies as may be specified Previous Next

  7. DEFINITION IMPORTANT INDICATORS – a) Source is important and not the currency. b) Contribution from NRI through normal banking channels are not foreign contribution. However it is advisable to obtain the passport details to establish that the person sending the remittance is an Indian citizen. c) Foreign citizen making donation in Indian currency is covered under foreign sources. Previous Next

  8. COVERAGE a) Earlier only Association was covered b) But now the Act is applicable to :- i) Association ii) Individual iii) HUF iv) Section 25 Companies Previous Next

  9. PROHIBITION Previous Next

  10. PROHIBITION SECTION -3 There is a prohibition on certain category of person to receive foreign contribution. These categories include – a) Member of legislature b) Correspondent, editor, columnist of an association/company engaged in production or broad-cast of audiovisual news or current affairs program through any electrical media or through any mode of mass communication. Organisation of a political nature as may be specified. The member of legislature shall include the Panchayat member. However the payment in ordinary course of business towards rendering of goods & services or in the form of salary & wages are allowed. Previous Next

  11. PROHIBITION Organisation of political in nature : As per Rule 3 the Central Govt. may specify an organisation as a political in nature if it falls under following situations – a) Organisation having political objectives in its Memorandum of Association or bylaws; b) Any voluntary action group with objectives of a political nature or which participates in political activities. Previous Next

  12. PROHIBITION c) Organisation which is not directly aligned to any political party, but whose objectives, as stated in the Memorandum of Association, or activities gathered through other material evidence, include steps towards advancement of political interests of such groups; d) Any organisation, by whatever name called, which habitually engages itself in or employs common methods of political action like `bandh’ or `hartal’, `rasta roko’ or `jail bharo’ in support of public causes. Previous Next

  13. REGISTRATION Previous Next

  14. REGISTRATION WHO CAN RECEIVE FOREIGN CONTRIBUTION? A) A person having a definite cultural, economic, educational, religious or social program can receive foreign contribution after it – a) obtains the prior permission of the Central Government (FC – 4) or, b) gets itself registered with the Central Government. ( FC – 3) B) Application for registration or prior permission, under the previous Act : To furnishes the prescribed fees of Rs.1,000/- for prior permission & Rs.2,000/- for permanent registration. Previous Next

  15. REGISTRATION KEY ISSUES : a) The permanent registration is valid for 5 years from the date of issue of registration. b) For existing registered NGOs the date of 5-year shall be calculated from 1st May, 2011. c) Prior permission shall be valid for the specific amount of contribution proposed to be received. d) No deemed approval of prior permission within 90 days from the date of receipt of application. Previous Next

  16. RENEWAL OF REGISTRATION a) Application for renewal is to be made in Form FC-5 latest by six months before the date of expiry of the certificate. b) The person implementing multi year projects shall apply for renewal latest by 12 months before the date of expiry of the certificate. c) If an organisation fails to renew within the due date, the department may condone the delay. However such delay should not be more than 4 months after the expiry of the original certificate. Previous Next

  17. RENEWAL OF REGISTRATION d) The Central Govt. may renew the certificate within 90 days or reject the application communicating the reasons thereof. e) In case of rejection the aggrieved NGO has a right to file an appeal within 60 days from the date of such order or may apply for revision of order. Previous Next

  18. OPERATIONAL REQUIREMENTS Previous Next

  19. OPERATIONAL REQUIREMENTS A) BANK ACCOUNT : a) All foreign contribution should be received through one designated bank account b) Now multiple bank account are allowed for utilisation purposes provided it is intimated to the Ministry within 15 days of the opening of the account. Previous Next

  20. OPERATIONAL REQUIREMENTS B) BOOKS OF ACCOUNTS : a) Rule 11 : a separate set of Books of Accounts & records shall be maintained, exclusively for foreign contribution received & utilised. b) If the foreign contribution is received in kind then the details should be preserved as mentioned in Form FC-7 c) Books of accounts should be preserved for a period of six years [As per Rule 17 (7)] Previous Next

  21. OPERATIONAL REQUIREMENTS C) SUBMISSION OF RETURNS : a) Annual Return : 1. Yearly Return in form FC-6 (earlier FC-3) accompanies by Receipt & Payment A/c, Income & Expenditure A/c & Balance Sheet within nine months. 2. Form FC-6 should reflect the foreign contribution received in the exclusive bank account & include the details of fund transfer to other bank a/c for utilisation. Previous Next

  22. OPERATIONAL REQUIREMENTS C) SUBMISSION OF RETURNS : 3. FC-6 form is more or less same except requirement of furnishing purpose wise expenditures on the basis of location /place with address of each of specific activities 4. FC-6 shall also be accompanied with a statement of A/c from the bank through which FC money is received duly certified by the officer of the bank. 5. Nil return shall be furnished if no receipt during the financial year. Previous Next

  23. OPERATIONAL REQUIREMENTS D) INTIMATION : a) Rule 15 : The bank should report to the FCRA department within 30 days under two circumstances : 1) if any foreign contribution is received without registration or prior permission, 2) if foreign contribution is receive in excess of Rs.OneCrore during a period of 30 days, b) Public Domain : Intimation for receipt of foreign contribution is in excess of Rs.1.00 Crore in a Financial Year : Organisation should place the data on receipt & utilisation pertaining to the year of receipt as well as for one year thereafter in public domain. Previous Next

  24. RESTRICTIONS Previous Next

  25. RESTRICTIONS FCRA, 2010 HAS COMPOSED FOLLOWING RESTRICTIONS : A) ADMINISTRATIVE EXPENDITURE : a) Admin. Exp. should not be more than 50% of the total FC Received during a financial year . In excess of 50% can be incurred with prior approval of the Central Govt. b) Rule 5 defines Admin. exp. & basically it includes :- > Remuneration & other expenditure to Board Members and Trustees > Remuneration for person managing activity and other related expenses.. Previous Next

  26. RESTRICTIONS FCRA, 2010 HAS COMPOSED FOLLOWING RESTRICTIONS : > Expenses at the office of the NGO. > Cost of accounting and administration. > Expenses towards running & maintenance of vehicle > Cost of writing and filing reports > Legal and professional charges > Rent and repairs to premises The rule further provides that any type of expenditure expended directly on program activities shall not be considered as administrative in nature. Previous Next

  27. RESTRICTIONS B) Foreign Contribution shall be utilised for the purpose for which the contribution has been received [Sec. 8(1)(a)]. C) Utilisation of FC for speculative purpose : FC or income arising therefrom shall not be used for speculative purpose. Rule 4 defines speculative activities : > As per the Rule in investment in equity market even through mutual fund shall be considered as sepculative activities. > The Rule basically prohibits investment into risk bearing instruments or assets. Previous Next

  28. RESTRICTIONS D) Transfer of FC fund to other FC registered organisation : FC fund can be transferred to other FC registered organisation provided the recipient organisation has not been proceeded against under any of the provision of the act. E) Transfer of FC fund to Non-FC registered organisation : a) Can be made under prior approval. b) The application shall be made in form FC-10. c) As per Rule 24 the total transfer to non-FC registered organisation shall not exceed 10% of the total contribution received. Previous Next

  29. CONSEQUENCES Previous Next

  30. CONSEQUENCES A) CANCELLATION OF CERTIFICATE : Sec. 14(1) : FCRA certificate can be cancelled if : a) the holder of the certificate has made a statement in, or in relation to, the application for the grant of registration or renewal thereof, which is incorrect or false; or b) the holder of the certificate has violated any of the terms and conditions of the certificate or renewal thereof; or c) if the holder of the certificate has not been engaged in any reasonable activity in its chosen field for the benefit of the society for two consecutive years or has become defunct. Previous Next

  31. CONSEQUENCES A) CANCELLATION OF CERTIFICATE : d) in the opinion of the Central Government, it is necessary in the public interest to cancel the certificate. e) No order of cancellation shall be made unless the person concerned has been given a reasonable opportunity of being heard. f) Once the certificate is cancelled, eligibility of registration or prior permission only after a period of three years from the date of cancellation. Previous Next

  32. CONSEQUENCES B) SUSPENSION OF CERTIFICATE : a) During the period of cancellation of certificate :- > The new act allows the power to suspend the registration for a period upto 180 days. > FC can be received only with prior approval. > the organisation can utilise existing foreign fund upto 25% that too with prior approval. b) Before suspending any organisation the department shall record the reason in writing. However provision of opportunity of being heard is not provided. Previous Next

  33. CONSEQUENCES C) CUSTODY OF FUNDS & ASSETS IN THE EVENT OF CANCELLATION : a) In case of available bank balances, the respective banking authority will become the custodian till the Central Govt. issues further directions. b) If funds have been transferred to another NGO after cancellation, then the funds in the bank a/c of such NGO will also go to the custody of the banking authority. Previous Next

  34. CONSEQUENCES C) CUSTODY OF FUNDS & ASSETS IN THE EVENT OF CANCELLATION : c) All other assets of the organisation shall go to the interim custody of the District Magistrate or any other authority which the Central Govt. may direct and for such period as may be prescribed. d) May also sale the assets if funds are not available for running the activity. Previous Next

  35. ISSUES NEED CLARITY Previous Next

  36. ISSUES NEED CLARITY a) Giving of loans under Micro Credit program to individuals or groups. b) Whether transfer of fund directly to end beneficiaries is permissible? c) Will non-receipt of foreign contribution for two years results in cancellation? How to report multiple bank accounts opened earlier? Previous Next

  37. IMMEDIATE ACTION POINTS Previous Next

  38. IMMDIATE ACTION POINTS a) Operational bank account & intimation thereof. b) Review of investments in view of the definition of speculative activities. c) Adjust the accounting framework so that the location wise expenditure can be determined. d) Separate books of accounts for documenting & accounting of foreign contribution received in kind. e) Process of transfer of foreign fund to FC registered organisation after obtaining a certificate. f) Process of transfer of fund to non-FC organisation with prior approval. g) Application for prior permission and registration filed under the old act to be regularised by furnishing filing fees Previous Next

  39. THANK YOU Previous Next

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