Frequently Asked Questions

Foreign contribution signifies donation, delivery or transfer made by any foreign source of any article or currency or foreign securities as defined under FERA.

Foreign sources include the following: -

• The Government of any foreign country or its agency ,
• Any international agency other than the agency specified by the Central Govt.
• A foreign company as specified in section 591 of the Companies Act including a subsidiary of a foreign company.
• A corporation incorporated in a foreign country or territory,
• A multi-national corporation within the meaning of this Act,
• An Indian company controlled by a foreign government, citizens of a foreign country, corporation incorporated in foreign country, Trusts, society body of individuals incorporated in a foreign country.
• A trade union in any foreign country or territory, whether or not registered
• A foreign trust or foundation
• A society, club or other association of individuals formed or registered outside India,
• A citizen of a foreign country,

Any NGO accepting foreign contribution should register itself with the Central Government. It has to intimate the Central Government of the amount of each foreign contribution received by it, the source from which and the manner in which such foreign contribution was received and the purposes for which and the manner in which such foreign contribution was utilised by it.

Any association that is not registered with the Central Government shall accept any foreign contribution only after obtaining the prior permission from the Central Government and should also give intimation to the Central Government as the registered association does.

Resident Indian:

• Having taxable income in India and
• Donating to an NGO that is having valid tax exemption certificate under section 80G, 80GGA or 35AC of the Income tax Act of 1961 of India. (The exemption certificate granted to the NGO by the Commissioner states the approval number and the period of approval under the said Sections.)

Non Resident Indian

• Holding Indian Passport,
• Donating to an NGO that is having valid tax exemption certificate under section 80G, 80GGA or 35 AC of the Income tax Act of 1961 of India. (The exemption certificate granted to the NGO by the Commissioner states the approval number and the period of approval under the said Sections.)

[ Read more about TAX BENEFITS ]

A donor, who is a resident of India and a non resident Indian holding an Indian Passport and also having taxable income in India, can claim income tax benefit from the donation made to an NGO with exemption status under section 80G, 80GGA or 35AC of the Income Tax Act of 1961.

Yes, income received by any religious or charitable trust, any other fund or institution established for religious or social purpose is not taxable provided the income is applied for the objects of the organisation.

However, to get exemption under Income Tax, it is essential for NGOs to register themselves with Income Tax Authorities.

NGOs can undertake any lawful activity allowed under their Charter or Memorandum of Association.

An NGO can be formed under various legal forms:

• Trust (Formed under a Trust deed and registered with Income Tax Authority.)
• Society registered under Societies Registration Act.
• Limited company incorporated under section 25 of The Companies Act.

The word NGO is an abbreviation of Non Government Organisation. It is used alternatively with voluntary organisation or social organisation. Any organisation working for a social, cultural, economic, educational or religious cause is termed as NGO.

NGO: Non Government Organisation

FEMA: Foreign Exchange Management Act

FCRA: Foreign Contribution Regulation Act

Laws relating to NGOs are mainly governed by FCRA with special emphasis on monitoring of foreign fund receipt by voluntary organisations. FCRA has made it compulsory for organisations to seek prior approval or permanent registration to receive finds from foreign sources.

Yes, according to the explanation 2 of the definition of foreign contribution (FC) as given under section 2(1) (h), the interest earned on the foreign contribution (FC) funds or any income generated from foreign contribution (FC) assets would be treated as foreign contribution (FC).

Legally there is no bar on appointing a foreigner as an executive committee member in a society or a trust. However, under FCRA 2010, an organization having members of the Board who are foreign nationals other than Person of Indian Origin (PIO), are generally not permitted to get registration under FCRA law without prior permission.

Frequently Asked Questions (FAQs) are listed questions and answers. All FAQs are supposed to be commonly asked questions in specific context and pertaining to a particular topic. The main purpose of FAQs is to answer common queries which website visitors may have. FAQs offer simplistic explanations/clarifications of terms/concepts related to the organization. Such explanations/clarifications that are provided on the website should neither be regarded as an interpretation of law nor be treated as a binding opinion/guidance from the organization’s point of view. Therefore, in our opinion FAQs are not binding on any organization or company.

According to Section 383A of Companies Act, 1956, every company having a paid up capital of Rs5 crores shall have a full time Company Secretary. However, Section 25 company has been exempted from the provisions of Section 383A and as such is not required to appoint a Company Secretary. Therefore, Company registered under Section 25 may appoint a Company Secretary at its own discretion.

According to explanation 3 of the definition of foreign contribution given in section 2(1)(h), any amount received in lieu of goods sold or services rendered in the ordinary course of business shall be excluded from the definition of foreign contribution. Therefore, the same shall not be treated as foreign contribution under FCRA, 2010.

The FCRA 2010 clearly mentions that all foreign contributions should only be received through the FC designated bank account as specified in the application for registration.

The Indian Banking System only allows maintaining a Rupee account in India. Therefore, it is not possible to maintain a US Dollar account in India to receive contributions.

Yes, an application for a new PAN card can be made through the Internet. For more details visit (www.tin-nsdl.com)

FCRA 2010 requires annual information of Foreign Contribution received & utilized in a year to be reported in Form FC-6. But, the law does not prescribe any particular format i.e. online/ hardcopy or procedures for submission of FC-6. However, it is advised that FC-6 should first be filed online; thereafter hard copy of the same FC-6 along with necessary documents should be submitted to MHA.

Yes, an organization which is not registered under section 12A shall be liable to tax. The organization shall be assessed as an Association of Person (AOP) under the Income Tax Law. Further, an AOP shall also be entitled to claim the basic exemption limit available to an individual..

Under the FCRA 2010, transfer of foreign contribution can only be made if the recipient organization possesses FC registration. An organization registered in another country (i.e. the Foreign Donor) will not come under the purview of FCRA provisions and therefore, will not have an FCRA registration. Hence, it is not permissible to transfer FC funds to the foreign donor.

All charitable organizations with annual income exceeding the exemption limit (i.e. amount of income below which assessee is not chargeable to tax during that financial year) are required to file tax return in compliance with Section 139(1) of the Income Tax Act. For example: for the financial year 2012-13 the exemption limit set was Rs. 2,00,000. Hence, any person with annual income over Rs. 2,00,000 in FY 2012-13, shall be liable to file Income Tax Return (ITR) under section 139 (1) of the Income Tax Law.

As per Section 17 of the FCRA 2010, every person who has been registered in accordance with the FCRA 2010, shall receive foreign contributions through only one Foreign Currency designated bank account as specified in its application for registration. However, such person may open one or more bank accounts for utilization purpose only.

According to provision 7 of the Indian Trusts Act, 1882, a Trust can be formed by any person competent to make a contract and deal with property of the Trust. So, as per the law of the land, there is no restriction on foreigners, PIOs or OCIs setting up Trusts in India. Further, foreigners can also become Trustees as well as authors of the Trust.

Yes, the provisions of TDS as referred to in sections 190 to 206C of Income Tax Act, 1961 are applicable to NGOs.

Quoting of TAN is mandatory in TDS returns, whether filed in paper or electronic format. Therefore, an e-TDS cannot be filed without TAN.

Return of income can be filed in the paper mode or in e-filing mode. If return of income is filed through electronic mode, then the assessee has the following two options : (1) E-filing using the Digital Signature (2) E-filing without using the Digital Signature If the return of income is filed by using the digital signature, then there is no requirement of sending the signed copy ITR V (i.e. acknowledgement of return filed electronically) to Bangalore CPC. However, if the return is filed without using the digital signature, then the assessee shall send the signed copy of ITR V to CPC, Bangalore within 120 days of uploading the return, either by ordinary post or speed post only.

As per the provisions of the Income Tax Act, 1961, if the total income of an institution as computed per the provisions of the Act, exceeds the maximum amount which is exempt from income tax in any previous year, the accounts are required to be audited by a Chartered Accountant and the audit report should be prepared in Form No. 10B. Further, the Return of Income along with the audit report in Form 10B has to be submitted to the Income Tax Department within the prescribed time limit.

No, a company cannot refuse to pay gratuity to its employees due to financial loss. A company is bound to pay gratuity even if the company is not doing financially well. A company should ensure that it pays gratuity within 30 days from the date when gratuity becomes payable to an employee. Also, it is the responsibility of the employer to notify the employee about his/her gratuity payment even if the employee does not apply for same.

No, there is no need to take any approval of MHA for withdrawal of money from the designated FC bank account and to redeposit the unutilized portion thereof back to the FC bank account. All these are the normal banking transactions which can be done without seeking approvals. One should ensure that no funds other than FC receipts should be deposited in the designated FC bank account and local funds should not be mingled with the FC fund under any circumstances

Yes, a Charitable Trust claiming tax exemption can also be involved in business activities. However, the exemption from business profits is subject to fulfillment of the below mentioned conditions:-

(a)        The business is carried on by the charitable trust for attainment of its objectives.

(b)        Separate books of accounts are maintained.

No, it is not necessary to maintain separate books of account showing the administrative expenditure as per FCRA 2011. However, the organization should be in a position to clearly segregate the expenditure which is administrative in nature, in the books of accounts.

Change in the bank or branch of designated bank account can be made with prior permission of the Central Government only. When a change of bank account becomes a necessity by virtue of relevant and justifiable reasons, the following procedures may be followed:

• A new bank account which is proposed to be designated bank account should be opened by depositing the minimum amount required for opening of the account.
• The proposed account should not be made operational since it is subject to approval. It should be treated as a multiple bank account opened with FC balance.
• An application should be made to the FCRA authorities by citing the relevant and justifiable reasons for such change along with complete details of the old account as well as the new account in the prescribed application form.
• The application form should be accompanied by the following documents:
  • Resolution of the Board for proposed change of Bank / Bank account
  • Copy of letter granting Registration / Prior Permission
  • Certification from the bank for the account to be opened / opened exclusively for FCRA purposes
• After acquiring permission from FCRA authorities, the entire balance from the old designated FC account should be transferred to the new account.

Yes, it is permissible to transfer funds from one FC registered organization to another unregistered organization which does not have registration/ prior permission under FCRA. However such transfer can be made only with prior permission of the Central Government in compliance of Section 7 and Rule 24 of FCRR, 2011. As per Rule 24 of FCRR 2011, FC registered organization may transfer such foreign contribution to an unregistered organization, to an extent not exceeding 10 % of the total value of the foreign contribution received and for this purpose an application to be made to the Central Government in Form FC-10. However if the application for prior permission is filed by the recipient organization, then this limit of 10% would not be applicable to the transferor organization.

All FC funds are required to be received in the designated bank account but any temporary surplus funds may be placed in fixed deposits with the bank. However, care should be taken that the investments are in compliance with section 11(5) of the Income-tax Act and are not speculative in nature. Once the fixed deposit matures, care should be taken to ensure that the amount is credited back to the FCRA designated bank account.

For seeking change in the name/address of the association, one should use the prescribed form available on Ministry of Home Affair’s website http://mha1.nic.in/fcra/forms/chng_name_addr.pdf  and submit the same along with the requisite documents specified therein.

The documents specified in the form as requisites are:

(i) Body for proposed change of name/address; 

(ii) Copy of letter granting Registration Number; 

(iii) Copy of revised certificate of Registration under Societies Act/Trust Act/Companies Act, whichever is applicable, in the case of change of name request

An Association that has lost its certificate of registration under FCRA should first lodge an FIR with its nearest Police Station. The Association must get a Resolution passed by its Governing Council/Executive Committee stating the loss and the need to approach Ministry of Home Affairs (MHA) for the issue of a duplicate copy of the Certificate.

Thereafter, the Association should apply to MHA for issuing it a duplicate copy of the certificate of registration. The application should be on a plain paper and accompanied by the original FIR, the Resolution, Bank details indicating the FCRA account number, ( a copy of bank passbook of the exclusive FC a/c ) and a photocopy of the registration certificate, if available

The application along with the requisite documents should be submitted to the Under Secretary (FCRA-II), Ministry of Home Affairs (FCRA Wing), NDCC-II Building, Jai Singh Road, New Delhi - 110001.

The legal entity of a 'person' under FCRA, 2010 is distinct from an individual person. Therefore, individuals who cannot receive foreign contribution i.e., individuals prohibited from accepting foreign contribution in terms of Section 3 of the Act, may happen to be on the Executive Committees/Boards of an association.

The transferor Association has to seek approval of Ministry of Home Affairs (MHA) in Form FC-10 prescribed for this purpose and cannot transfer any amount of foreign contribution until such transfer has been approved by MHA. The application should be accompanied by a declaration to the effect that the amount proposed to be transferred during the financial year is less than 10 % of the total value of the foreign contribution received by it during the financial year. Hence, the amount to be transferred should not exceed 10% of the total value of the foreign contribution received by the transferor Association during the financial year.

A loan or advance, interest bearing or otherwise, and secured or otherwise, would be recoverable. Associations desirous of giving such loans/advances should apply in the prescribed manner in Form FC-10 under Rule 24 for taking permission to provide loans and other disbursements towards revolving funds and micro finance activities by CBOs and SHGs. The funds disbursed should be shown as utilization in the annual return in Form FC-6 and also as expenditure in the Income and Expenditure Account in the year of the disbursal. When such loans are recovered, the money should be considered as subsequent FC receipt and re-deposited in the designated FC A/c. Loans given out again and subsequently recovered should also be treated in the same manner. It is advisable to maintain separate records of the disbursals and recovery of such loans/advances for effective control.

In terms of Rule 12(2) of FCRR,2011, an Association registered under FCRA should apply in Form FC-5 for renewal of its registration 6 months before the date of expiry of the certificate of registration. Further, Associations implementing an ongoing multi-year project should apply for renewal 12 months before the date of expiry of their registration vide Rule 12(3) of FCRR,2011.

All FC from all donors should be received in the exclusive designated FC account only. An organisation may open multiple bank account(s) only for the purpose of utilization of the FC received in that exclusive designated FC account. If it becomes necessary to have a separate account for any donor, the FC from that donor should first be received in the exclusive designated FC account and then the amount of his donation can be transferred to the multiple bank account opened for utilization of the FC of that donor.

In terms of Section 13 (1) of FCRA, 2010," Where the Central Government , for reasons to be recorded in writing, is satisfied that pending consideration of the question of cancelling the certificate on any of the grounds mentioned in sub section (1) of section 14, it is necessary so to do, it may, by order in writing , suspend the certificate for such period not exceeding one hundred and eighty days as may be specified in the order."

Section 8 (1) (b) of FCRA,2010 prescribes that an association should not incur, as far as possible, more than 50 percent of the foreign contribution received in a financial year to meet administrative expenses. However, the proviso to this section also states that administrative expenses exceeding 50 percent of such foreign contribution may be incurred with prior approval of the Central Government. It implies that wherever there is a possibility of incurring more than 50 percent of foreign contribution received in a financial year towards administrative expenses, prior approval of MHA should be taken. It should be noted that administrative expenses have been capped at 50 percent of the FC to prevent diversion of funds from the core welfare activities of an organisation.

Any asset created / purchased out of foreign contribution (FC) is an FC asset and should be recorded in the FC books of account only. When an asset created/ purchased out of FC is sold, its sale proceeds must be shown as FC receipt.

Inter-account transfer of funds between the multiple accounts is not permissible. As such, the Banks should apply full diligence to keep track of such transfers. Transfer of funds is allowed from the exclusive designated FC a/c of an Association to the multiple account(s) opened for its utilization . However, no funds other than the amount received in the exclusive designated FC a/c shall be received or deposited in such multiple accounts.

The 9 digit Registration number allotted to an Association follows a logical sequence:

The first 2 digits represent the specific State, the next 3 digits represent the code for the District where the Association is located and the last 4 digits represent the sequential number of registration within that District. If the location of an Association changes from one State to another or from one District to another; the allotted registration number would need to change altogether. This is not normally permitted.

However, if compelling reasons require the Association to shift its location, it has to seek fresh registration by submitting an application in Form FC-3 in the prescribed manner, duly indicating the reasons for submission of the application. On approval, it will be allotted a new registration number and the previous registration number would be cancelled.

The Commissioner of Income Tax (CIT) is authorized to condone a delay in filing Form 10 under these deserving circumstances:
1. That the genuineness of the trust is not in doubt,
2. That the failure to give notice to the Income Tax Officer under section 11(2) of the Income Tax Act and investment of the money in the prescribed securities was due only to oversight,
3. That the trustees or the settler have not been benefited by such failure directly or indirectly,
4. That the trust agrees to deposit its funds in the prescribed securities prior to the issue of the Government sanction extending the time under section 11(2), and
5. That the accumulation or setting apart of income was necessary for carrying out the objects of the trust.

Normally trusts/ organisation are late in filing Form No. 10 and the Commissioner condones the delay after ensuring that the failure to apply in time was not deliberate and did not benefit the settler, trustee and founders in any manner and the accumulation of income was necessary for carrying out the objects of the organisation. The condonation of delay by the CIT has become even more important in the light of Supreme Court where it was held that the time limit to file Form No. 10 is mandatory. The CBDT Circular No. 273 dated 03.06.1980 has empowered the CIT under section 119(2)(b) to condone the delay in filling of application in Form No. 10.

Corpus donation cannot be treated as the income of the trust, therefore that is not taxable and the assessee is not required to apply under section 11(2) for accumulation under Income Tax Act.

Corpus donations come with specific direction of the donor and therefore, the recipient organizations do not have the liberty to apply these funds as they wish and they are generally kept on long term basis as a permanent fund. To claim a donation to be a corpus donation, it is necessary that a written direction from the donor is obtained. In the absence of a written direction from the donor, the donation would not be treated as corpus donation and consequently will form part of the income of the organization

Yes. The prescribed Form FC-5 for renewal of registration specifically seeks information relating to details of foreign contribution received and utilized since registration.
Details of yearly break up and adherence to various provisions of FCRA, 2010 are to be stated. In cases where the annual return was not filed within due date or was not filed at all, it is most likely that the registration would not be renewed due to violation of the Act. If the registration already stands cancelled by MHA because of this violation, the question of its renewal will not arise

In case an application for renewal of registration is not at all submitted to MHA or is submitted after 4 months of expiry of the original certificate of registration, the validity of the registration shall be deemed to have ceased from the date of completion of the period of 5 years from the date of the grant of registration. In such case, the Association may submit a request for the grant of a fresh registration as per the provisions of Rule-9 of FCRR, 2011. Kindly note that the provision for renewal of registration after 5 years has been introduced under FCRA, 2010 to ensure weeding out of the defunct organisations.

Since registration granted to Associations under the repealed FCRA, 1976 shall be valid up to 30th April, 2016, such Associations should apply for renewal of their registration on or before 31st October, 2015 as per the prescribed procedure. Please note that in terms of Rule 12(3) of FCRR, 2011, Associations implementing an ongoing multi-year project should apply for renewal 12 months before the date of expiry of their registration, i.e., on or before the 30th April, 2015

If the aggregate annual receipts of the said institution do not exceed Rs.1 crore of the amount of annual receipts, then such institutions will get exemption under section 10 (23C) of the Income Tax Act. Exemption under this section is available to these institutions:
(i) any university or other educational institutions existing solely for educational purposes and not for purposes of profit, or
(ii) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit .

Funds other than foreign contribution cannot be deposited in the exclusive single designated FC a/c of a Bank, as mentioned in the order for registration or prior permission granted by MHA, to be separately maintained by an Association. However, one or more accounts in one or more Banks may be opened for utilizing the foreign contribution after it has been received in the designated FC a/c provided that no funds other than foreign contribution shall be received or deposited in such account(s) opened for utilization of the FC and in all such cases, intimation on plain paper shall have to be furnished to MHA within 15 days of the opening of the account(s).

It may be noted that there is no bar in opening of multiple Bank account(s) with Banks other than the one where the designated FC a/c is maintained. However, it is advisable to open multiple Bank account(s) in the branches of the same bank, if available at the location where the multiple account(s) are to be opened. Further, interest earned on such multiple Bank accounts should also be treated as FC as subsequent receipt and accounted for in the annual return in Form FC-6.

While submitting the application for registration or prior permission, the Association cannot change the designated FC a/c without obtaining permission of Ministry of Home Affairs (MHA).
For change of the Bank and/ or branch of the Bank, an application in prescribed form available on the website http://mha.nic.in/fcra/forms/chng_Bank_acnt.pdf mentioning the details of the old Bank account and the proposed new Bank account along with justification for change of designated Bank and its branch, as the case may be, name/ address of the Association, copy of registration under FCRA, copy of fresh resolution of the Governing Body/ Executive Committee ( in English or Hindi) for the proposed change of designated bank account, certificate from the proposed Bank ( copy of Bank Pass Book is not acceptable) that the account is being opened exclusively for FCRA, may be submitted to MHA.

The status of pending applications for grant of registration or prior permission can be checked on-line. Visit MHA's web-site- http://mha.nic.in/fcraweb/fc_online.htm . The numbers provided by on the acknowledgement letter or other correspondence with MHA ( Foreigners Division, FCRA wing) must be entered in status enquiry icon to view status.

Section 7 of FCRA , 2010 states :-
" No person who-

(a) Is registered and granted a certificate or has obtained prior permission under this Act; and

(b) Receives any foreign contribution,

shall transfer such foreign contribution to any other person unless such other person is also registered and had been granted the certificate or obtained the prior permission under this Act:

Provided that such person may transfer, with the prior approval of the Central Government, a part of such foreign contribution to any other person who has not been granted a certificate or obtained permission under this Act in accordance with the rules made by the Central Government."

There is no bar on receiving such foreign contribution in installments. However, the aggregate amount should not exceed the specified amount for which prior permission has been granted. The Association shall have to submit the mandatory annual return in Form FC-6 for receipt and utilization of the foreign contribution during every financial year, till the amount of foreign contribution is fully utilized. Even if no transaction takes place during a year, a NIL return should be submitted.

The following are the six limbs of the definition of charitable purposes:

•          Relief to poor
•          Education
•          Medical relief
•          Preservation of environment (including watersheds, forests and wildlife)
•          Preservation of monuments or places or objects of artistic or historic interest and
•          The advancement of general public utility.

Provided that the advancement of any other object of general public utility shall not be treated as charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activities.

Provided further that first proviso shall not apply if the aggregate value of the receipt from the activities referred to therein is 25 lacs rupees or less in the previous year.