Government tightens FCRA rules, revises penalties for violations by NGOs

The Centre has introduced sweeping changes to the Foreign Contribution (Regulation) Act (FCRA), 2010, revising penalties for violations and tightening rules governing how non-governmental organisations (NGOs) receive and utilise foreign funds. The amendments, notified by the Ministry of Home Affairs (MHA) on Monday, are aimed at increasing transparency, accountability and oversight of foreign contributions.

Revised penalty framework

Under the revised penalty framework, NGOs that exceed the permissible limit on administrative expenses will face a penalty of ₹1 lakh or 5% of the excess expenditure, whichever is higher. The FCRA currently caps administrative expenses at 20% of foreign contributions received.

The government has also imposed stricter penalties for speculative investments using foreign funds. Such violations will now attract a fine of ₹1 lakh or 30% of the amount invested, whichever is higher. In addition, authorities will recover 100% of the returns earned from those investments.

Similarly, organisations found using foreign contributions for purposes other than those for which the funds were received will have to pay a penalty of ₹1 lakh or 30% of the amount diverted, whichever is higher. The same punishment will apply in cases where foreign funds are utilised in states or Union Territories not covered under the organisation's registration or in violation of the Act.

Purpose and area of operations

In a separate notification, the government amended the FCRA Rules, 2011, requiring organisations seeking registration to specify the exact purposes for which they intend to receive foreign funds and the states or Union Territories where they plan to operate. Applicants will have to select their activities from a prescribed list covering religious, educational, cultural, economic and social sectors.

The amended rules allow several faith-based activities, including the construction and maintenance of religious places and religious education. However, activities involving proselytisation have been explicitly excluded from categories such as religious education, preservation of indigenous faith traditions and documentation of religious practices.

Restrictions on foreign nationals

The government has also tightened norms relating to foreign nationals. Associations having foreign citizens, other than persons of Indian origin, as key functionaries will ordinarily not be considered for registration or prior permission under the FCRA. However, exceptions may be granted through specific government orders.

The definition of "key functionary" has been broadened to include company directors, partners in firms, trustees, Karta of a Hindu Undivided Family and others exercising control over an organisation's management.

Social media details, donor disclosure

NGOs will now be required to provide details of their social media accounts while applying for registration or renewal. Organisations receiving funds through intermediary remittance channels or donor-advised funds must disclose the ultimate source of the money.

The amended rules also introduce a minimum spending requirement. To retain or renew registration, organisations must have spent at least ₹10 lakh of foreign contributions on their declared activities during the previous two financial years.

For entities receiving funds under prior permission, subsequent instalments will be released only after 75% of the earlier tranche has been utilised, subject to field verification by the government.

Additionally, annual returns must now include detailed activity reports along with financial statements, further strengthening scrutiny over the use of foreign contributions.

(With PTI inputs)