significant fcra amendments: what they are and how they affect you !!

Significant FCRA Amendments What they are and How they affect you

Sunil Goel & Associates, CAs August 2016 www.sunilgoel.com

For Internal Circulation Only

www.sunilgoel.com New Delhi | Noida | Gurgaon | Mumbai [email protected]

SIGNIFICANT FCRA AMENDMENTS

The Foreign Contribution (Regulation) Act, 2010 is broadly a law that asks all the Non-

Government Organizations and Charitable Individuals to disclose the information to the government regarding the funds that they receive from foreign sources. A person should not accept any foreign funds without government’s permission. This is done through obtaining prior permission or registration under the Act.

The Indian government holds a vision to transform the nation into a digitally

empowered society and knowledge economy. In order to improve the existing system of registration, prior permission and renewal under FCRA, 2010, Ministry of Home Affairs came up with an amendment making majority of the FCRA services online. This is to ensure faster processing and disposal of cases and also to bring transparency.

Circular dated 17th June 2015 announced the Foreign Contribution (Regulation)

Amendment Rules, 2015. These were put up for suggestions till 1st July 2015 after which provisions were eventually watered down in accordance with the comments and suggestions received from NGOs. These Foreign Contribution (Regulation) Amendment Rules, 2015 were subsequently brought into force with effect from 14th December 2015.

With provisions such as fee payment through online payment gateway and all types of

queries made to applicants through emails, this move of shifting the FCRA procedures online shall induce following changes:

S No. Particulars Earlier Provisions Revised Provisions

1 Registration & Prior permission

Applications of Registration (FC-3) and Prior Permission (FC-4) were first to be filed online and then a hard copy was to be submitted to the Ministry within 30 days.

There is now a single form FC-3 for registration and prior permission, which has to be submitted online. The provisions of physical submission have been removed.

2 Renewal Renewal of registration was done offline via Form FC-5

Renewal is now done through Form FC-3 which is online.

3 Application Submission

Hard copy of the applications were signed and submitted with the Ministry.

All the applications are now digitally signed by uploading image of seal and stamp in the required format.

4 Attachment Submission

Hard copies of the attachments filed with applications were to be submitted within 30 days of the online submission.

The self-certified copies of required attachments are now scanned and attached online with the applications.

5 Payment Mode Fee was paid through demand draft or Banker’s Cheque filed and submitted with attachments

Fee is now paid through online payment gateway.



6 Correspondence with the Ministry

Correspondence with the Ministry was through letters and personal visits

Queries are now ordinarily handled through emails and a monthly meeting with the Director on the last Monday of every month (refer Circular dated 4th July 2016).

7 Annual Return A person was required to file an annual return giving details of receipt and purpose wise utilization of foreign contribution via Form FC-6, duly certified by a Chartered Accountant for every financial year by 31st December every year.

A person has to file FC-4 online along with audited statements of accounts on receipts & utilization of the foreign contribution, including Income &Expenditure Statement, Receipt & Payment Account & Balance sheet for every financial year by 31st December each year.

8 Declaration of Receipt and Utilization in Public Domain

A person who has been granted a certificate of registration or prior permission, having received Foreign Contribution in excess of One Crore rupees, or equivalent thereto, in a financial year, was required to place the summary data on receipts and utilization of the foreign contribution pertaining to the year of receipt as well as for one year thereafter in the public domain.

A person who has been granted certificate of registration or prior permission shall place the audited statement of accounts on receipts and utilization of the foreign contribution, including income & expenditure statement, receipt and payment account and balance sheet for every financial year on its official website or on the website as specified by the Central Government. A person receiving foreign contribution in any quarter of the financial year shall place details of receipt within 15 days following the last day of the said quarter clearly indicating the details of donors, amount received and date of receipt on its official website or on the website as specified by the Central Government.

9 FCRA no longer applicable to companies with foreign shareholding

Indian companies with more than 50% shareholding were considered to be a foreign source.

If the foreign investment in a company is within the limits prescribed by FEMA, 1999, the said company shall not be considered as a foreign source. This change is retrospective, i.e. companies who were in default cannot be penalized.

10 Filing of Returns under Lokpal and Lokayuktas Act, 2013

If a person has received foreign donations exceeding Rs 10 lakhs during FY 2015‐16, then all the directors, managers, secretaries, other important officers during the said period, irrespective of the fact whether they are or are not still a part of the Trust, shall have to disclose their personal assets and liabilities by 31st December 2016 . (Refer Circular dated 4th July 2016). From FY 2016‐17 onwards, the declaration shall have to be filed within four months after the end of that financial year.



WHY YOU MUST BE CAREFUL WITH FCRA By and large organizations do not realize that they are breaching the Foreign

Contribution (Regulation) Act, 2010.

A recent Order dated 16th June 2016, published on the FCRA site witnesses a case where the Organization’s Registration was cancelled because it had not utilized the funds as per FCRA norms.

Some of the Key Areas which require attention are as under:-

1. Association must bear in mind that registration/prior permission is sought for the

sector that they want to work in.

2. There are several other clauses which require permission/intimation, some of them

being more than 50% of change in governing body members, change of name of

the NGO or change of address.

3. Annual Returns need to be filed on time.

4. Not more than 50% of the foreign contributions can be utilized for the

administrative purposes.

5. Amount cannot be transferred from FC designated bank account to domestic

bank account. The same can be treated as misutilisation of foreign contribution.

6. FC funds should not be transferred to organizations not registered under FCRA

without prior permission.



WHAT YOU MUST KNOW

More often than not, people misinterpret the FCRA applicability. Foreign contribution does not necessarily imply that the only the money received from outside India has to be reported.

1. Updation of Bank Account

Notice dated 18th July 2016 requests all the FCRA Associations to update their Bank Account Details (the designated bank account and the utilization bank account) in FC-6 by 31st August, 2016.

2. Change of Name, Address, Aims, Objectives, or Key members

If the name of the association, its address, aims, nature change or there is a change which causes replacement of 50% or more of the original key members as reported in the application of grant of registration/prior permission/ renewal, then such change need to be reported through FC-6 within 15 days.

3. Annual Returns

Notice dated 22nd July 2016 mandates online filing of Annual Returns for FY 2014-15 onwards .

We at Sunil Goel & Associates understand the significance and importance of the NGO sector and their contribution to the society. To help in the little way that we can, we work diligently to help you with your FCRA matters, thereby keeping your grant inflow steady and allow you to work into making the nation into a better society. We assist NGOs in the following areas:-

Setup & Formation of the NGO – whether as a Trust, Society or Section 8 Company;

Seeking Registration under Income Tax for 80G & 12A;

Seeking Registration/Prior Permission under FCRA;

Operational & Labour Law Compliances

Year-End Tax Filings & Audit/Assurance Services;

Project Grant/Donor Mandated Audits ;

Guidance for Financial Management

Disclaimer The changes quoted have been inferred from the FCRAR, 2015 published in The Gazette of India on Monday, December 14, 2015. Information presented in this document is considered private & proprietary information (unless otherwise noted) and may not be distributed or copied. We strongly recommend that you seek professional guidance and opinion before acting in any way on the proposals. While SGA makes every effort to provide accurate and complete information, various proposals may change subsequently. We welcome suggestions on how to improve our services and correct errors if any. SGA provides no warranty, expressed or implied, as to the accuracy, reliability or completeness of furnished information.