Praposed FCMC Bill 2005

Highlights of the proposed FCMC Bill

seeking to replace FCRA act1976

The Central Govt. has tabled a Bill namely Foreign Contribution (Management and Control) Bill, 2005 (here-in-after called as FCMC Bill) seeking to replace the existing FCRA act1976. Some of the major features of this FCMC Bill are highlighted here-in-below:

Area	Proposed under FCMC Bill	Present provisions under FCRA act1976	Comments
Preamble	Bill to consolidate the law relating to the acceptance and utlisation of foreign contributions or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilization of foreign contributions or foreign hospitality for anti- national activities and for matters connected therewith or incidental thereto.	An act to regulate and utlisation of foreign contribution or foreign hospitality by certain persons , or associations with a view to ensuring that parliamentary institutions, political associations, and academics and other voluntary organizations as well as individuals working in the important areas of national life may function in manner consistent with the values of sovereign democratic republic and for matters connected therewith or incidental thereto.	The Preamble of the Bill seeks to ensure that no person accepts any foreign contribution/foreign hospitality for anti-national activities. This is very strict and prohibitive preamble. Position in the FCRA act1976, the intention of the statute is to regulate the acceptance and utilisation of foreign contributions so that the values of Indian sovereign Democratic republic are maintained. Here, the intention is to ensure that foreign funds are used properly.
Exclusion of Govt. companies / societies from its purview	In the FCMC Bill, Sec.2(1) , Clause (a), while defining the word “Association”, it excludes from its scope the Govt. companies/ corporations established under Central/ state / provincial acts and also the societies owned or controlled by the Govt. This is a new development.	All associations including Govt. companies/ govt. controlled societies are presently falling covered by FCRA provisions.	However, it is failed to understand how a society (a democratic structure and that too without any ownership structure) can be owned by any one including by any Govt. Societies can be controlled by a person (by virtue of a specific provision in the by-laws of the society providing election of its executive committee/ council by a specific person). Therefore, there is a need for a review of this definition and a possible deletion of the phrase: societies owned……”
Changes in some of the present provisions	In the FCMC Bill, following changes are proposed in the definition of Foreign contribution: Any article whose value does not exceed Rs10K, shall not be treated as foreign contributions Sec.2(1)(f)).	This value presently is fixed at Rs.1K (Sec.2©.
Treatment of Interest earned on Foreign contributions	Explanation2 to Sec 2(1)(f) provides for Treatment of interest earned on foreign contributions as foreign contributions.	No specific explanation/ provision	Practically, interest income earned on FCRA deposits with banking institution(s) etc. are treated as FCRA grants. This is now specifically included as foreign contribution u/s 2(1)(f) in new FCMC Bill.
New definition of foreign source:	Now, FCMC Bill seeks to exclude from the definition of foreign source: Receipts of moneys /articles: -earned in lieu of rendering professional services, -towards fees for attending seminars / workshops in India, -towards tuition fees for studies in an educational institutions. -towards subscription for a journal or printed material published in India.	-in the FCRA act, Sec.7 provides for intimating the FCRA department in case any Indian student receives any education scholarships exceeding Rs.36K per annum).	Position in the FCRA act1976, foreign contributions include donation/ delivery/ transfer of any sum of money/ articles. This definition is large enough to cover with in its preview, receipt of all types of sums/articles from foreign sources including those for rendering commercial / professional services. This anomaly is now proposed to be removed in the proposed FCMC Bill.
Provision allowing operation of more than one bank account	Under FCMC Bill (Sec17), an organization is now allowed to operate more than one bank account for the limited purpose of utilizing the foreign contribution. However, the restriction on opening only one bank account for the purpose of receipt of foreign contribution stays.	An organization is required to receive FCRA contributions only through such one of the branches of a bank as the organization has specified to FCRA authorities (refer Sec.6/ rule 8).	Such relaxation in the proposed FCMC Bill on operating more than one bank account for the purpose of utilizing foreign contribution is to facilitate the working of large sized NGOs’ operating at multi-state level. These organizations face problems while making transfer of foreign contributions to its projects located across India.
Quantitative restriction on spending of foreign contribution	In FCMC Bill, it is proposed that every person receiving foreign contribution shall not spend any amount of such foreign contribution in excess of 30% on administrative expenses. The Central Govt. shall provide the basis for calculating the administrative expenses.	There is no such restriction or bar on spending of such foreign contribution.
New provisions	In FCMC Bill, following new provisions have been provided for: -Grounds for rejecting application for registration/prior permission (Sec12(3), -Provision of appellate machinery in case the applicant organisation chooses to file an appeal against such rejection of application for registration/ prior permission by the authority (Sec12(5), -Provision for cancellation/ suspension of registration (Sec13/14), -Periodical renewal of registration certificate after every two years (the first certificate of registration shall be valid for a period of five years) (Sec16), In case of organizations, covered by FCRA act, their registration certificates shall be valid for a period of two years from the commencement of new FCMC act Sec (11), -Manner of disposal of assets created out of the foreign contributions (Sec22),	Not provided for in FCRA act1976
Insertion of new definitions	Following terms have been defined - Company, - foreign company - persons.	These are presently not defined in the FCRA act.