The Foreign Contribution (Regulation) Act, 2010

Summary of the Foreign Contribution (Regulation) Act, 2010
Key Provisions
1. Definitions
• Foreign Contribution: Donations, currency, securities, or hospitality from foreign sources.
• Foreign Hospitality: Non-casual offers of travel, boarding, etc., from foreign sources.
• Foreign Source: Includes foreign governments, international agencies, foreign companies, etc.
2. Regulation of Foreign Contribution & Hospitality
• Prohibitions and Restrictions:
• Organisations of Political Nature: Designation process outlined, emphasizing transparency and due process.
• Restrictions on Foreign Hospitality: Prohibits acceptance without prior Central Government permission, with exceptions for emergency medical aid.
• Prohibition on Transfer of Foreign Contributions: Strict ban on transferring received foreign contributions to other persons.
• Limitations on Administrative Expenses : Caps administrative expenses to 20% of foreign contributions, with possibilities for approval of excess.
3. Registration, Prior Permission, and Reporting
• Registration Requirement: Mandatory for consistent foreign contribution recipients, with a streamlined 5-year renewal process.
• Prior Permission: Required for non-registered entities, with a clarified application process for specific purposes or sources.
• FCRA Account and Reporting: Mandatory account with specified banking channels; tightened reporting timelines, especially for election candidates (within 180 days before nomination).
4. Power of Central Government
• Specification of Organisations of Political Nature: Detailed process for designation, including notice, representation, and decision timelines (up to 180 days).
• Prohibition and Regulation Powers: Authority to prohibit foreign contributions or hospitality based on national interest, public interest, electoral fairness, foreign relations, or social harmony.
• Exemption Power: Central Government can exempt entities in the public interest.
5. Compliance and Penalties
• Enhanced Audit Powers: With confidentiality for information obtained.
• Penalties for Non-Compliance: Includes suspension, cancellation of registration, and legal action for violations.

Legislative History:

The Foreign Contribution (Regulation) Act, 2010

● Act Title - The Foreign Contribution (Regulation) Act, 2010

● Act Number / Year - 42 of 2010

● Act ID (India Code) - 201042

● Assent Date - September 26, 2010

● Enforcement Date - May 1, 2011

● Nodal Ministry - Ministry of Home Affairs

Precedent & Historical Rationale

● Deficiencies and Lacunae in the Foreign Contribution (Regulation) Act, 1976 - Foreign donations in India were previously governed by the Foreign Contribution (Regulation) Act, 1976 (Act 49 of 1976), enacted during the Emergency primarily to curb covert foreign political influence during elections. Over the decades, massive increases in foreign inflows to non-governmental organizations (NGOs) and associations exposed major loopholes in the 1976 law, including permanent/perpetual registrations with no statutory renewal mechanism, lack of statutory caps on administrative expenses, and inadequate tracking of diverted funds affecting national security.

● Modernized Statutory Framework for Transparency and National Security - Formulated to consolidate the law to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit the acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest. The Act introduced a 5-year validity and mandatory renewal regime for FCRA registrations, prohibited political parties, candidates, judges, journalists, and public servants from receiving foreign funds, capped administrative expenses funded by foreign donations, mandated maintenance of separate accounts, and expanded inspection and audit powers of the Union Government.

Parliamentary Trajectory & Enactment

● Formulation & Standing Committee Review - Drafted by the Ministry of Home Affairs to replace the outdated 1976 statute; introduced as The Foreign Contribution (Regulation) Bill, 2006 in the Rajya Sabha on December 18, 2006, and examined by the Parliamentary Standing Committee on Home Affairs, which presented its report in October 2008.

● Parliamentary Passage - Incorporating the Standing Committee's recommendations, the Bill was debated and passed by the Rajya Sabha on August 19, 2010, and considered and passed by the Lok Sabha on August 31, 2010, during the Monsoon Session.

● President's Assent - Received the assent of the President of India (Pratibha Devisingh Patil) on September 26, 2010, and was published in the Gazette of India on September 27, 2010.

● Enforcement - Enforced on May 1, 2011.

Sources - Parliamentary Debates (Lok Sabha & Rajya Sabha), Reports of the Department-Related Parliamentary Standing Committee on Home Affairs, The Gazette of India, India Code, and Ministry of Home Affairs.