Provisions relating to receipt of Foreign Contribution
The receipt of foreign contribution is regulated by the provisions of the Foreign Contribution (Regulation) Act, 1976 and the Foreign Contribution (Regulation) Rules, 1976. In India, funding by foreign development agencies is covered by the Foreign Contribution (Regulation) Act, 1976 and the nodal ministry for regulating this Act is the Ministry of Home Affairs. The objectives of the Act are as stated in its preamble. These can be briefly summarized as an Act to regulate the acceptance and utilization of foreign contribution by certain persons or associations so that such persons or associations may function in a manner consistent with the values of a sovereign democratic republic.
An NGO which wishes to utilize funds of a foreign development funding agency has to register under the FCRA Act. This is easier said than done. The department as a practice does not register organizations which come to it for the first time. In such cases, the NGO has to apply for prior permission for any funds that it is likely to receive. The department invariably gets a survey done of the applicant organization by state intelligence agencies.
What is Foreign Contribution [Section 2(C)]
“Foreign Contribution” as per Section 2 (1) (c) of the Foreign Contribution (Regulation) Act, 1976 means the donation, delivery or transfer made by any foreign source-
1. of any article, not being an article given to a person as a gift for his personal use, if the market value, in India, of such article, on the date of such gift, does not exceed one thousand rupees.
2. of any currency, whether Indian or foreign;
3. of any foreign security as defined in clause (0) of section 2 of the Foreign Exchange Management Act, 1999.
Explanation: A donation, delivery or transfer of any article, currency or foreign security referred to in this clause by any person who has received it from any foreign source, either directly or through one or more persons, shall also be deemed to be foreign contribution within the meaning of this clause.
The definition of “foreign contribution” as contained in the Act, included only the donation, delivery or transfer made by any foreign source. It did not include donation or contribution received by an organization from another organization from out of foreign contribution received by the latter organization. The definition was enlarged to include such contributions also for the purpose of tracing the utilization of foreign contribution down the line.
What is Assocation ?
“Association” as per Section 2 (1) (a) of the Foreign Contribution (Regulation) Act, 1976 means an association of individuals, whether incorporated or not, having an office in India and includes a society, whether registered under the Societies Registrations Act, 1860 (21 of 1860), or not, and any other organization, by whatever name called.
Two or more persons can form an association by resolving to act as an association. The following forms of associations are recognized in law:
a. a trust of two or more persons as Trustees therein. The Trust may be registered under the Indian Trusts Act, 1882.
b. a company registered U/s. 25 of the Companies Act, 1956. Usually clubs, associations of provision of the Companies Act, 1956.
c. a society of persons registered under the provisions of the Societies Registration Act, 1860 with the registrar of the societies with aims and objects and a structure as laid down in the said Act.
d. a statutory body consisting membership of persons constituted by or under a statute, having a structure as laid down in the statute by which it is constituted.
e. a charitable trust constituted under the Charitable Endowments Act, 1920
f. ‘any other organization’ has to be read sui generic and can not mean any organization of whatsoever form but has to mean any organization akin to a society.
g. It is not necessary that the association should be registered one but there must be some document to show its existence and working. But it must have an office in India in order to come within the perview of this Act.
h. a partnership firm constituted for the purpose of doing business. It is also an association and is usually registered under the Partnership Act, 1932 with the Registrar of the Firms.
i. A co-operative society formed and registered under the co-operative Societies Act, 1925 is an association.
j. A trade union of employees or employers formed and registered under the Trade Union Act, 1926 is an association.
k. A chit fund society created under the Chit Funds Act, 1982, is an association.
l. A multi state chit fund society created under the Multi State Chit Funds Act, 1984, is an association.
m. A company including its subsidiaries and a group companies registered under the Companies Act, 1956, is an association.