Key Highlights of the FCRA (Amendment) Bill, 2020 – by Mahesh Kumar (Tax Consultant)

Foreign Contribution (Regulation) Amendment Bill 2020 was introduced in the Lok Sabha on September 21, 2020 with the objectives of

  •  making the FCRA law more stringent,
  • strengthening the compliance mechanism, and
  • enhancing transparency and accountability in the receipt and utilization of foreign contributions
  1. Objective of passing FCRA (Amendment) Bill, 2020 :

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. Criminal investigations were initiated against dozens of such non-Governmental organisations.

  • Therefore, there is a need to streamline the provisions of the said Act by strengthening the compliance mechanism, enhancing 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.
  1. Key Amendments of Proposed Bill :

The Amendment Bill, 2020 proposes more than 10 reforms to the Foreign Contribution (Regulation) Act, 2010 (“FCRA”). The key amendments proposed in the bill are :

    • Bar on Public Servants to accept foreign contribution : The bill proposes to widen the list of the persons prohibited to accept foreign contributions by including Public Servants in the prohibited list.
    • Prohibition to transfer of foreign contribution to another person : Earlier, a registered person holding a valid certificate could transfer contributions to another person holding a valid certificate. The bill seeks to prohibit transfers altogether purportedly to restrict money laundering.
    • Cap on usage of foreign funds for Administrative purpose : The bill also seeks to limit the use of foreign funds received under FCRA for administrative purposes from the current limit of 50% to 20%.
    • Requirement of FCRA Account : The FCRA account needs to be opened in a manner as specified under the Act and foreign contribution shall be received in such an account only.
    • Mandatory Aadhaar Card to receive foreign funds : The bill proposes to make Aadhaar card mandatory for all resident Office bearers or directors of NGOs and other organizations eligible for foreign contribution. In case of a foreign national, a passport or overseas citizen of India card would be required.
    • Time Limit for suspension of certificate : The Bill proposes to empower the Government to further extend the time limit for suspension of a certificate that has been issued under FCRA. The Ministry of Home Affairs has powers to suspend FCRA certificates for more than 180 days, without specifying an upper limit. By suspending the FCRA certificate, the Government can starve organisations of funds while it investigates them.
    • New provision for surrender of certificate : In order to provide an easy exit route to the genuine person, the bill proposes to introduce a new provision for surrender of certificate. If the Government is satisfied that such person has not contravened any of the provision of FCRA, then their application could be surrendered.

    -BY MAHESH KUMAR (Tax Consultant)