Foreign Contribution (Regulation) Amendment Act, 2020

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Foreign Contribution (Regulation) Amendment Act, 2020

The Foreign Contribution (Regulation) Act, 2010 controls the acceptance of foreign contribution by the organizations of India. Recently, from 29th September 2020, the Government introduced and made effective the Foreign Contribution (Regulation) Amendment Act, 2020.

With the amendment act, the government aims to enhance transparency/ accountability, prohibit the use of foreign contribution towards activities against the interest of the nation, strengthen compliance etc. The present article highlights the key changes introduced vide the Foreign Contribution (Regulation) Amendment Act, 2020.

Highlights of Foreign Contribution (Regulation) Amendment Act, 2020

  1. Amendment in the list of persons prohibited from receiving foreign contribution-

Section 3 of the Act is amended so as to include the ‘public servant’ into the prohibition list. That means the ‘public servant’ (as defined under Section 21 of the Indian Penal Code 1860) are prohibited from receiving any foreign contribution. Notably, the public servant includes the person in service/ pay of the Government or remunerated by fees/ commission for the performance of any public duty by the Government.

  1. Restriction on transfer of foreign contribution-

Section 7 of the Act is substituted and accordingly the new provisions prohibits the person, receiving any foreign contribution, to transfer such foreign contribution to any other person.

  1. The decrease in the limit of the utilization of foreign contribution towards administrative purpose-

Section 8(1) of the Act prescribes the maximum limit of the utilization of foreign contribution fund towards administrative expenses. The said maximum limit is reduced to 20% of foreign contribution received in the financial year (earlier the same was 50%).

  1. Amendment in powers to prohibit the receiver of foreign contribution from utilizing or receiving the funds-

The proviso is added to section 11 of the Act which empowers the Government, on the basis of information/ report, to restrict the person, contravening any provisions of the Act from utilizing the pending foreign contribution. Such a person can also be prohibited from receiving the remaining portion of foreign contribution.

  1. Identification proof in case of specified approval/ application-

New section 12A is inserted in the Act which prescribes the person seeking any of the following approval/ application is required to submit a specific identification document-

The person seeking approval/ application of the following Identification document to be submitted

·        Prior permission/ approval under section 11, or

·        Application for grant of a certificate under section 12, or

·        Renewal of a certificate under section 16.

In the case of a foreigner-

·        Copy of the Passport; or

·        Copy of the Overseas Citizen of India card.

In any other case-

·        Aadhaar number of all the officer bearers/ directors/ key functionaries.

  1. Increase in period of suspension-

As per the amended provisions of section 13 of the Act, now the Government can suspend the registration of the person for a period not exceeding 360 days (earlier the same was 180 days).

  1. Surrender of registration certificate-

Section 14A is inserted into the Act. Accordingly, the central government may permit any person to surrender their registration certificate. However, such permission will be granted only after being satisfied that the person has not contravened any provisions of the Act.

  1. Inquiry before the renewal of the certificate-

The proviso has been inserted to section 16(1) which provides that the Central Government can inquire, regarding fulfilment of conditions prescribed under section 12(4), before renewing the certificate.

  1. Opening of the FCRA Account

Entire section 17 is substituted. The substituted section 17 provides as under-

  • It is mandatory for the person to open the FCRA Account at the designated branch of the State Bank of India, New Delhi.
  • The foreign contribution shall be received only in the said FCRA account.
  • The person can also open another FCRA account in any scheduled bank for keeping/ utilizing the foreign contribution.

Post by poonamgandhi

CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.