FCRA

FCRA is the Foreign Contribution (Regulation) Act, 2010. It governs donations that Indian non-profits receive from abroad.

The rule the workbook stresses is simple: an NPO must register under FCRA to accept foreign donations. The Act is administered by the Ministry of Home Affairs (MHA), and the workbook describes its purpose as governing foreign donations to NGOs to ensure transparency.

FCRA money is one of the four big funding streams for Indian NPOs. That makes FCRA status a practical question for any NPO thinking about the Social Stock Exchange. It shows up in what the exchange asks to see, in what the NPO must disclose every year, and in the risks the NPO has to recognise.

Who regulates what (Chapter 1). The workbook lists the bodies overseeing Indian NPOs. Among them:

The funding picture (Chapters 2 and 10). About 70% of NPO funding comes from four sources: individual donations, contributions under FCRA, CSR grants, and government scheme grants. The benefits have gone mostly to large NPOs. As of 2018 only 1.8 lakh institutions had registered and claimed tax-exempt status, and of those only about 12% had obtained FCRA funding and about 11% CSR funding.

On the SSE.

• Credibility documents. Among the differentiators an NPO discloses when raising funds (Chapter 3, Table 3.2, and Chapter 9) are its registration, trust deed or MoA/AoA, IT PAN, 12A/12AA/12AB certificate, and FCRA certificate and returns.
• Governance disclosure. An NPO's disclosures include its registration certificate and other licences and certifications, listed as 12A, 80G, FCRA, GST, etc. (Chapter 9).
• Form 1B. Of the reporting forms for social enterprises, Form 1B covers general, governance and finance disclosures that refer to audited financial statements and filings with the Income Tax authorities, FCRA, the Charity Commissioner, the Registrar of Societies, the Registrar of Companies and others as applicable.

As a risk (Chapter 1). Under regulatory risk, the workbook warns that changes in FCRA regulations, CSR policy or Schedule VII of the Companies Act may affect the existing funding and interventions of social enterprises.

An illustrative NPO; names and figures are made up.

Aarogya Seva Society, Bhubaneswar, runs mobile health vans in tribal blocks. Last year it received:

The foreign grant is ₹52 lakh ÷ ₹1.2 crore ≈ 43% of its funding. The society could accept it only because it is registered under FCRA with the Ministry of Home Affairs.

When it prepares to raise ₹80 lakh through a ZCZP issue on an SSE:

1. Its credibility disclosures include its FCRA certificate and returns, alongside its 12A/12AA/12AB certificate and PAN.
2. Its governance disclosure lists FCRA among its licences and certifications, and its Form 1B refers to its FCRA filings.
3. Its risk section should name regulatory risk. If FCRA rules changed and the US grant stopped, 43% of its funding would be exposed. That is exactly the risk Chapter 1 describes.

It is the foreign grant that brought FCRA into the picture.

Chapter 1 (10% weightage) introduces FCRA twice: among the legislation governing the sector, and as the Ministry of Home Affairs' remit in the list of NPO regulators. It also names FCRA changes as a regulatory risk. Chapters 2 and 10 place FCRA contributions among the four main NPO funding sources and give the 12% statistic. Chapters 3 and 9 list the FCRA certificate and returns among NPO disclosures, and Form 1B refers to FCRA filings. Expect "which ministry regulates foreign contributions to NPOs?" and "which is not one of the four main NPO funding sources?"

• MHA, not the Income Tax Department. The Ministry of Home Affairs regulates foreign contributions. The Income Tax Department handles 12A and 80G.
• FCRA is the 2010 Act and a law of its own. It is not an Income Tax provision like 12A or 80G.
• Registration comes before the money. The workbook's rule is that an NPO must register under FCRA to accept foreign donations.
• 12% and 11% are different streams. About 12% of registered, tax-exempt institutions had FCRA funding; about 11% had CSR funding. Both figures are for 2018 and both are out of 1.8 lakh institutions.
• Four sources, about 70%. Individual donations, FCRA contributions, CSR grants and government scheme grants together account for about 70% of NPO funding. SSE money is not one of the four.
• It is a named regulatory risk. Chapter 1 groups FCRA changes with CSR policy and Schedule VII changes.