Foreign Contribution Regulation Act, FCRA Rules, Amendments, Impacts

The Foreign Contribution Regulation Act (FCRA) was enacted to prevent foreign influence on India's internal affairs through financial contributions. Consequently, amended in 2010 and 2020, the FCRA plays a key role in regulating the acceptance and use of foreign funds to safeguard national interests.

While promoting transparency and compliance, the FCRA has posed challenges for NGOs, with over 20,701 licenses revoked since its inception for alleged violations. The FCRA Rules further tighten oversight, impacting NGO operations and development initiatives.

Foreign Contribution Regulation Act (FCRA)

The Foreign Contribution (Regulation) Act (FCRA), introduced in 1976 during the Emergency, was established to prevent foreign influence on India's internal affairs through financial contributions. It is aimed at regulating and overseeing the flow of foreign funds into the country.

It establishes a structured framework outlining how individuals and organisations can receive and use foreign contributions, ensuring their utilisation aligns with the nation’s interests and objectives.

Amendments to FCRA

The Foreign Contribution (Regulation) Act (FCRA), 2010, regulates foreign contributions to protect national sovereignty and security. Amendments in 2020 mandated Aadhaar for office bearers, SBI accounts, and reduced expense limits. FCRA Rules 2022 raised the annual remittance limit from relatives to ₹10 lakh. 

Foreign Contribution (Regulation) Act (FCRA), 2010

The FCRA, 2010 governs the receipt and use of foreign contributions by individuals, associations, and companies operating in India. It aims to ensure that foreign donations do not compromise the nation’s sovereignty or internal security.

Foreign Contribution (Regulation) Amendment Act, 2020 

The Foreign Contribution (Regulation) Amendment Act, 2020 introduced key changes as outlined below:

• Prohibition on Transfers: Foreign contributions cannot be transferred to an individual, an association, or a registered company.
• Mandatory Aadhaar: Office bearers must provide an Aadhaar or passport/OCI card for registration.
• FCRA Account: Contributions must be received in a designated SBI branch in New Delhi.
• Reduced Administrative Use: Administrative expense limits were reduced from 50% to 20%.
• Renewal of licence: The government can inquire before renewing certificates, checking for fictitious entities or misuse of funds.
• Suspension Extension: Initially, registration suspension can be enforced for a period of 180 days. This suspension can be further extended by an additional 180 days.
• Surrender of Certificate: Entities can surrender their certificate post-government approval.
• Utilisation Restrictions: The government can restrict unutilized funds based on inquiries.

Foreign Contribution Regulation (Amendment) Rules 2022

In 2022, the government amended the Foreign Contribution (Regulation ) Rules, 2011, to strengthen safeguards against foreign contributions that could harm national interests, with key updates introduced under the FCRA Rules 2022:

• These rules are designed to prevent the acceptance and use of foreign contributions or hospitality for activities that may harm national interests.
• Under the FCRA Rules 2022, Indians can now receive up to ₹10 lakh annually from relatives abroad without notifying the authorities, compared to the previous limit of ₹1 lakh.

Need of Foreign Contribution Regulation Act (FCRA)

The Foreign Contribution Regulation Act (FCRA) regulates foreign contributions to prevent misuse and protect India’s sovereignty, integrity, and security. It requires NGOs to obtain licensing or prior approval from the Ministry of Home Affairs. The need for the Act is outlined below:

• Regulation: The FCRA ensures that foreign donations are utilised responsibly, avoiding misuse or allocation to illegal activities.
• Protection of National Interests: The Act prevents contributions that could harm India’s sovereignty, integrity, and national security.
• Oversight on Utilisation: It establishes a licensed regime to monitor the acceptance and use of foreign contributions for charitable purposes.
• Mandatory Licensing: NGOs must obtain FCRA registration or prior permission from the Ministry of Home Affairs to accept foreign funds legally.

Impact of FCRA

The Foreign Contribution Regulation Act (FCRA) revokes licences for non-compliance, misuse of funds, or activities threatening national security. Since 1976, over 20,701 licences, including Oxfam India's, have been cancelled. Key issues are as below:

• Non-Compliance Issues: FCRA licences can be cancelled due to non-compliance with rules, such as failing to submit required reports or misusing foreign contributions.
• Involvement in Detrimental Activities: Licences may be revoked for activities against India’s national interest or security.
• Operational Challenges: NGOs can lose their licences if they remain non-operational for two consecutive years or become defunct.
• Stringent Regulations: Grounds for cancellation include obtaining registration through false statements or violating certificate conditions, causing operational difficulties for many NGOs.
• License Cancellations: Since 1976, over 20,701 NGO licences, including those of Oxfam India, were cancelled for violations. 
  • As of April 3, 2024, over 16,242 NGOs have valid FCRA licences, while 14,396 licences have expired, reflecting stringent regulatory oversight and compliance challenges.

FCRA UPSC PYQs

Q1. Examine critically the recent changes in the rules governing foreign funding of NGOs under the Foreign Contribution (Regulation) Act (FCRA), 1976. (UPSC Mains 2015)

Foreign Contribution Regulation Act FAQs

Q1. What is the Foreign Contribution Regulation Act (FCRA)?
Ans. FCRA is a law in India that regulates the acceptance and utilisation of foreign contributions by individuals and organisations to ensure national interests are safeguarded.

Q2. Why is FCRA registration mandatory for NGOs?
Ans.FCRA registration is required for NGOs to legally accept and utilise foreign funds for specific projects or charitable purposes.

Q3. What are the key amendments introduced in the FCRA Amendment Act, 2020?
Ans. The amendments include mandatory Aadhaar for office bearers, prohibition of fund transfers, reduced administrative expenses, and stricter renewal processes.

Q4. What are the grounds for FCRA licence cancellation?
Ans. Licenses can be revoked due to non-compliance, misuse of funds, activities against national interest, or remaining non-operational for two consecutive years.

Q5. How does FCRA Rule 2022 impact individual foreign fund transfers?
Ans. FCRA Rule 2022 allows Indians to receive up to ₹10 lakh annually from relatives abroad without prior government approval, up from the earlier limit of ₹1 lakh.