Foreign Contribution (Regulation) Amendment Act, 2020

The Foreign Contribution (Regulation) Amendment Act 2020 (Amendment Act) has been notified by the Central Government (Government) on 29 September 2020, to amend certain provisions of the Foreign Contribution (Regulation) Act 2010 (Act / FCRA).

Key Dates

– Introduced in Lok Sabha on 20 September, 2020
– Passed by Lok Sabha on 21 September, 2020
– Passed by Rajya Sabha on 23 September, 2020
– President’s Ascent on 28 September, 2020
– Provisions have come into force on 29 September, 2020

About FCRA

The Foreign Contribution (Regulation) Act (FCRA) has its origins in 1976 during the Emergency. It was essentially meant to keep a check on foreign influence in social, political, economic, and religious discussions in India.

The 1976 Act allowed non-profits to freely receive foreign donations, although they were required to report the amount received and spent each year. In 1984, the law was made stricter by making it mandatory for non-profits to register before receiving any foreign donations. They could also not pass on that money to other non-profits who were not registered.

In 2010, the 1976 Act was repealed and replaced by an even stricter law – Foreign Contribution (Regulation) Act, 2010 (2010 Act) along with the Foreign Contribution (Regulation) Rules, 2011 (2011 Rules) read with other notification / orders etc., issued thereunder from time to time.

Key changes introduced by the 2010 Act vis-à-vis the 1976 Act

The 2010 Act introduced following key changes that render the 2010 Act more stringent than the 1976 one:
a) Under the 2010 Act, FCRA registration is valid for five years, and must be renewed thereafter, whereas under the 1976 Act it was a permanent registration.
b) Under the 2010 Act, only 50% of the foreign contributions could be utilised for administrative expenses, whereas no such specific restriction existed under the 1976 Act.

Purpose of the 2020 Amendment Act

The preamble of the Amendment Act specifies that the primary purpose of the Act is:
A. to regulate the acceptance and utilisation of “foreign contribution or foreign hospitality” by certain individuals or associations or companies; and
B. to prohibit such acceptance and utilisation for any activities detrimental to national interest

Amendments under the FCRA Amendment Act, 2020

1. Prohibition to accept foreign contribution

Under this Act, certain persons are prohibited to simply accept any foreign contribution including election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties, among others to the present list, the bill adds “public servants”. Public servants include any person who is in service or pay of the government or remunerated by the government for the performance of any public duty.

2. Transfer of foreign contribution

Under the 2010 Act, foreign contribution could be transferred to another person who is also registered to accept foreign contribution (or has obtained prior permission under the Act to obtain foreign contribution), and to a limited extent and with prior permission, to a person who is not registered under the 2010 Act. However, the 2020 Amendments have changed this position and imposes a blanket ban on transfer of foreign contribution to any other person. Under the Act, the term ‘person’ includes an individual, a Hindu undivided family (HUF), an association, or a registered company.

3. Aadhaar for registration

The earlier 2010 Act allowed a person to accept foreign contribution if it has:
(i) obtained a certificate of registration, or
(ii) not registered, but obtained prior permission from the government.

The 2020 Amendments add that for such a prior permission, registration or renewal of registration, the applicant must provide the Aadhaar number of all its office bearers, directors or key functionaries, as an identification document. In case of a foreigner, they must provide a copy of the passport or the Overseas Citizen of India card for identification.

4. Designated FCRA account

Under the 2010 Act, foreign contributions had to be deposited in a single branch of a scheduled bank specified by the receiver of such funds. However, the funds could be utilised from other accounts. The 2020 Amendments further restricts the receipt of funds only in an account designated by the bank as “FCRA account” in such branch of the State Bank of India, New Delhi, as notified by the Central Government and no other funds can be received or deposited in this account. The person may open another FCRA account in any scheduled bank of their choice for keeping or utilising the received contribution

5. Reduction on use of foreign contribution for administrative purposes

Under the 2010 Act, a maximum of 50% of the foreign contribution could be used for meeting administrative expenses of the recipient entity. The 2020 Amendments reduce this limit to 20%

6. Restriction in utilisation of foreign contribution

Under the 2010 Act, upon a finding of violation of any provisions of the Act, the unutilised or unreceived foreign contribution may be utilised or received by such person, only with the prior approval of the Central Government. The 2020 Amendments clarifies that in such a case, the government can also restrict the entity from further receiving any foreign contribution. The Government can take such actions if, based on a summary inquiry, and pending any further inquiry, it has reasons to believe that such person has contravened provisions of the Act.

7. Renewal of License

Any person, under this Act, got the certificate of registration must renew it within six months of expiration. Also, before renewing the certificate, the bill provides that the government may conduct an inquiry to ensure that the person generating the application:
– is not fictitious or Benami
– has not been prosecuted or convicted for creating communal tension or indulging in activities aimed at religious conversion
– has not found guilty of diversion or misutilization of funds, among other conditions.

8. Surrender of certificate

There is a provision added within the act that permits the central government to allow an individual to surrender their registration certificate.

The government may do so if, post an inquiry, it’s satisfied that such person has not contravened any provisions of the Act, and therefore the management of its foreign contribution (and related assets) has been vested in an authority prescribed by the government.

9. Suspension of Registration

Under the 2010 Act, the government could suspend the registration of a person for a period not exceeding 180 days. The 2020 Amendments add that such suspension may be extended up to an additional 180 days thereafter.