Questions. Question1: Whether interest earned or any other income received from FC funds would be considered as foreign contribution?

Transcription

1 Questions Question1: Whether interest earned or any other income received from FC funds would be considered as foreign contribution? Yes, according to the explanation 2 of the definition of foreign contribution as given under section 2(1) (h), the interest earned on the FC funds or any income generated from FC assets would be treated as foreign contribution. Question2: Can a foreigner be an executive committee member in a society or a trust? Legally there is no bar on appointing a foreigner as an executive committee member in a society or a trust. However, under FCRA 2010, organizations having foreign nationals as member of the Board, other than Person of Indian origin (POI), are generally not permitted to get registration under FCRA law, except without prior permission. Question3: Are frequently asked questions (FAQs) on FCRA binding any FCRA Registered Organisation? Frequently asked questions (FAQs) on FCRA are listed questions and answers. All supposed to be commonly asked in some context and pertaining to a particular topic. Main purpose of the FAQs is to answer visitor s queries. FAQs offer simplistic explanations/clarifications of terms/concepts related to the organization. Such explanations/clarifications that are provided on the website should neither be regarded as an interpretation of law nor be treated as a binding opinion/guidance from the

2 organization s point of view. Therefore, in our opinion FAQs are not binding any organization or company. Question4: Whether funds received from foreigners in lieu of goods sold or services rendered are treated as foreign contribution? According to explanation 3 of the definition of foreign contribution given in section 2(1)(h), any amount received in lieu of goods sold or services rendered in the ordinary course of business shall be excluded from the definition of foreign contribution. Therefore, the same shall not be treated as foreign contribution under FCRA, Question5: Is it necessary to appoint a Company Secretary in a Section 25 company? According to Section 383A of Companies Act, 1956, every company having a paid up capital of Rs 5 crores shall have a full time Company Secretary. However, Section (25) company has been exempted from the provisions of section 383A and as such is not required to appoint a Company Secretary. Therefore, Company registered U/S 25 may appoint a Company Secretary at its own discretion. Question6: Is there is any way to open and maintain a USD Currency bank account to receive contributions in US dollars? The Indian Banking System only allows maintaining a Rupee account in India. Therefore, it is not possible to maintain a US Dollar account in India to receive contributions.

3 Question7: Can foreign contribution be received through Western Union or PayPal? The FCRA 2010 clearly mentions that all foreign contributions should only be received through the FC designated bank account as specified in the application for registration. Question8: Can an application for PAN be made through Internet? Yes, an application for a new PAN card can be made through the Internet. For more details visit ( nsdl.com) Question9: Is online submission of annual return (FC 6) mandatory? FCRA 2010 requires annual information of Foreign Contribution received & utilized in a year to be reported in Form FC 6. But, the law does not prescribe any particular format i.e. online/ hardcopy or procedures for submission of FC 6. However, it is advised that FC 6 should first be filed online; thereafter hard copy of the same FC 6 along with necessary documents should be submitted to MHA. Question10: Whether an NPO is liable for tax if not registered under 12A? Yes, an organization which is not registered under section 12A shall be liable for tax. The organization shall be assessed as association of person (AOP) in the Income Tax Law. Further, an AOP shall also be entitled to claim the basic exemption limit available to an individual.

4 Question11: Whether FC funds can be refunded to the foreign Donor in compliance of project agreement terms? Under the FCRA 2010, transfer of foreign contribution can only be made if the recipient organization possesses FC registration. Since, an organization registered in other country (Foreign Donor) will not come under the purview of FCRA provisions and therefore, will not have an FCRA registration. Hence, it is not permissible to transfer FC funds to the foreign donors. Question12: Whether NPOs are liable to file income tax return? All the charitable organizations with annual income exceeding the maximum amount, which is not chargeable to tax during the financial year, are required to file tax return in compliance of Section 139(1) of the Income Tax Law. For example: for the financial year the exemption limit set was Rs. 2,00,000.Hence, any person with annual income more than Rs. 2,00,000 in FY , shall be liable to file Income Tax Return (ITR) under section 139 (1) of the Income Tax Law. Question13: Can organisations registered under the FCRA 2010, open multiple bank account for receiving foreign funds? As per Section 17 of the FCRA 2010, every person who has been registered in accordance with the FCRA 2010, shall receive foreign contribution only through one FC designated bank account as specified in its application for registration. However, such person may open one or more bank accounts for utilization purpose only.

5 Question14: Can a Person of Indian origin (PIO) and Overseas Citizens of India (OCI) set up a Trust, as an author? According to provision 7 of the Indian Trusts Act, a Trust can be formed by any person competent to make a contract and deal with property of the Trust. So, as per the law of the land, there is no restriction on foreigners and PIOs setting up Trusts in India. Further, foreigners can also become Trustees as well as authors of the Trust. Question15: Whether the provision of Tax deducted at source (TDS) as referred in Income tax Act, 1961 is applicable over NGOs? Yes, the provision of TDS as referred in section 190 to 206C of Income tax Act, 1961 is applicable over NGOs. Question16: Can an e TDS return be filed without TAN? Quoting of TAN is mandatory in TDS returns, whether filed in paper or electronic format. Therefore, an e TDS cannot be filed without TAN. Question17: What are the modes of filing return of income?

6 Return of income can be filed in the paper mode or in e filing mode. If return of income is filed through electronic mode, then the assessee has the following two options : (1) E filing using the Digital Signature (2) E filing without using the Digital Signature If the return of income is filed by using the digital signature, then there is no requirement of sending the signed copy ITR V (i.e. acknowledgement of return filed electronically) to Bangalore CPC. However, if the return is filed without using the digital signature, then the assessee shall send the signed copy of ITR V to CPC, Bangalore within 120 days of uploading the return either by ordinary post or speed post only. Question 18: Whether the audit is compulsory for NPOs? As per the provision of income tax law, if the total income of the institution as computed exceeds the maximum amount which is not chargeable to Income tax in any previous year, the accounts are required to be audited by a Chartered Accountant and the audit report should be prepared in Form no. 10B. Further, the return of Income along with the audit report i.e. form 10B has to be submitted to the Income tax department within the prescribed time limit. Question19: Can a company refuse to pay gratuity payable to its employees due to financial loss? No a company cannot refuse to pay gratuity payable to its employees due to financial loss. A company is bound to pay gratuity even if company is not doing financially well. Company should ensure that it pays gratuity within 30 days from the date when gratuity become payable to an employee. Also, it is the responsibility of the employer to notify employee about his/her gratuity payment even if employee does not apply for same.

7 Question20: Does it require any approval of MHA for withdrawal of money from the designated FC bank account and redeposit the unutilized portion thereof back to the FC bank account? No, there is no need to take any approval of MHA for withdrawal of money from the designated FC bank account and redeposit the unutilized portion thereof back to the FC bank account. All these are the normal banking transactions which can be done without such approvals. Everyone should ensure that no fund other than FC fund should be deposited in the designated FC bank account and local fund shouldn t be mingled with the FC fund under any circumstances. Question21: Can a Charitable trust claiming exemption, do business also? Yes, a charitable trust can also be involved in business activities. However, the exemption from business profits is subject to fulfillment of the below mentioned conditions: (a) (b) The business is carried on by the charitable trust for attainment of its objectives. Separate books of account are maintained. Question 22: Is separate accounting necessary for administrative expenses as per FCRA? No, it is not necessary to maintain separate books of account showing the administrative expenditure as per FCRR However, the organization should be in a position to clearly segregate the expenditure which is administrative in nature, in the books of accounts. Question 23: Is transfer of funds from one FC registered organization to another unregistered organization (under FCRA) permissible?

8 Yes, it is permissible to transfer funds from one FC registered organization to another unregistered organization which does not have registration/ prior permission under FCRA. However such transfer can be made only with prior permission of the Central Government in compliance of Section 7 and Rule 24 of FCRR, As per Rule 24 of FCRR 2011, FC registered organization may transfer such foreign contribution to an unregistered organization, to an extent not exceeding 10 % of the total value of the foreign contribution received and for this purpose an application to be made to the Central Government in Form FC 10. However if the application for prior permission is filed by the recipient organization, then this limit of 10% would not be applicable to the transferor organization. Question24: Is it permissible under FCRA to change the designated bank account? Change in the bank or branch of designated bank account can be made with prior permission of the Central Government only. When a change of bank account becomes a necessity by virtue of relevant and justifiable reasons, the following procedures may be followed: i. A new bank account which is proposed to be designated bank account should be opened by depositing the minimum amount required for opening of the account. ii. iii. iv. The proposed account, since it is subject to approval should not be made operational. It should be treated as a multiple bank account opened with FC balance. An application should be made to the FCRA authorities by citing the relevant and justifiable reasons for such change along with complete details of the old account as well as the new account in the prescribed application. The application form should be accompanied by the following documents: a. Resolution of the Board for proposed change of Bank/bank account b. Copy of letter granting Registration/ Prior Permission

9 c. Certification from the bank for the Account to be opened/opened exclusively for FCRA purposes v. After acquiring permission from FCRA authorities, the entire balance from the old designated FC account should be transferred to the new account. Question 25: Can FC funds be placed in fixed deposits? All FC funds are required to be received in the designated bank account but any temporary surplus funds may be placed in fixed deposits with the bank. However, care should be taken that the investment are in compliance with the section 11(5) of the Income tax Act and are not speculative in nature. Once the fixed deposit matures, care should be taken to ensure that the amount is credited back to the FCRA designated bank account. Question 26: What is the procedure for seeking changes in the name/address of an association registered under FCRA? For seeking change in the name/address of the association, one should use the prescribed form available on Ministry of Home Affair s website and submit the same along with the requisite documents specified therein. The documents specified in the form as requisites are: (i) Resolution of Governing Body for proposed change of name/address; (ii) Copy of letter granting Registration Number; (iii) Copy of revised certificate of Registration under Societies Act/Trust Act/Companies Act, whichever is applicable, in the case of change of name request.

10 Question 27: Whether associations who have been granted registration or prior permission under the repealed registration or prior permission FCRA, 1976 shall have to renew their registration or prior permission? In terms of the proviso to Section 11(1) of FCRA, 2010, an Association granted registration or prior permission under the repealed FCRA, 1976 shall be deemed to have been registered or granted prior permission, as the case may be, under FCRA, 2010 valid for a period of 5 years from 1 st May, 2011 i.e., up to the 30 th April, Therefore, all existing organizations registered under FCR, 1976 shall have to get their registration renewed from the 1 st May, 2016 as prescribed under Section 16 of FCRA, 2010 and corresponding Rule 12 of FCRR, Please note that prior permission granted under FCRA, 1976 shall remain valid till receipt and full utilization of the amount of FC for the purpose for which the permission was granted. Question 28: What should an Association do if it loses its FCRA certificate of registration? Could the Association be given a duplicate certificate? An Association that has lost its certificate of registration under FCRA should first lodge a FIR in its nearest Police Station and then get a Resolution passed by its Governing Council/Executive Committee indicating the loss and that it needs to approach MHA to have a duplicate copy of the Certificate. Thereafter, the Association should apply to MHA for issuing it a duplicate copy of the certificate of registration. The application should be on a plain paper and accompanied by the original FIR and

11 Resolution, Bank details indicating the account number, i.e., a copy of the passbook from the Bank where the exclusive FC a/c is maintained and a photocopy of the registration certificate, if available. The application along with the requisite documents should be submitted to the Under Secretary (FCRA II), Ministry of Home Affairs (FCRA Wing), NDCC II Building, Jai Singh Road, New Delhi Question 29: Can an Association having registration or prior permission under FCRA 2010 transfer foreign contribution received by it to another Association which does not have FCRA registration of prior permission? Can an Association registered under FCRA give loans or advances, interest bearing of otherwise, and secured or otherwise, out of the FC received to Self Help Groups (SHGs) and Community Based organizations (CBOs), registered or not? The transferor Association has to seek approval of Ministry of Home Affairs (MHA) in Form FC 10 prescribed for this purpose and cannot transfer any amount of foreign contribution until such transfer has been approved by MHA. The application should be accompanied by a declaration to the effect that the amount proposed to be transferred during the financial year is less than 10 % of the total value of the foreign contribution received by it during the financial year. Hence, the amount to be transferred should not exceed 10% of the total value of the foreign contribution received by the transferor Association during the financial year. A loan or advance, interest bearing or otherwise, and secured or otherwise, would be recoverable. Associations desirous of giving such loans/advances should apply in the prescribed manner in Form FC 10 under Rule 24 for taking permission to provide loans and other disbursements towards revolving funds and micro finance activities by CBOs and SHGs. The funds disbursed should be shown as utilization in the annual return in Form FC 6 and also as expenditure in the Income and Expenditure Account in the year of the disbursal. When such loans are recovered, the money should be considered as subsequent FC receipt and re deposited in the designated FC A/c.

12 Loans given out again and subsequently recovered should also be treated in the same manner. It is advisable to maintain separate records of the disbursals and recovery of such loans/advances for effective control. Question 30: Can Government servants, Judges and employees of a Government owned/controlled Company/Body be on the Executive Committee/Board of an Association under FCRA, 2010? The legal entity of a person under FCRA, 2010 is distinct from an individual person. Therefore, individuals who cannot receive foreign contribution i.e., individuals prohibited from accepting foreign contribution in terms of Section 3 of the Act, may happen to be on the Executive Committees/Boards of an association. Question 31: What is the procedure for renewal of registration? In terms of Rule 12(2) of FCRR,2011, an Association registered under FCRA should apply in Form FC 5 for renewal of its registration 6 months before the date of expiry of the certificate of registration. Further, Associations implementing an ongoing multi year project should apply for renewal 12 months before the date of expiry of their registration vide Rule 12(3) of FCRR, Question 32: What will happen to the unutilized FC and assets created out of FC after the registration of an Association is cancelled?

13 In terms of Section 15 of FCRA,2010 and Rule 15 of FCRR, 2011, the unutilized FC lying in the designated FC a/c as also the FC assets of such Association will vest with the Bank concerned till the Central Government issues further directions in the matter. If a person whose registration has been cancelled transfers/ has transferred the FC to any other person, this rule shall apply to the person to whom the FC has been transferred. If the Association is subsequently given registration under FCRA,2010, the unutilized FC and FC assets will be returned to that Association by the Bank. Question 33: Can an organisation open separate FC A/Cs for separate donors? All FC from all donors should be received in the exclusive designated FC a/c only. An organisation may open multiple bank account(s) only for the purpose of utilization of the FC received in that exclusive designated FC a/c. If it becomes necessary to have a separate account for any donor, the FC from that donor should first be received in the exclusive designated FC a/c and then the amount of his donation can be transferred to the multiple Bank accounts opened for utilization of the FC of that donor. Question 34: Could the Government suspend the certificate of registration granted to a person under FCRA? In terms of Section 13 (1) of FCRA, 2010, Where the Central Government, for reasons to be recorded in writing, is satisfied that pending consideration of the question of cancelling the certificate on any of the grounds mentioned in sub section (1) of section 14, it is necessary so to do, it may, by order in writing, suspend the certificate for such period not exceeding one hundred and eighty days as may be specified in the order.

14 Question 35: Could an Association whose registration has been cancelled in terms of section 14 of FCRA, 2010 again apply for grant of registration or prior permission? The Association can apply permission only after 3 years from the date of cancellation of its registration. In terms of Section 14(3) of FCRA, 2010, Any person whose certificate has been cancelled under this section shall not be eligible for registration or grant of prior permission for a period of three years from the date of cancellation of such certificate. Question 36: What is to be done if administrative expenses are higher than the prescribed ceiling? Section 8 (1) (b) of FCRA,2010 prescribes that an association should not incur, as far as possible, more than 50 percent of the foreign contribution received in a financial year to meet administrative expenses. However, the proviso to this section also states that administrative expenses exceeding 50 percent of such foreign contribution may be incurred with prior approval of the Central Government. It implies that wherever there is a possibility of incurring more than 50 percent of foreign contribution received in a financial year towards administrative expenses, prior approval of MHA should be taken. It should be noted that administrative expenses have been capped at 50 percent of the FC to prevent diversion of funds from the core welfare activities of an organisation. Question 37: How to account for the sale proceeds of an asset created out of foreign contribution? Any asset created / purchased out of foreign contribution is FC asset and should be recorded in the FC books of account only. If an asset created/ purchased out of FC is sold, then its sale proceeds should be shown as FC receipt.

15 Question 38: Whether inter account funds transfer shall be allowed within the multiple accounts that an Association is now permitted to open for the purpose of utilizing the FC and the level of diligence required on the part of the Banks in this regard? Inter account transfer of funds between the multiple accounts is not permissible. As such, the Banks should apply full diligence to keep track of such transfers. Transfer of funds is allowed from the exclusive designated FC a/c of an Association to the multiple account(s) opened for its utilization. However, no funds other than the amount received in the exclusive designated FC a/c shall be received or deposited in such multiple accounts. Question 39: What would happen in the case of change of address of a FCRA registered Association from one District to another District within the same State or from one State to another State? The 9 digit Registration number allotted to an Association follows a logical sequence the first 2 digits represent the code in respect of the State, the next 3 digits the code of the District in which the Association is located and the next 4 digits represent the sequential number of registration within that District. If the location of an Association is changed from one State to another or from one District to another in the same State, then the allotted registration number has to be changed altogether and as such this is not normally permitted. However, if an Association has to shift its location requiring such change due to some compelling reasons, it has to seek fresh registration by submitting an application in Form FC 3 in the prescribed manner, duly indicating the reasons for submission of the application. On approval, it will be allotted a new registration number and the previous registration number would be cancelled.

16 Question 40: A Section 8 company does not get 12AA registration on grounds of zero activity. Later it generates corpus funds, but does not apply for 12AA registration. Will it has to pay income tax on such corpus funds? Any donation received with a specific direction shall form part of the corpus. If the organisation is registered under 12AA of the Income Tax Act, then the corpus will not be included in the total income of the organisation. If the organisation generates corpus and is not registered under section 12AA, section 11(1) (d) would not apply. Non application of section 11(1)(d) means that voluntary contributions would be taxed under normal provisions of the Income Tax Act, even if it is given with a specific direction to form part of the corpus fund. Question 41: Are powers vested with the Income Tax authority to condone delay in filing Form 10? The Commissioner of Income Tax (CIT) is authorized to condone the delay in the deserving circumstances such as: 1. That the genuineness of the trust is not in doubt, 2. That the failure to give notice to the Income Tax Officer under section 11(2) of the Income Tax Act and investment of the money in the prescribed securities was due only to oversight, 3. That the trustees or the settler have not been benefited by such failure directly or indirectly, 4. That the trust agrees to deposit its funds in the prescribed securities prior to the issue of the Government sanction extending the time under section 11(2), and 5. That the accumulation or setting apart of income was necessary for carrying out the objects of the trust. Normally trusts/ organisation make delay in filing Form No. 10 and the Commissioner condones the delay after ensuring that the failure to apply in time was not deliberate and did not benefit the settler, trustee and founders in any manner and the accumulation of income was necessary for carrying out the

17 objects of the organisation. The condonation of delay by the CIT has become even more important in the light of Supreme Court where it was held that the time limit to file Form No. 10 is mandatory. The CBDT Circular No. 273 dated has empowered the CIT under section 119(2)(b) to condone the delay in filling of application in Form No. 10. Question 42: Which Association should make the application in the case of transfer of foreign contribution from one Association to another Association? The Association intending to transfer has to submit the prescribed application in Form FC 10 to Ministry of Home Affairs (MHA) if the proposed recipient Association does not have FCRA registration or prior permission. Such an application has to be made by the intending transferor Association and not the recipient Association. The intending transferor Association cannot transfer any amount of foreign contribution until such transfer has been approved by MHA. Question 43: Is corpus donation received by a trust or a charitable organisation taxable? Corpus donation cannot be treated as the income of the trust, therefore that is not taxable and the assessee is not required to apply under section 11(2) for accumulation under Income Tax Act. Corpus donations come with specific direction of the donor and therefore, the recipient organizations do not have the liberty to apply these funds as they wish and they are generally kept on long term basis as a permanent fund. To claim a donation to be a corpus donation, it is necessary that a written direction from the donor is obtained. In the absence of a written direction from the donor, the donation would not be treated as corpus donation and consequently will form part of the income of the organization.

18 Question 44: Will non submission of annual return adversely affect renewal of registration under FCRA, 2010? Yes, the prescribed Form FC 5 for renewal of registration specifically seeks information relating to details of foreign contribution received and utilized since registration with yearly break up and whether various provisions of FCRA, 2010 was adhered to by the Association. In cases where the annual return was not filed within due date or was not filed at all, it is most likely that the registration would not be renewed because of violation of the Act. If the registration already stands cancelled by MHA because of this violation, the question of its renewal will not arise. Question 45: When should an Association which has been granted registration under FCRA, 1976 apply for renewal of registration? Since registration granted to Associations under the repealed FCRA, 1976 shall be valid up to 30 th April, 2016, such Associations should apply for renewal of their registration on or before 31 st October, 2015 as per the prescribed procedure. Please note that in terms of Rule 12(3) of FCRR, 2011, Associations implementing an ongoing multi year project should apply for renewal 12 months before the date of expiry of their registration, i.e., on or before the 30 th April, Question 46: Could the registration of an Association be cancelled if it has been filing 'nil' return for two consecutive years?

19 As per Section 14 (1) (e) of FCRA, 2010, the Central Government may cancel the registration of an Association if such Association has not been engaged in any reasonable activity in its chosen field for the benefit of the society for two consecutive years or has become defunct. Submission of a 'nil' return under FCRA 2010 for two consecutive years means that the Association concerned has not received any FC for those two years. It does not necessarily mean that the Association was not engaged in its field of activity because it could have continued with its programme with local donations. However, if the Government takes the view that since the Association concerned has been unable to find any foreign donor for two consecutive years, it may cancel the registration of that Association after following the due procedure where the Association will be given the opportunity of being heard. Question 47: Could the registration of an Association be cancelled if it has been filing 'nil' return for two consecutive years? As per Section 14 (1) (e) of FCRA, 2010, the Central Government may cancel the registration of an Association if such Association has not been engaged in any reasonable activity in its chosen field for the benefit of the society for two consecutive years or has become defunct. Submission of a 'nil' return under FCRA 2010 for two consecutive years means that the Association concerned has not received any FC for those two years. It does not necessarily mean that the Association was not engaged in its field of activity because it could have continued with its programme with local donations. However, if the Government takes the view that since the Association concerned has been unable to find any foreign donor for two consecutive years, it may cancel the registration of that Association after following the due procedure where the Association will be given the opportunity of being heard. Question 48: How to find the status of a pending application for registration/ prior permission?

20 Status of pending applications for grant of registration or prior permission may be checked on line from MHA s web site One needs to fill in the numbers given on the acknowledgement letter or any correspondence from MHA (Foreigners Division, FCRA wing) in status enquiry icon in respect of registration or prior permission, as the case may be. Question 49: Is there any restriction on transfer of FC funds by one organization to another organization? Section 7 of FCRA, 2010 states : No person who (a) Is registered and granted a certificate or has obtained prior permission under this Act; and (b) Receives any foreign contribution, shall transfer such foreign contribution to any other person unless such other person is also registered and had been granted the certificate or obtained the prior permission under this Act: Provided that such person may transfer, with the prior approval of the Central Government, a part of such foreign contribution to any other person who has not been granted a certificate or obtained permission under this Act in accordance with the rules made by the Central Government. Question 50: Whether the amount of foreign contribution for which prior permission has been granted can be received by an Association in installments and how would it file the Annual Return? There is no bar on receiving such foreign contribution in installments. However, the aggregate amount should not exceed the specified amount for which prior permission has been granted. The Association

21 shall have to submit the mandatory annual return in Form FC 6 for receipt and utilization of the foreign contribution during every financial year, till the amount of foreign contribution is fully utilized. Even if no transaction takes place during a year, a NIL return should be submitted Question 51: Can the fee paid by the foreign delegates/ participants attending/ participating in a conference/ seminar etc. be termed as foreign contribution and thus require permission from FCRA? Delegate/ participation fees paid in foreign currency by foreign delegates/ participants for participation in a conference/ seminar and which is utilized for the purpose of meeting the expenditure of hosting the conference/ seminar is not treated as foreign contribution and as such no permission under FCRA is required. Question 52:What are the six limbs of the definition of Charitable purpose according to section 2(15) of the Income Tax Act, 1961? The following are the six limbs of the definition of charitable purposes: Relief to poor Education Medical relief Preservation of environment (including watersheds, forests and wildlife) Preservation of monuments or places or objects of artistic or historic interest and The advancement of general public utility. Provided that the advancement of any other object of general public utility shall not be treated as charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or

22 business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activities. Provided further that first proviso shall not apply if the aggregate value of the receipt from the activities referred to therein is 25 lacs rupees or less in the previous year. Question 53: Whether donation given by Non Resident Indians (NRIs) is treated as foreign contribution? Contributions made by a citizen of India living in another country ( i.e. Non resident Indian) from his personal savings, through the normal banking channels, is not treated as foreign contribution. However, while accepting any donations from such NRI, it is advisable to obtain his passport details to ascertain that he/ she is an Indian passport holder. Question 54: What is the procedure for change of Bank and/or branch of the Bank or designated FC Bank Account? While submitting the application for registration or prior permission, the Association cannot change the designated FC a/c without obtaining permission of Ministry of Home Affairs (MHA). For change of the Bank and/ or branch of the Bank, an application in prescribed form available on the website mentioning the details of the old Bank account and the proposed new Bank account along with justification for change of designated Bank and its branch, as the case may be, name/ address of the Association, copy of registration under FCRA, copy of fresh resolution of the Governing Body/ Executive Committee ( in English or Hindi) for the proposed change of designated bank account, certificate from the proposed Bank ( copy of Bank Pass Book is not acceptable) that the account is being opened exclusively for FCRA, may be submitted to MHA.

23 Question 55: Whether any approval from MHA is required by an Association having registration or prior permission under FCRA,2010 for transferring the foreign contribution received by it to another Association which is also having FCRA registration or prior permission? The approval from MHA is required, provided that the recipient Association has not been proceeded against under any of the provisions of FCRA,2010. The onus of ensuring the eligibility of the recipient Association for receiving foreign contribution lies with the transferor. Question 56: What will happen if application for renewal is not made at all? In case an application for renewal of registration is not at all submitted to MHA or is submitted after 4 months of expiry of the original certificate of registration, the validity of the registration shall be deemed to have ceased from the date of completion of the period of 5 years from the date of the grant of registration. In such case, the Association may submit a request for the grant of a fresh registration as per the provisions of Rule 9 of FCRR, Kindly note that the provision for renewal of registration after 5 years has been introduced under FCRA, 2010 to ensure weeding out of the defunct organisations. Question 57: Does an Association need to have separate Bank accounts for its local funds and FC funds? An association must have at least two separate Bank accounts one for the local funds and the other as the designated FC account. All local donations, income etc. should be deposited in the local account. All contributions made by a foreign citizen / entity shall have to be deposited in the designated FC account. The requirement of maintaining an exclusive FC bank account is to avoid mixing up local funds/donations with foreign contribution. Question 58: Whether funds received from foreigners in lieu of goods sold or services rendered are treated as foreign contribution?

24 According to explanation 3 of the definition of foreign contribution given in section 2(1)(h), any amount received in lieu of goods sold or services rendered in the ordinary course of business shall be excluded from the definition of foreign contribution. Therefore, the same shall not be treated as foreign contribution under FCRA, Question 59: Is online submission of annual return mandatory? The Government of India, Ministry of Home Affairs has notified major amendments to the Foreign Contribution (Regulation) Rules 2011 (FCRR). By virtue of the notification dt , Annual return shall be filed in Form FC 4 and not in FC 6. There is no requirement to send the hard copies of the Form and the financial statements. The organization has to upload scanned copies of Receipt & Payment Account, Income & Expenditure Account and Balance Sheet. The Form FC 4 has to be filed within 9 months of the closure of the Financial Year, i.e. before 31st December. Question 60: Does it require any approval of MHA for withdrawal of money from the designated FC a/c and re depositing the unutilized portion thereof back to the FC a/c? Regular and normal banking activity is not regulated under FCRA,2010. The basic point to remember is that no fund other than FC should be deposited in the designated FC a/c. and that local fund and FC should not be mixed up under any circumstances. Question 61: Will interest or any other income earned from foreign contribution be considered as foreign contribution?

25 In terms of Explanation 2 under the definition of Foreign Contribution vide section 2(1)(h) of FCRA,2010, the interest accrued on the foreign contribution deposited in any Bank or any other income derived from the foreign contribution or interest thereon shall also be deemed to be foreign contribution. In other words if an organization puts any of its funds from its foreign contribution in a fixed deposit account with a bank, the interest earned thereon would also be treated as foreign contribution. Similarly, if an organization creates/ purchases any asset out of foreign contributions and derives any income from those assets, the income so generated will be treated as foreign contribution. In both the cases, the income, which is treated as foreign contribution, has to be accounted for in the annual return. Question 62: Is there any restriction under FCRA, 2010 for having relatives in the Executive Committee/ governing body of an Association? There are no restrictions for having relatives in the Executive Committee/ governing body of an Association. However, having a diverse board may give an organization more legitimacy and effectiveness in achieving its objectives. Good governance practice requires that the executive members/ trustees of an organization should be unrelated persons. Further, a family run organization may give the impression that it has been formed and being run for personal gains. Question 63: Is it legally permissible to transfer FC funds as Programme Advance to the bank account of employees to implement programmes in remote places? Transfer of FC funds as Programme Advance to personal bank accounts of employees is not permissible under the FCRA It is considered a serious violation to transfer FC funds to any local bank account.

26 For this purpose, an organization can open multiple bank accounts for utilization of FC funds in the project areas. However, no direct FC funds should be received in this multiple bank account. Only one designated FC bank account shall be used for receiving FC funds and then these funds can be transferred to multiple bank accounts for project implementation. It is to be noted that no other funds shall be deposited in this multiple bank account. Question 64: Can an OCI (Overseas Citizenship of India) holder who has given up his Indian passport transfer/gift immovable property to a charitable trust in India? An OCI card holder does not hold an Indian passport, so he/she will not be considered as Indian citizen. Hence, the concerned individual will be covered under the definition of foreign source as per FCRA laws. In order to receive any gift or donation from a foreign source, the charitable trust should have an FCRA registration. On the other hand if the trust is not registered under FCRA it will not be eligible to receive gift from such person as per the FCRA law. Question 65: Whether the amount of foreign contribution for which prior permission has been granted can be received by an Association in installments and how would it file the annual return? There is no bar on receiving such foreign contribution in installments. However, the aggregate amount should not exceed the specified amount for which prior permission has been granted. The Association shall have to submit the mandatory annual return in Form FC 4 for receipt and utilization of the foreign contribution during the financial year, till the amount of foreign contribution is fully utilized. Even if no transaction takes place during a year, a NIL return should be submitted.

27 Question 66: Is it mandatory for an Association to have registration under Section 80G or Section 35AC of the Income Tax Act, 1961 to be eligible for obtaining registration/prior permission under FCRA, 2010? The Income Tax Act, 1961 is applicable to NGOs and they are required to be registered under IT Act for their taxation purposes, i.e. for payment of taxes and claiming exemption, etc. Registration under 80G or 35 AC of the Income Tax Act helps NGOs in mobilizing funds from potential local donors. The provisions for tax exemptions under 80G or 35 AC of the Income Tax Act are applicable to local donors and have nothing to do with the donations given by a foreign source. Therefore, it is not mandatory for organizations to have registration under 80G or 35 AC of the Income Tax Act for the purpose of seeking registration or prior permission under FCRA, 2010 because FCRA,2010 is about receipt and utilization of foreign contribution i.e. donation received from foreign source.