FCRA and FEMA

Foreign Contribution (Regulation) Act, 2010(FCRA)

In the Indian context, FCRA refers to the Foreign Contribution (Regulation) Act, 2010 and amendment there to. FCRA was enacted by the Government of India to regulate the acceptance and utilization of foreign contributions by certain individuals, associations, organizations, and companies. The primary purpose of the FCRA is to ensure that foreign contributions are not used for activities detrimental to national interest or affecting public interest.

Key provisions of the Foreign Contribution (Regulation) Act, 2010 (FCRA) in India include:

1. Regulation of Foreign Contribution: The FCRA regulates the receipt and utilization of foreign contributions by individuals, associations, NGOs, and other entities. It prohibits acceptance of foreign contributions without obtaining prior registration or obtaining prior permission from the government.
2. Registration and Prior Permission: Organizations and individuals seeking to accept foreign contributions must register under the FCRA with the Ministry of Home Affairs or obtain prior permission for a specific project or activity. FCRA registration is valid for 5 years, and organizations are expected to apply for renewal within 6 months of the date of expiry of registration. The government can also cancel the FCRA registration of any NGO if it finds that the NGO is in violation of the Act, if it has not been engaged in any reasonable activity in its chosen field for the benefit of society for two consecutive years, or if it has become defunct. Once the registration of an NGO is cancelled, it is not eligible for re-registration for 3 years.
3. Prohibited Activities: The FCRA specifies activities for which foreign contributions cannot be utilized, including activities that are political in nature, affect public interest, or harm the sovereignty and integrity of India.
4. Compliance and Reporting: Organizations registered under FCRA are required to maintain
   • separate bank accounts for foreign contributions,
   • submit annual reports detailing the receipt and utilization of foreign contributions, in FC-4, and
   • comply with the provisions of the law and any regulations issued by the government.
5. Monitoring and Regulation: The FCRA empowers the government to inspect accounts and records of organizations receiving foreign contributions to ensure compliance with the law. Penalties and legal action can be taken against organizations or individuals found in violation of FCRA provisions.
6. Other key Point:
   • The Act prohibits the receipt of foreign funds by candidates for elections, journalists or newspaper and media broadcast companies, judges and government servants, members of legislature and political parties or their office-bearers, and organisations of a political nature.
   • In July 2022, some changes has been made by the the Ministry of Home Affairs in FCRA rules to which number of compoundable offences is increased under the Act from 7 to 12.
   • The other key changes are exemption from intimation to the government for contributions less than Rs 10 lakh from 1 lakh received from relatives abroad, and increase in time limit for intimation of opening of bank accounts. ( it has been increased from 30 days to 90 days)

FEMA-Foreign Exchange Management Act, 2000

The FEMA came into effect on June 1, 2000, replacing the previous Foreign Exchange Regulation Act (FERA) of 1973. The FEMA Act is aimed at facilitating external trade, payments, and investments in India, and regulating foreign exchange transactions.

Here are some key features and provisions of the FEMA Act:

1. Definition of Foreign Exchange: The FEMA Act defines foreign exchange as foreign currency, whether in the form of notes, coins, or traveler’s cheques, and includes deposits, credits, and balances payable in any foreign currency.
2. Regulation of Capital Account Transactions: The FEMA Act regulates various capital account transactions, such as the acquisition and transfer of immovable property outside India, investments by Indian residents in foreign securities, borrowing and lending in foreign currency, and more. It provides guidelines and restrictions on these transactions to ensure compliance with the law.
3. Authorized Persons: The FEMA Act designates authorized persons, such as authorized dealers, banks, and financial institutions, who are permitted to deal in foreign exchange transactions. They act as intermediaries between individuals or entities and the Reserve Bank of India (RBI).
4. Liberalized Remittance Scheme (LRS): The FEMA Act introduced the Liberalized Remittance Scheme, which allows resident individuals to remit a certain amount of money abroad for various purposes, including education, medical treatment, travel, and investments, subject to specified limits and conditions.
5. Enforcement and Penalties: The FEMA Act empowers the Directorate of Enforcement to investigate and take action against violations of the Act. It imposes penalties for non-compliance, including fines and imprisonment, to ensure adherence to the provisions and regulations under the Act.
6. Foreign Exchange Management: The FEMA Act provides the legal framework for the management and regulation of foreign exchange in India. It empowers the RBI to formulate regulations, issue licenses, and exercise control over foreign exchange transactions to maintain stability and regulate the flow of foreign currency in the country.

Detail discussion on the above is coming soon