Key Changes in Rules subsequent to amendment in FCRA 2020

Subsequent to amendments in FCRA through FCRA 2020, now the Govt. has brought out several major changes in the Rules. These changes have brought some clarity on earlier changes made in the Act. In this post we cover some of the key changes.

1. ‎”FCRA Account”: 

Entire process of opening of Bank Account atSBI New Delhi Main Branch (NDMB) at Sansad Marg has become slightly now more clear.

1. SBI FCRA Account cannot be operated immediately after opening the Account with SBI. One will need to take approval from MHA through Form 6C and once approval is submitted to SBI, only after that SBI will allow this account to be operated.
2. Please note this account is only for receipt of Foreign Contribution from abroad. Funds generated in India, say on sale of assets, refund of deposits, etc cannot be deposited in this account.
3. There is no need to transfer funds from your existing FCRA Account to SBI Account. In fact, you would not be able to transfer those funds to SBI, NDMB branch, since it is only for receipt of funds from abroad.
4. NPOs facing problem in opening of bank account at SBI NDMB branch may contact them at Telephone Nos. 011-23374143/4213/4390/4392 and write to them on email: fcra.00691@sbi.co.in.
5. This account can be opened till 31^st March 2021. Therefore, till such time SBI Account becomes operational, one may continue to use its current FCRA designated account. Though receipt of funds should be avoided, as FCRA authorities have not made abundantly clear, if funds can be rec’d from outside India, once FCRA Account with SBI has been opened, but not yet operationalised, pending MHA approval.

• Another FCRA Account:
• FCRA Authorities have allowed to retain current FCRA designated account with a status of ‘Another FCRA Account’ for keeping & utilization of funds. But please note intimation of its status to be used as ‘Another FCRA Account’ or opening of a fresh account to be used as ‘Another FCRA Account’ needs to be intimated to FCRA authority in Form 6C. Same form can be used both for FCRA Account at SBI NDMB Branch as well as use of ‘Another FCRA Account’.
• ‘Another FCRA Account’ is considered very important. In SRRF’s opinion all NPOs should continue to use current FCRA designated Account or another ‘FCRA Account’ should be continued. This will be useful, as following advantages can be gained by the NPO, by retaining the same.
• As funds presently lying in FCRA designated accounts cannot be transferred to SBI NDMB branch, hence NPO can continue to use this account to keep its present funds in the same account.
• Home branch advantage by retaining the account, as it will not be easy to operate & manage SBI, NDMB branch in a remote manner.
• As mentioned above, funds generated within India, from sale of assets, etc. cannot be deposited in FCRA account at SBI NDMB.

• Transfer of funds to other NPOs totally prohibited

Subsequent to changes in S.7, of FCRA Act 2010, now Indian NPOs cannot transfer any funds to any other NPOs. Rules have made it further amply clear by removing Rule 24. Even Annual return (FC4) now specifically requires information of transfer of funds to other NPOs, before 29-9-2020.

• Administrative Exps. Limited to 20%

FCRA amendment Act 2020 brought down administrative expenses to 20%. There are two schools of thought, which stated that this 20% limit is applicable only from 29^th September, date when the amendment was put in place. Another school of thought stated that once the amendment was made, all Annual returns filed after this date would require that Administrative Exps. Be 20%, irrespective of the period for which the retuen is applicable. While there is no direct clarity in the Rules regarding this dilemma, however I f one has to go by some indication, the Annual return (FC4) now requires that the NPO declares that administrative expenses do not exceed 20%.

Therefore SRRF would suggest that all NPOs now restrict their administrative expenses to 20% or below of total Foreign Contribution rec’d. It may be noted both the Act as well as Rules require limit to be 20% of FC rec’d and not total expenditure.

• Renewal of FCRA
• All FCRA renewal applications are required to have FCRA Account at SBI, NDMB.
• Major change is, i.e., last time in 2016 FCRA if not renewed NPOs while could not receive fresh FCRA funds after expiry date but could utilize the funds lying in their NPO Account. However this time Rule 12(5) states that an NPO can neither receive nor utilize FCRA funds in the FCRA Account. This will cause innumerable problems to the Sector, since it is the Dept which generally is at fault in delaying the renewal.
• There seems to be drafting error in these rules, as Rule 12(2) states that renewal application needs to be made within 6 months of the expiry of FCRA registration, while Rule 12(6) states that application for renewal alongwith fees should be received before expiry, otherwise FCRA will expire. It is suggested that all NPOs must file their applications at least 6 month before expiry date, considering different languages used in different rules.
• Renewal Fee has been increased to Rs 5000/-.

• Annual return (FC4)
• It seems Darpan Id & Adhar for members has been made mandatory.
• Annual Return while is almost same in terms of information required, however now requires 15 different declarations covering almost all compliance requirements covered for NPOs.
• Some of the disclosure requirements, which caused difficulties in tallying total utilization, amongst different disclosures in previous version of FC4, like assets, etc. has been made more logical.

Another blog will be posted to cover remaining changes, in a few days.

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