Amended Provisions for Utilization of Foreign Contribution

The Foreign Contribution (Regulation) Amendment Act, 2020 was introduced in Lok Sabha on September 20, 2020. The Act regulates the acceptance and utilization of foreign contribution by individuals, associations and companies.  Foreign contribution is the donation or transfer of any currency, security or article (of beyond a specified value) by a foreign source.

Gist of major changes made under the Amendment Act.

Particulars Earlier Provisions Amendment made by Act
Prohibition to accept foreign contribution Certain persons are prohibited to accept any foreign contribution including election candidates, editor/publisher of newspaper, government servants, members of any legislature, and political parties. It is proposed to includes public servants (as defined under the Indian Penal Code) to this list.

(Public servant includes any person, in service or pay of the govt., or remunerated by the govt. for the performance of any public duty.)

Transfer of foreign contribution Earlier, Foreign contribution received can be transferred only to such person who is also registered to accept foreign contribution. It is proposed to prohibit the transfer of foreign contribution to any other person whether registered or not.
Aadhaar required for registration The Act states that a person may accept foreign contribution only if, Obtained a certificate of registration from central government.

(No Identification document required earlier)

It is proposed that any person seeking prior permission, registration or renewal of registration must provide the Aadhaar number of all its office bearers, directors or key functionaries, as an identification document.
FCRA account A registered person must accept foreign contribution only in a single branch of scheduled bank specified by them. However, they may open more accounts in other banks for utilization of the Fund. It is proposed that foreign contribution must be received only in an account designated as “FCRA account” in such branch of the SBI (as notified by the cent. govt.). However, another FCRA account in any scheduled bank may open for keeping or utilizing the received fund.
Restriction in utilisation of foreign contribution According to the Act, if a person is found guilty of violating any provisions of the Act, the unutilised or un-received foreign contribution may be utilised or received, only with the prior approval of the central government. It is proposed that the govt. may also restrict usage of unutilised foreign contribution for guilty persons who have been granted prior permission to receive such unutilised contribution.
Renewal of license Under the Act, every person who has been given a certificate of registration must renew the certificate within six months of expiration. Bill provides that the government may conduct an inquiry before renewing the certificate to ensure that the person making the application:

·         is not fictitious or benami,

·         has not been prosecuted or convicted for creating communal tension.

·         has not found guilty of misutilization of funds.

Reduction in use of foreign contribution for administrative purposes a person must use foreign contribution only for the purpose for which the contribution is received.  Further, they must not use more than 50% of the contribution for meeting administrative expenses. The Amendment Act reduces this limit to 20%.
Suspension of registration Government may suspend the registration for a period not exceeding 180 days. The Amendment act provides that such suspension may be extended up to an additional 180 days.

Source: 2020/ASVINA 6, 1942 (SAKA)

-Mayank Mittal, Associate, ShineWing India