How can an NGO Accept International Donations in India

Thursday 23 June 2016
A non-profit in India only has a handful of options to sustain projects - foreign funding, corporate social responsibility (CSR), government-funded campaigns, donation by Indian foundations, charitable trusts and raising funds from individual donors. For large operations, only the first 3 are relevant. CSR can add Rs.20,000-25,000 crore to social development, but only 30% of leading firms obligated to CSR collaborate with NGOs - most have their own foundations. CSR in India tends to centre around rural communities. In government funding, there are issues of utilisation of funds, as well as selective funding of projects. Foreign funding is a consistent source of funding, as international bodies undertake strategic and cause-driven philanthropy when they identify the best NGO for charity.

Foreign Contribution (Regulation) Act, (FCRA), 2010
Foreign payments to NGOs in India are regulated by the Foreign Contribution (Regulation) Act, (FCRA), 2010. It is important to understand the registration and compliance requirements for how foreign bodies can legally donate to NGOs. The FRCA enables anyone - individuals, associations or companies to receive foreign contributions after receiving formal registration. The Act prohibits organisations of political nature to receive this contribution.

A permanent FCRA registration number is issued to companies, without which a one-time case by case basis approval is needed from the government. This can be suspended due to a violation of the provisions specified under the Act. In this case, 25% of foreign contribution received can be used for declared purpose - the remainder can only be accessed for use after permission is obtained again. The amount is then vested with the banking authority until further instructions by the Central Government.

One time approval
For prior one-time approval, online application Form FC-4 must be filled, and forwarded to the Ministry of Home Affairs with a hard copy along with a certificate of recommendation from the District Magistrate or other relevant State/Central Government departments. This will be processed within 120 days.

Within 30 days, other required documents must be sent after sending online application, lest the request for FCRA approval is cancelled.

Documents required:
  1. Form No. FC. 3
  2. A copy of memorandum
  3. Rules and regulations of the organisation
  4. Audited accounts of the last three years
  5. List of office bearers
  6. Description of the NGO's activity for the past three years
  7. Particulars and account number of bank,
  8. Copy of registration certificate

Registering under FCRA for regular foreign contribution
To register for regular inflow of foreign contribution, the following eligibility requirements must be met:
  1. Having been in operation for 3 years
  2. Should not have a parent society already registered under FCRA
  3. No foreigner should be on the board of this aforementioned society
A separate bank account, created for receiving and utilising funds for FCRA approved inflows must be created. No other funds can be deposited in this account so that it exclusively exists as a record of foreign contribution received and utilised.

A long term registration certificate is granted for 5 years, and must be renewed six months before its expiry. Renewal requires filling out the Form FC-5 with a small re-registration charge. Ongoing multi-year projects require renewal 12 months before the date of expiry of this certificate.

Expenses
One time prior permission: Rs. 1000
Application for grant of registration: Rs. 2000

Organisations can use up to 50% of the fund for administrative purposes, above which permission from the Central Government is needed. The remainder must be used for the specific purpose for which the contribution was made.

Compliance
Recipients of the foreign contribution must submit a report, certified by a chartered accountant, in Form FC-6. This must be accompanied by documentation submitted to the Ministry of Home Affairs.
  1. Income and expenditure statement
  2. Receipt and payment account
  3. Balance sheet for every financial year beginning on the 1st day of April within nine months of the closure of the financial year

Conclusion
With such stringent measures, it is clear that transparency and accountability are highly important to NGOs sourcing foreign funding.  According to the latest data, NGOs received INR 11546.29 crore in foreign donations in 2015, a much-needed boost to large scale sustained projects.  With the donation and tax benefits available to an NRI who can donate online, it is a great way to invest personal funding towards India's development projects. The government is eagerly 'looking out' to see that your money is being invested effectively, and precisely audited reports give you clarity over how your money is spent.