Section V

WHO CAN & WHO CANNOT ACCEPT FOREIGN CONTRIBUTION

Section V

Question 54

Who can accept foreign contribution?

Answer: A ‘person’, as defined in Section 2(1)(m) of FCRA, 2010, with the exclusion of those mentioned in Section 3 of the Act, having a definite cultural, economic, educational, religious or social programme[1] can accept foreign contribution after it obtains prior permission of the Central Government, or gets itself registered with the Central Government in accordance with section 11 of the Act.

Note: In this context, the following excerpts from Section 11 of FCRA, 2010 may be noted carefully:

“(1) Save as otherwise provided in this Act, no person having a definite cultural, economic, educational, religious or social programme shall accept foreign contribution unless such person obtains a certificate of registration from the Central Government:

……………….

(2) Every person referred to in sub-section (1) may, if it is not registered with the Central Government under that sub-section, accept any foreign contribution only after obtaining the prior permission of the Central Government and such prior permission shall be valid for the specific purpose for which it is obtained and from the specific source:”

As corollary to the above, it may be argued that a person, as defined in the Act with the exclusion of those mentioned in its Section 3, who does not have a definite cultural, economic, educational, religious or social programme, would not require to obtain registration or prior permission of the Central Government for the purpose of accepting foreign contribution.   In other words, the argument would be that a person without a definite cultural, economic, educational, religious or social programme is not covered under Section 11 of the Act and hence, does not need registration or prior permission for accepting contribution from a foreign source for use on any activity other than for a definite cultural, economic, educational, religious or social programme.

While the above deductive argument seems perfect because of probable lacuna in FCRA, 2010, one should not try to take its advantage because the intention of FCRA, 2010 does not appear to be in favour of such a position. It is advisable to seek clarification from MHA in this regard, if required. Further, even one who may not be subject to Section 11 of FCRA, 2010, must comply with the KYC[2] norms of the Reserve Bank of India and would be subject to applicable taxes on the inward foreign remittances under the Income Tax Act, 1961 (being any sum of money or specified movable or immovable property without consideration or lower consideration; other than specified circumstances/ categories). Moreover, the acceptance of foreign contribution by a person using the lacuna in FCRA is likely to be suspect and may lead to inquiry under the Prevention of Money Laundering Act, 2002.

 

[1] What constitutes a ‘definite cultural, economic, educational, religious or social programme’ has not been defined either in FCRA or in FCRR. In this context, please refer to the reply to Q. 125.

[2] KYC is an acronym for “Know your Customer”, a term used for customer identification process. It involves making reasonable efforts to determine true identity and beneficial ownership of accounts, source of funds, the nature of customer’s business, reasonableness of operations in the account in relation to the customer’s business, etc. which in turn helps the banks to manage their risks prudently. The objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering.

 

Question 55

Who cannot accept foreign contribution?

Answer: In terms of Section 3(1) of FCRA, 2010, foreign contribution cannot be accepted by the following persons:

(a) a candidate for election;

(b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;

(c) public servant[3], Judge, Government servant or employee of any corporation or any other body controlled or owned by the Government;

(d) member of any legislature;

(e) political party or office bearer thereof;

(f) organisation of a political nature as may be specified under sub-section (1) of   Section 5 by the Central Government.

(g) association or company engaged in the production or broadcast of audio news or audio visual news or current affairs programmes   through any electronic mode, or any other electronic form as defined in clause (r) of sub-section (1) of Section 2 of the Information Technology Act, 2000[4] or any other mode of mass communication;

(h) correspondent or columnist, cartoonist, editor, owner of the association or company referred to in clause (g).

[5]Explanation 1.—For the purpose of clause (c), “public servant” means a public servant as defined in section 21 of the Indian Penal Code.

[6]Explanation 2.– In clause (c) and section 6, the expression “corporation” means a corporation owned or controlled by the Government and includes a Government Company as defined in clause (45) of section 2 of the Companies Act, 2013.

Besides the above, individuals or Associations who have been placed under prohibited category in terms of Section 9 or Section 10 of FCRA, 2010, cannot accept foreign contribution.

Sections 3(2) and 3(3) of FCRA, 2010, prohibit acceptance and delivery of foreign contribution in the following situations:

“(2) (a) No person, resident in India and no citizen of India resident outside India, shall accept any foreign contribution, or acquire or agree to acquire any currency from a foreign source, on behalf of any political party, or any person referred to in sub-section (1), or both.

(b) No person, resident in India, shall deliver any currency, whether Indian or foreign, which has been accepted from any foreign source, to any person if he knows or has reasonable cause to believe that such other person intends, or is likely, to deliver such currency to any political party or any person referred to in sub-section (1), or both.

(c)  No citizen of India resident outside India shall deliver any currency, whether Indian or foreign, which has been accepted from any foreign source, to—

(i) any political party or any person referred to sub-section (1) or both; or

(ii) any other person, if he knows or has reasonable cause to believe that such other person intends, or is likely, to deliver such currency to a political party or to any person referred to in sub-section (1), or both.

(3) No person receiving any currency, whether Indian or foreign, from a foreign source on behalf of any person or class of persons, referred to in section 9, shall deliver such currency—

(a) to any person other than a person for which it was received, or

(b) to any other person, if he knows or has reasonable cause to believe that such other person intends, or is likely, to deliver such currency to a person other than the person for which such currency was received.”

 

[3] In Section 3(1)(c) of FCRA, 2010, the words “public servant” have been inserted before the word ‘Judge’ vide Foreign Contribution (Regulation) Amendment Act, 2020 dated 28th September, 2020.

[4] Clause (r) of sub-section (1) of Section 2 of Information Technology Act, 2000 — “electronic form” with reference to information means any information generated, sent, received or stored in media, magnetic, optical, computer memory, micro film, computer generated micro fiche or similar device.”

[5] Explanation 1 inserted vide Foreign Contribution (Regulation) Amendment Act, 2020 dated 28th September, 2020.

[6] ibid

Question 56

What can be accepted as FC even by persons specified in Section 3 of FCRA, 2010, i.e., persons otherwise prohibited from accepting FC?

Answer: In terms of Section 4 of FCRA, 2010 and subject to the provisions of Section 10 of the Act, persons specified in Section 3 can accept foreign contribution —

(a) by way of salary, wages or other remuneration due to him or to any group of persons working under him, from any foreign source or by way of payment in the ordinary course of business transacted in India by such foreign source; or

(b) by way of payment, in the course of international trade or commerce, or in the ordinary course of business transacted by him outside India; or

(c) as an agent of a foreign source in relation to any transaction made by such foreign source with the Central Government or State Government; or

(d)  by way of a gift or presentation made to him as a member to any Indian delegation provided that such gift or present was accepted in accordance with the rules[7] made by the Central Government with regard to the acceptance or retention of such gift or presentation; or

(e)   from his relative[8]; or

(f) by way of remittance received, in the ordinary course of business through any official channel, post office, or any authorised person in foreign exchange under the Foreign Exchange Management Act, 1999; or

(g) by way of any scholarship, stipend or any payment of like nature;

Provided that in case of any foreign contribution received by any person specified under section 3, for any of the purposes other than those specified under Section 4, such contribution shall be deemed to have been accepted in contravention of the provisions of section 3.

 

[7] Vide the Foreign Contribution (Acceptance or Retention of Gifts or Presentations) Rules, 2012 [G.S.R. 150 dated the 6th June, 2012].

[8] Vide answer to Q. 53 for the meaning of ‘relative’.

Question 57

Whether foreign remittances from relatives can be accepted by individuals without MHA’s approval?

Answer: Yes.  In terms of Section 4(e) of FCRA, 2010 and subject to the provisions of section 10, even the persons specified under section 3, i.e., persons not permitted to accept foreign contribution, are allowed to accept foreign contributions from their relatives.  It is, therefore, obvious that an individual in general can accept foreign contribution where such contribution is accepted by him/her from his/her relative.  Individuals accepting such normal family remittances need not seek any approval/permission from the Government.  It should, however be noted that in terms of Rule 6 of FCRR, 2011, any person receiving foreign contribution in excess of Rs. 10 lakh or equivalent thereto in a financial year from any of his relatives shall inform the Central Government by uploading details electronically online in Form FC-1 within three months from the date of receipt of such contribution. It should also be noted that the relative remitting the money should be a foreign citizen for the purpose of such reporting. The meaning of ‘relative’ has been given in reply to Q. 53.

Question 58

Whether individuals not covered under section 3 or a HUF can freely accept foreign contribution for the purposes listed in section 4 of FCRA, 2010?

Answer: Yes.  Since, subject to the provisions of section 10 of FCRA, 2010, even the persons specified under section 3, i.e., persons not permitted to accept foreign contribution, are allowed to receive foreign contribution for the purposes listed in section 4 of the Act, it is obvious that a HUF is permitted to accept foreign contribution without permission for the purposes listed in section 4 of the Act.   However, it should be borne in mind that the monetary limit for acceptance of foreign contribution from a foreign source in the form of any article given as gift to a person for his personal use has been specified as Rs. 1,00,000/ vide Foreign Contribution (Regulation) (Second Amendment) Rules, 2019.

Question 59

Whether an individual can freely accept any scholarship or stipend or any payment of like nature from a foreign source?

Answer: Yes. Since, in terms of Section 4(g) of FCRA, 2010 and subject to the provisions of section 10 of the Act, even the persons specified under section 3 of the Act, i.e., persons prohibited from accepting foreign contribution, are allowed to receive foreign contribution by way of any scholarship, stipend or any payment of like nature, it is obvious that an individual is permitted to accept such scholarship etc. from a foreign source.  Any payment of like nature should include grants, fellowship etc.   ​

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