Transfer of foreign funds to Private Trust/Private Limited Company

Hi All,

Can an NGO transfer foreign funds to private trust or Private
Limited Company as an Sub Award and if so, what is the process and
legal work to be looked into

Would TDS be applicable and at what rate?


Ruben Menon

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6 Responses to Transfer of foreign funds to Private Trust/Private Limited Company

  1. smittal says:

    Both Sriraman and Soma Sastry have covered the point well. I would like to supplement regarding a basic principle, which may be borne in mind while transferring FCRA funds to an organisation.

    FCRA funds can be transferred to a non-profit (trust, society, s. 25 entity) as grants/sub-grants if it is registered as FCRA entities. In case of non FCRA registered non-profits Soma Sastry has already covered the point quite comprehensively.

    Where funds are being transferred to a ‘for-profit’ entity the transfer can be only in the form of a contract, where the for-profit entity is acting as an agent of the transferor. In such case in all probability TDS will also be applicable. Important point is that responsibility of how the FCRA funds have been utilised is of the non-profit entity, and the non-profit entity will need to disclose these as spent on the particular activity in its annual return.

    Another Issue raised by Kaithang & Bhavesh regarding ‘reimbursement of expenses’ to a non-profit entity for a period relating to prior to its FCRA registration. Well strictly it should not be done, since funds cannot be transferred before registration. However if it has incurred expenses in anticipation of the grant, it could charge the expenses against this grant (provided transparency & accountability is maintained). However it must not include expenditure for earlier financial year, since it would need to disclose all such utilisations under its annual return to FCRA dept.

    warm rgds

    subhash mittal

  2. Colombowala Zulkef F. says:

    I agree with the view given by Soma Satry and Sriraman.

  3. Kaithang says:

    May I ask for further clarication: Supplmentary to transfer of fund to NGO, can FCRA registered organisation transfer FC funds to a private trust as reimbursement for project expenses carried out pending arrival of the foreign grant? Will this be different from outright transfer of FC grant?

  4. BHAVESH SONI says:

    Thank you for information
    One more clarification desire:

    If we made payment to organisation who is not registered under FCRA Act. and we made payment in reference to reimbursement of Exp. and if we take support from them and made payment for expenses incurred by the organisation on behalf of us.


  5. Soma Satry says:

    Dear Ruben,

    Greetings from Hyderabad!

    1. NGOs can transfer funds to private trust as a sub grant only if the trust is registered with FCRA.

    2. In case of organizations who do not have FCRA registration, there is a process to follow:

    a. FC-10 needs to be filled up with all the details as sought in the application

    b. The filled up forms with all the necessary supporting documents should be sent to MoHA

    c. The funds can be released to such organization only after the written approval is received from MoHA.

    d. The quantum of such funds transferred should not exceed 10% of the total FC funds received by the donor organization

    e. Refer to section 7 rule 24 of the FCRA 2010 and FCRR 2011

    3. In case TDS is deducted from the amount being transferred, as per my understanding, the character of the transfer would no longer be a grant.

    4. TDS @ 10% (in case of professional consultancies) and @ 2% (in case of other contracts) will be applicable

    5. Funds transferred in such a manner can also be deposited in the local account of the done since the relationship between the 2 parties is that of a vendor and vendee.

    This is my understanding of the things as they stand. I would request other to also give their views.

    Thanks and regards,

    B V Soma Sastry

  6. Sriraman says:

    Dear Ruben

    Payment from an NGO to a Private Limited Company from FCRA funds is possible, if the payment is NOT in the color of a “Grant”. In other words, if an NGO makes payment, in the normal course of the business, for a commercial transaction, such payment can be made to a Private Limited Company or to even a Private Trust. VAT, and/or Service Tax and/or TDS will be applicable on such payments.

    Applicable TDS will depend on the nature of the contract. For e.g., if the nature of contract is for a professional service TDS applicable will be @ 10%.

    Hope this clarifies.

    Best regards


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