• To regulate the acceptance and utilization of foreign contribution (FC) and foreign hospitality by certain persons and associations

• To ensure that FC does not adversely affect the values of sovereign democratic republic of India

• To prevent our parliamentary institution, polity, voluntary organizations and individuals working in important areas of national life from being influenced by FC in a manner contrary to the national interest

The Foreign Contribution Bill, 2006 ("The Bill") is presently pending before the Parliament. Salient features of the proposed amendments are mentioned at appropriate places herebelow.

FC means donation, delivery, or transfer made by any foreign source of:–

1. Any article other than personal gifts of market value not exceeding Rs. 1000.
   
   [Under the Bill the limit for amount gifted would be specified in the Rules.]

2. Any currency whether Indian or foreign.

3. Any foreign security.

Note: Any donation, delivery, or transfer of any article, currency or foreign security by any person who has received it from any foreign source shall also be deemed to be foreign contribution.

[Bill proposes that any amount received, by any person from any foreign source in India, by way of fee (including fee charged by an educational institution in India from foreign student) or towards cost in lieu of goods or services rendered by such person in the ordinary course of business, trade or commerce shall be excluded from the definition of foreign contribution.]

Foreign source includes:–

1. Government of any foreign country or any agency of such government.

2. Any international agency except United Nations or any of its specialized agencies, World Bank, International Monetary Fund or such other agency as the Central Government may, by notification in the official Gazette, specify in this behalf.

3. Foreign company within the meaning section 591 of the Companies Act, 1956 including a subsidiary of the foreign company.

4. Any other entity incorporated outside India.

5. A multinational corporation.

6. A company where more than 50% of its share capital is held by a foreign country, foreign entity or by citizens of a foreign country.

[Bill covers Individuals, HUFs, associations (whether incorporated or not) and company registered u/s. 25 of the Companies Act, 1956.]

• Associations having a definite cultural, economic, educational, religious or social programme can accept FC, only if:

a) It is registered with the Central Government under this Act or takes prior permission before receiving each contribution;

b) It receives FC through a designated bank account.

• Central Govt. is kept intimated as to the amount and source of the FC and the manner of its utilisation.

• Application for prior approval to be made in Form FC 1A.

• Application if not disposed of within 90 days then permission deemed to have been granted. Period can be extended to 120 days.

• Application for registration to be submitted in Form FC 8.

• Registration granted is valid till such time until it is specifically revoked.
  
  [Bill proposes that registration will be valid for 5 years at a time.]

• Registration process can take anything from 6 months to 1 year.

• The Ministry of Affairs has introduced a new facility "FCRA – Online" to facilitate associations to file their applications for registration and submit statutory receipt and annual returns regarding utilisation of Foreign Contribution under FCRA, online on the Ministry's Website www.mha.nic.in

1. Cash Book, Bank Book and Ledger accounts on double entry system basis to be maintained where FC relates to currency received and utilised.

2. Details in Form FC 6 to be maintained where FC relates to articles.

3. Details in Form FC 7 to be maintained where FC relates to foreign security.

1. Political candidate for election
   
   Exception: If he had received any foreign contribution within 180 days immediately preceding the date on which he is duly nominated as such candidate and intimates the Central Government regarding the source of the contribution, the manner in which it was received, its purpose and the manner in which the contribution was utilized within such time and in such manner as may be prescribed.

2. Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper.

3. Government servant, judge or employee of any Government corporation

4. Member of any legislature.

5. Political party or office-bearer thereof.

[The Bill proposes to also ban the following:–

• Association or company engaged in production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode or form.

• Correspondent or columnist, cartoonist, editor, owner of the above association or company.]

The above ban also covers gifts from relatives. Gifts exceeding Rs. 8,500 per annum requires prior permission of the Central Government, while gifts below Rs. 8,500 is required to be intimated to the Central Government. The ban does not apply to FC received by way of salary or in the ordinary course of business transacted or by way of gift or presentation made to him as a member of any Indian Delegation.

• None of the above persons, while visiting any foreign country shall accept any foreign hospitality except with the prior permission of the Central Government.

• Such permission is not necessary in case of medical emergency. However, even in case of such an emergency the Central Government is required to be intimated within one month of receiving hospitality.

• Meaning of Foreign Hospitality – any offer, not being a purely casual one, made by a foreign source for providing a person with the costs of travel to any foreign country or territory or with free board.

Such organisations not being a political party can accept FC only with prior approval of the Central Government.

[Under the Bill an organization notified as being of a political nature is barred from accepting foreign contribution.]

• Receipt of scholarships or stipends or any payment of a like nature from any foreign source by a citizen of India is required to be intimated to the Central Government in the prescribed format.

• In case of recurring receipts, it is sufficient if the intimation gives precise information as to the interval at which, and the purpose for which such recurring payments are to be received.

• No intimation if the annual value of receipts does not exceed Rs. 36,000 in an academic year. In calculating Rs. 36,000 amount received for purchase of books, clothing, equipments and site-seeing in a foreign country shall be considered. But, travel and tuition fees shall be excluded.

• [Scholarships & stipends are not included in the purview of foreign contribution under the Bill.]

• To prohibit associations or other persons from accepting FC

• To require even registered associations to obtain prior permission before accepting FC

• To require any person or associations not covered u/s 6 to furnish information about FC

• To require any person not covered u/s 9 (foreign hospitality) to obtain prior approval or furnish intimation to Central Government about foreign hospitality received

• To authorise Gazetted officers to enter premises for inspecting and/or auditing accounts

• To prohibit payment of currency in contravention of the Act

• Seizure and confiscation of accounts or articles or currency

• Cancel registration

• To exempt any association (not being a political party), organization or individual (not being a candidate for election).

• No suit or other legal proceedings shall lie against the Central Government in respect of loss or damage caused or likely to be caused by anything which is done in good faith in pursuance of the provisions of this Act or any Rule or order made thereunder.

• The Central Government has been empowered, to inspect as well as seize the accounts and records if it has reason to believe that any provisions of this Act or any other law relating to foreign exchange has been contravened.

• Central Government may seize and/or confiscate any article exceeding Rs. 1000 in value, or any currency in relation to which any provision has been contravened.

• The seized records and accounts to be released if no proceedings initiated within six months from the date of seizure.

• A person who has been convicted more than once for offence relating to acceptance or utilization of FC is prohibited from accepting any FC for a period of 3 years.

Some other important changes proposed by the bill other than reflected in the relevant sections above are listed below:

1. Every person registered or having prior permission shall not defray as far as possible such sum, not exceeding 50% of the contribution received in that financial year to meet administrative expenses. Spending on administrative expenses may exceed the above limit of 50% with prior approval of the Central Government. Central Government to prescribe rules for determining administrative expenses and its components.

2. Foreign contribution or any income arising out of it shall not be used for speculative business.