Introduction
The Foreign Contribution (Regulation) Act 1976 governs foreign development agency funding in India and the Ministry of Home Affairs is the relevant ministry for enforcing this Act.
This Act was first passed in 1976 to solve all security issues about funding from outside sources.
Foreign contributions are not permitted from candidates running for office as judges, employees of the government, members of political parties and organizations, businesses engaged in politics, journalists, or news organizations.
This Act's primary goals are to reduce the risk of money laundering, limit the movement of black money into and out of the country, and eliminate funding for any illegal activity.
FCRA Registration: A Requirement for NGO
FCRA registration is a requirement for NGOs since they’re involved in the affairs of protecting human rights, and fundamental rights of the general public, therefore it becomes crucial to ensure that the person managing these NGOs is not using the money for any unsolicited affair.
Know the Eligibility for FCRA registration
The applicant is required to register under any of the below-mentioned acts.
Societies Registration Act, 1860/The Indian Trusts Act, 1882/ a Section 8 company under the Companies Act, 2013
If a newly registered organization wishes to receive foreign donations, they can opt for the pre-approval (PP) method & can apply to the Ministry of Home Affairs for approval for specific purposes and activities, and from specific sources.
If an Indian award-winning organization and a foreign organization have a common member, they need to fulfil the below-mentioned criteria:
The main officials of Indian organizations are not eligible to be part of the donor organization.
At least 51 % of the members /staff of Indian beneficiary organizations must should not be employed or act as members of foreign donor organizations.
If the foreign donor is an individual then he/she cannot hold the position of head of any organisation in India.
A minimum of 51% of the officers/members of the body of the recipient organisation cannot be family members or relatives of the donor.
When Does FCRA Apply to Private Businesses?
The FCRA applies to private entities when they are engaged in receiving foreign aid or assistance. When a business crosses the threshold of Rs 100,000 in financial contributions, it must register for FCRA. Registration under the Foreign Partnership Act (FCRA) 2010 (FCRA) for acceptance and use of foreign partnership or foreign hospitality by any person, association or company for related activities to national interests and related or connected matters.
Foreign Contributions' Purpose Under the FCRA
One of the main objectives of the FCRA is to regulate foreign aid received in India (mainly by NGOs). Foreign aid is the gift, transfer or transfer from a foreign source (or source) of goods above a specified amount (limit 1000 in the 1976 Act), foreign currency, bank or money [Section 2(1)(h)) of FCRA, 2010].
The Foreign Partnership Rules, 2011 do not have a large amount, but it does require a report when the amount exceeds one lakh.
How Does the FCRA Affect Private Indian Companies?
However, for most private companies, FCRA registration is unnecessary if they fall within section 8 of the Companies Act, 2013. If a private company does not comply with the FCRA regulations, subject to severe penalties, including fines, cancellation of FCRA registration and prosecution under FCRA.
FCRA Registration Requirements for Private Firms
The first step is where you need to access the FCRA online portal.
1. Visit the FCRA portal and apply for a new application under Form FC – 3A or Form FC – 3B, as per the organisational requirement.
2. Once you select the "Application online" option click "Sign Up" to create a username and password. As soon as the username and password are created the applicant can enter the account.
3. Select FC 3 from the menu. After duly filing the form select the sending button.
4. Fill the details of the executive committee.
5. Enter the data and save it by pressing the "Save" button.
5. Make an online payment. The submission is complete and no changes can be made now.
Private Company Compliance with FCRA Regulations
However, unless a private company is covered by Section 8 corporations under the Firms Act of 2013, FCRA registration is not relevant for the majority of private companies. A private corporation may be subject to harsh consequences, such as fines, cancellation of its FCRA registration, and legal action under the FCRA Act if it violates the regulations.
Penalties for Non-compliance with FCRA Regulations
Failing to comply with the FCRA registration criteria can result in severe financial fines, registration suspension, and cancellation. The federal government is authorized by Section 11 of the FCRA to penalize individuals or groups who violate the Act's restrictions.
Depending on the type and seriousness of the infraction, the penalty's amount may change. A specific percentage of the foreign contribution received or a set sum per day of non-compliance may be the penalty for people or businesses operating without first registering or receiving permission under the FCRA.
Revocation of Registration: Section 14 of the FCRA gives the central government authority to revoke an organization's registration if it determines that the organization has breached the Act's provisions or its registration conditions.
Organizations facing revocation of registration by the FCRA are made to shut down their operations and put a halt on all activities involving receiving and using foreign donations.
Can Private Companies Run Without FCRA Registration?
Private companies can run without an FCRA registration when they are not engaged in procuring funds from other entities.
Conclusion
This Act came into the picture to prevent foul play and misuse of funds. It does not prohibit the entities from taking them. The private companies can take the help of foreign funds but they should be compliant in their procedure.
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