THE FOREIGN CONTRIBUTION (REGULATION) ACT, 1976

High lights

1)            OBJECT AND APPLICABILITY

        To regulate the acceptance and utilization of foreign contribution (FC) and foreign hospitality by certain persons and associations

       To ensure that FC does not adversely affect the values of sovereign democratic republic of India

       To prevent our parliamentary institution, polity, voluntary organizations and individuals working in important areas of national life from being influenced by FC in a manner contrary to the national interest

2)            What is Foreign Contribution?

FC means donation, delivery, or transfer made by any foreign source of:-

a)                   Any article other than personal gifts of market value not exceeding Rs.1000.

b)                   Any currency whether Indian or foreign.

c)                   Any foreign security.

Note: Any donation, delivery, or transfer of any article, currency or foreign security by any person who has received it from any foreign source shall also be deemed to be foreign contribution.

                 Foreign Source:

                Foreign source includes:-

a)                   Government of any foreign country or any agency of such government.

b)                   Any international agency except United Nations or any of its specialized agencies, World Bank, International Monetary Fund or such other agency as the Central Government may, by notification in the official gazette, specify in this behalf.

c)                   Foreign company within the meaning section 591 of the Companies Act, 1956 including a subsidiary of the foreign company.

d)                  Any other entity incorporated outside India.

e)                   A multinational corporation.

f)                    A company where more than 50% of its share capital is held by a foreign country, foreign entity or by citizens of a foreign country.

3)            Acceptance of FC by organisations including charitable Trusts (excluding organisations of a political nature or a political party).

       Associations having a definite cultural, economic, educational, religious or social programme can accept FC, only if:

a)    It is registered with the Central Government under this Act or takes prior permission before receiving each contribution;

b)    It receives FC through a designated bank account

       Central Govt. is kept intimated as to the amount and source of the FC and the manner of its utilisation.

Prior Permission:

       Application for prior approval to be made in Form FC 1A

       Application if not disposed off within 90 days then permission deemed to have been granted. Period can be extended to 120 days.

Registration of the Association:

       Application for registration to be submitted in form FC 8

       Registration process can take anything from 6 months to 1 year.

4)                   Maintenance of Accounts & Audit:

 Maintenance of accounts:

       Accounts to be maintained on yearly basis from April to March

       Separate set of accounts to be maintained exclusively for FC

a)            Cash Book, Bank Book and Ledger accounts on double entry system basis to be maintained where FC relates to currency received and utilised.

                b)            Details in form FC 6 to be maintained where FC relates to articles

                c)             Details in form FC 7 to be maintained where FC relates to foreign security

  Audit:

       Balance Sheet, receipts & payment account with report in form FC 3 duly certified by a CA to be submitted in duplicate to Home Ministry before 31st of July

       Form FC 3 to give details of each contribution received, the source, manner of receipt, purpose of receipt and manner of utilisation

       Even Nil report has to be submitted.

5)            Total Ban on acceptance of foreign contribution & Hospitality:

                Ban applies to:

a)                   Political candidate for election

b)            Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper.

c)             Government servant, judge or employee of any Government corporation

d)            member of any legislature.

e)             Political party or office bearer thereof.

                Also Covers Gifts:

                The above ban also covers gifts from relatives. Gifts exceeding Rs.8500/- per annum requires prior permission of the Central Government, while gifts below Rs 8,500 are required to be intimated to the Central Government. The ban does not apply to FC received by way of salary or in the ordinary course of business transacted or by way of gift or presentation made to him as a member of any Indian Delegation.

And Foreign Hospitality:

       None of the above persons, while visiting any foreign country shall accept any foreign hospitality except with the prior permission of the central government.

       Such permission is not necessary in case of medical emergency. However, even in case of such an emergency the Central Government is required to be intimated within one month of receiving hospitality.

       Meaning of Foreign Hospitality - any offer, not being a purely casual one, made by a foreign source for providing a person with the costs of travel to any foreign country or territory or with free board.

6)            Organization of a political nature:

                        Such organisations not being a political party can accept FC only with prior approval of the Central Government.

7)            Scholarships, stipend etc.

        Receipt of scholarships or stipends or any payment of a like nature from any foreign source by a citizen of India is required to be intimated to the Central Government in the prescribed format.

       In case of recurring receipts, it is sufficient if the intimation gives precise information as to the interval at which, and the purpose for which such recurring payments are to be received.

       No intimation if the annual value of receipts does not exceed Rs. 36,000 in an academic year. In calculating Rs. 36,000 amount received for purchase of books, clothing, equipments and site-seeing in a foreign country shall be considered. But, travel and tuition fees shall be excluded.

8)                   Penalty:

       A person who has been convicted more than once for offence relating to acceptance or utilization of FC is prohibited from accepting any FC for a period of 3 years.

Top