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Why India changed law on foreign donations

George Iype | July 06, 2005

The Union Cabinet has approved a draft Bill seeking replacement of the Foreign Contributions Regulation Act, 1976 (FCRA).

Foreign contributions and donations to scores of Indian voluntary organisations, religious groups and charitable institutions every year touch nearly Rs 5,000 crore (Rs 50 billion).

What are the laws that govern foreign donations? Which are the Indian non-governmental organisations that receive the biggest chunk of foreign donations? Why is the government replacing the FCRA? finds out:

What is FCRA?

The provisions of the Foreign Contribution (Regulation) Act, 1976 regulate the receipt of foreign donations in India. The Foreign Contribution (Regulation) Rules, 1976 contain the various forms prescribed for this purpose. According to the rules, only an association having a definite cultural, economic, educational, religious or social programme -- after it obtains the prior permission of the Central government -- can receive foreign contribution.

What has prompted the government to propose a new law in place of the FCRA?

Loopholes in the nearly 30-year-old law. The ministry of home affairs says that scores of NGOs, religious groups and charitable agencies are receiving foreign funds for humanitarian purposes in India. But some of them are allegedly diverting funds for profit-making enterprises.

The government says that the new legislation to replace the existing FCRA, 1976 will facilitate inflow of foreign contribution for genuine activities without compromising concerns over national security.

Has the government banned any NGO from receiving foreign funds?

Yes, in June 2005, the government banned nine organisations from receiving foreign donations saying that there are serious gaps in their audit reports.

What are the salient features in the proposed new FCRA rules?

The main feature of the amendments is the decentralisation of the administrative structure. There will be four or five regional offices in place of the existing Central office located at New Delhi.

These offices will help associations located at different parts of the country easy access to the department for registration and other purposes. These associations need not depend on the special consultants who charge hefty fee for such services.

What are the other key amendments to the law?

The amendment proposed allows voluntary groups and associations to open multiple bank accounts to disburse the funds received from abroad.

However, they can receive foreign contributions only through the designated bank account. After receiving the funds through that bank, the groups can transfer the money to a number of Imprest bank accounts to meet the requirements of their various projects.

The Imprest system controls small cash disbursements by establishing a fund at a fixed amount and periodically reimbursing the fund by the amount necessary to restore its original cash balance.

What was the main drawback of the existing FCRA?

The present law does not contain any provisions for the de-recognition of an association that violates the provisions of the Act. It simply gives power to the Central government to debar the association from receiving the foreign contributions.

The new enactment contains provisions for de-recognition of defaulting associations.

How much money have Indian voluntary groups and religious organisations received last year from abroad?

Figures with the Ministry of Home Affairs during the year 2003-04 says that as many as 14,700 groups in India have received foreign funds worth Rs 4,856 crore (Rs 48.56 billion).

How many associations are registered under FCRA?

Nearly 30,000. But not all of them receive foreign donations.

Who are the biggest recipients of foreign funds?

The Andhra Pradesh-based Sri Sathya Sai Central Trust is the largest recipient of foreign contributions. The Sathya Sai Trust received Rs 95 crore (Rs 950 million) during 2003-04.

Which is the biggest foreign donor?

World Vision International, a United States-based Christian relief and development organisation, is the biggest donor agency for many Indian voluntary groups.

World Vision released nearly Rs 95 crore for charitable purposes for Indian agencies last year. Other big donors are Foster Parents Plan International, USA and Watch Tower Bible and Tract Society, USA.

So is the US the biggest foreign donor for the Indian NGOs?

Yes. As per the latest available data with the Union home ministry, the US heads the list of donor countries to India with Rs 1,492.62 crore (Rs 14.926 billion), followed by the United Kingdom (Rs 677.59 crore), and Germany (Rs 664.51 crore).

Which are the Indian states that receive the largest foreign donations?

Among the states and Union Territories, Delhi is the leading recipient following by Tamil Nadu, Andhra Pradesh and Kerala.

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Read what others have to say:

Number of User Comments: 3

Sub: Registering a Trust in US

Can US$ contributions by a US taxpayer to a FCRA approved trust registered in India be shown as tax deduction in a US tax return? ...

Posted by Appu

Sub: Y v accept Funds

Why not we stop taking funds from these foreign countries. I fear that this funds are diverted towrds terrorist Organisation, Conversion and other Unsocial activities ...

Posted by Dinkar

Sub: new law for foreign donation

ITS VERY GOOD MOVE, by the government, Excelent , keep it up. REEZ.

Posted by REEZ


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