Foreign Fundraising for NGOs under FCRA

In India, for NGOs, there are certain restrictions regarding receiving a donation from outside India. During applying the Foreign Contribution Regulation Act (FCRA) 1976 on the NGO recipient, the source of money is a very important determination. Foreign source means any type of organization which is not controlled by the Indian citizen. However, organizations such as the World Bank and UN Agencies are not known as 'foreign source'.

Prior Permission or Registration Is Required by The NGOS Under FCRA.

Approval of the Indian government is required in order to receive the foreign contribution in any kind of currency or from any foreign source which is known as prior permission or FCRA (foreign contribution regulation act) registration is required. 

The foreign source includes:

i. The government of any foreign country or territory and any government agency.

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

iii. A foreign company as defined under the Companies Act, 2013.

iv. It also includes the following:

a. A subsidiary company of a foreign company. 

b. A multinational corporation as defined under the law.

v. A company incorporated in a foreign country not being a foreign company. 

vi. A company incorporated under the Companies Act, 2013 who’s more than one-half of the nominal value of its share capital is held either individually or in the aggregate, by one or more of the following below mentioned: 

a. Foreign country or territory’s government. 

b. Foreign country citizen. 

c. The company incorporated in a foreign country or territory. 

d. Any type of NGO such as trust or society registered in a foreign country or territory.

vii. In any foreign country or territory, a trade union whether registered or not.

viii. A foreign trust or a foreign foundation which is basically financed by a foreign country or territory.

ix. A society or individual’s association registered outside India.

x. A foreign country citizen, not any foreign institution permitted by the Central Government by notification in the Official Gazette to carry on its activities in India.

FCRA funds should not be given to such NGOs which do not possess FCRA registration or obtained prior-permission by such NGOs which have FCRA registration or prior permission. 

NRI donations which are given to NGOs are categorized as Indian funds or Foreign Currency funds. It will be considered as Indian funds if the NRI holds an Indian passport. Otherwise, it will be considered as Foreign Currency funds if NRI doesn’t hold an Indian passport. 

Implications of Donations from the Donor’s Point Of View

i. The holder of an Indian Passport is free to make donations to any NGO registered in India. These donations will not be considered the foreign source.

ii. A non-resident Indian who does not hold an Indian Passport can donate to NGOs which are registered under FCRA. Such donations will be considered as foreign source provided if such non-resident want to give donations to such NGOs which are unregistered under FRCA, have to give a letter of intention to give a donation of a specified amount for a specific purpose to the Central Government and the NGO. Thereafter NGOs have to apply for prior permission under FCRA by attaching a letter of intention. NGO will be eligible to accept donation after receiving the prior permission. 

iii. Above mentioned norms shall be applied in case donor is a citizen of any country other than India.

iv. Verification must be done of FCRA certificate before making donations. 

Ways of Foreign Fundraising for NGO in India 

For receiving fund from foreign, multiple accounts are not allowed under FCRA. Therefore, an account cannot be opened in the name of NGO abroad to raise funds.

However, there are two following options which can be followed:

1. The first option is to set up an independent sister concern abroad. This will help you in raising funds and transfer these funds.

2. An arrangement can be made with a fund-raising group abroad. This group will raise funds on the behalf of NGO and further transfer these funds to NGO.