Foreign Contribution Regulation Act, 2010 – A detailed overview

In our daily lives, we see many business and financial transactions happening around us, whether intra-national or international. After the liberalization policy of 1991, India has expanded the scope of these transactions beyond its frontiers. By opening our economy to foreign participants, both us and they have been benefitted a lot. The foreign participants, on one hand, have got an additional market to do business whereas on the other hand India has also been presented with more opportunities mainly in the business sector.

Now when any new activity gains momentum and has an impact on the country or its economy, it is brought under the ambit of a specific law, either existing or new. Hence, to govern foreign exchange transactions, a law called as Foreign Exchange Management Act, 1999 was passed. It closely monitors how a transaction involving foreign currency is executed.

Similarly, to ensure that these foreign exchange transactions are discharged in all fairness without any vested interests against the nation or nation’s security, a law known as Foreign Contribution (Regulation) Act (FCRA) was passed. The Act was first passed in 1976, later it was amended in 1984 and passed again in 2010. This law basically upholds the internal security of India and therefore is regulated by the Union Home Ministry of India.

In the forthcoming points, we shall discuss – what foreign contribution means, what is foreign hospitality, what is the object behind passing the foreign contribution law (i.e FCRA), the persons who need to comply with the provisions of this law, and the consequences for non-compliance.

What is foreign contribution?

1) Any article, not being in the nature of a personal gift, whose value does not exceed the amount prescribed;

2) Indian or foreign currency;

3) Any security as defined by the Securities Contracts (Regulation) Act or foreign security as defined under FEMA.

donated, delivered, or transferred by a foreign source is called a foreign contribution.

-  Whether the above things are received directly or indirectly through one or multiple persons, it would still be considered foreign contribution.

- On investing the amount of foreign contribution, any interest earned on such investments would also be deemed to be a foreign contribution.

What is foreign hospitality?

Any facility such as the cost of travelling to a foreign country, boarding or lodging for free, facilities of transport, or medical treatment provided to a person by a foreign whether in cash or kind is known as foreign hospitality.

If the above offers are made casually, then it would not come under the definition of foreign hospitality.

The motto behind enacting FCRA:

FCRA was enacted with the following object

(i) Regulating the acceptance of foreign contribution and foreign hospitality as by certain individuals, associations, and companies.

(ii) Prohibiting the acceptance of foreign contribution and foreign hospitality for certain activities which can be detrimental to the national interest.

(iii) Making provisions for registering organizations that accept foreign contributions.

Prohibition of certain persons from accepting foreign contribution:

FCRA prohibits the following persons from accepting foreign contribution

1) A person who is an election candidate.

2) A correspondent, cartoonist, columnist, editor of a registered newspaper.

3) Judge of the Court of law.

4) Government servants and employees.

5) Member of the legislature (i.e MP, MLA).

6) Political parties or office bearers of such parties.

The Act also prohibits any person residing in India from accepting foreign contributions on behalf of the above-prohibited persons.

It also prohibits the delivery of foreign or Indian currency received from a foreign source to such a person who is likely to further deliver it to any of the prohibited persons as aforesaid.

Relaxations for prohibited persons from accepting foreign contribution:

The persons who are prohibited can accept foreign contributions in the following ways:

1) Salary or wages from any foreign source.

2) Payment in the course of international trade.

3) Gift is given by a foreign source and accepted as a member of Indian delegation subject to the rules made by the Central Government.

4) Receipt of remittance ordinarily in the course of business under FEMA.

5) Stipend, scholarship, or any payment of a similar nature.

Persons required to obtain compulsory registration before accepting foreign contribution:

Any person having a definite, religious, cultural, educational economic, or social programme cannot accept foreign contribution unless:

1) the certificate of registration has already been obtained by such person or

2) such registration certificate had been obtained by him under the prior Act or

3) he has to obtain the prior permission of the Central Government before accepting such foreign contribution in case of an unregistered person.

Persons or class of persons who shall obtain prior permission before accepting foreign contribution shall be expressly specified by the Central Government.

Once granted, the certificate of registration under the Act shall be valid for a period of 5 years.

The consequence for contravening the provisions of FCRA:

The Central Government is empowered to prohibit any person from paying, transferring, or delivering any foreign contribution if he has accepted the same by contravening the provisions of the FCRA.

If the person violated the prohibition order served by the Central Government on him, then he shall be liable for an imprisonment of up to 3 years or fine or both.

Conclusion:

With India witnessing a rise in international trade in the recent past, our country has seen instances where certain organizations and persons were involved in anti-social activities under the garb of receiving foreign contributions. Also, by adding certain persons to the prohibited list with respect to accepting foreign contributions, the Government intends to protect their independence since they work in the public interest and any form of compromise on their duty may malign the image of public services.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.