Difficulties in FCRA approval

Dear Dialogue Members,
We are the Miracle Foundation India that supports children’s homes in India.  We have previously filed and received two prior permissions.  However, it is over a year and half  since our 3rd prior permission has not been approved.  We are registered as a Section 25 NGO. We have also recently passed our 3 year mark and as such are eligible to receive FCRA. 
We have received a letter stating that our donor-done names are same (similar words as US organization).  Secondly we have been told (not in writing) that in order to receive approval it would be necessary to change the ownership percentage to India majority owned.  
Our question is whether any other NGO has been successful in receiving approval by changing to a majority ownership by the India NGO.  
We also are concerned because we do not want to change the name of the organization as it will dilute our brand.  
What would be the recommendation of other members on the path we should take in order  to move our FCRA application forward? We are concerned if we do not have action on this that our support for the destitute children will be at risk.  
Thank you & regards
Nivedita DasGupta
India Country Head
Miracle Foundation India
A-149 Shivalik
New Delhi 110017
Posted in FCRA, TAX, LEGAL | 8 Comments

In View of CSR would foreign controlled Indian companies still be treated as foreign source?

Dear Sir,

Many companies in India have foreign shareholding more than 50% due to liberalization of FDI policy. These would be “foreign source” as per section 2(1)(vi) of FCRA. Receipt of donation/contribution by NGO (not registered under FCRA) directly or indirectly by these Indian subsidiaries of Foreign Companies are presently violation of FCRA. Sec. 52 of FCRA states that applicability of FCRA is in addition to any other law in force for the time being.

Clause (iv) of circular No.21/2014 dated 18-6-2014 issued by MCA indicates that Expenditure incurred by Foreign Holding Company for CSR activities in India will qualify as CSR spend of the Indian subsidiary if, the CSR expenses are routed through Indian Subsidiaries and if the Indian Subsidiary is required to do so as per Section 135 of the Companies Act.

In this changed scenario, can one interpret that NGO (without FCRA registration) can receive donation/contributions from Indian Subsidiary of a Foreign Company, without any prior permission from Ministry of Home Affairs?

Looking forward to your considered opinion in this regard.

Thanks & regards,

Rajakumar K

Posted in FCRA, TAX, LEGAL | 9 Comments

Change in Registered Office

Dear SRRF partners, kindly give answer to the following query.

At the time of registration of a Trust or a Society, all will not have their own buildings for the offices. They will provide the address where the Founder presently live. Suppose that the Founder has shifted his residence to another accommodation on rental basis. Now they have to apply for 12A and 80G etc. Which address is to be given in the applications? The address of registration or the address in which the Trust office is presently situated ie the place in which the Founder now resides.

My case is that our Trust was registered during 2008 and the Trust address also was given the address where I used to live. I had applied for 12A during Jan 2014 and given the address of registration. I was to shift to another address and the Inspector from Income Tax department will be visiting for verification during this month. Can we show the present address or old address which was the address at the time of registration? Unfortunately, the address of registration was a government accommodation and it was occupied by another family.

What the Income Tax laws tell about the addresses? Please clarify.

Dr. D. V. Jayakumar
Rural and Tribal Development Organisation
Itarsi-461111, MP

Posted in FCRA, TAX, LEGAL | 1 Comment

Treatment of contribution received for workshop.

Dear Sir,

We are organizing a workshop on solid tumor (a type of cancer) in which we are expecting the participants from all over India. We will charge registration fee only. We will do all expenses like providing accommodation, to and fro train fare, local conveyance, material etc. There are chances of finding the sponsors also.

My question is being in NGO can we take this participation fee ? what kind of receipt we should issue, 80 G receipt ? will it count as misc income ? if this workshop is sponsored and getting funds from sponsors than will it be treated fund raising event ? will there be any tax problem ? may have impact on our 12a exemption status ? pls suggest how
should we deal with it.


Posted in FCRA, TAX, LEGAL | 2 Comments

Clarifications provided by Government regarding CSR

Recently Ministry of Corporate Affairs has issued a circular further clarifying the scope of CSR activities.

  1. It states that Schedule VII is to be interpreted liberally so as to capture the essence of services included in Schedule VII. The circular includes an annexure, where various queries raised have been answered in quite a liberal manner. For example, it has suggested that
    • ‘awareness for road safety’ is covered by education.
    • ‘training to drivers’ is covered by ‘vocational training’.
    • ‘capacity building of farmers/agricultural labourers can be covered by ‘vocational skill’.
    • ‘consumer education and awareness’ may be covered under ‘education’
    • ‘donations to IIM(A) for ‘conservation of buildings and renovation of classrooms’ can be covered under ‘education’
    • Similarly disaster relies though not specifically covered under CSR, it has stated that ‘medical aid during such calamity’ can be covered under ‘promoting Health care’, food supply to be covered under ‘eradicating hunger, poverty and malnutrition’
    • Similarly research studies can be covered under relevant areas of different clauses.

Only place it has given a negative opinion is expenditure on government servants, elected representatives, etc. whether of capacity building or of similar nature.

From the above it is clear that the government has taken quite a liberal attitude in application of schedule VII, and the approach seems to be to fit a CSR activity under one or other clause.

  1. CSR activities should be undertaken in programme / project mode (interpretation seems to be that a planned activity which is a sustainable activity). It has particularly banned any activity which is one off, e.g. marathon event, award, or even one of charitable donation, advertisements, sponsorship of TV shows.
  2. Any expenditure incurred for compliance of legal requirements would not qualify for CSR expenditure, this includes compliance with Land Acquisition Act, Labour Laws, etc.
  3. Salaries to CSR staff or even proportionate salary of company staff volunteering would be considered as CSR expenditure.
  4. Contribution to corpus of entities (Societies/Trusts / S. 8 companies (the new clause for S. 25 companies under the new Companies Act) will be considered eligible for CSR only if the corpus is meant for an entity which would exclusively undertake CSR activity or the corpus is meant exclusively for projects to be undertaken identified under Sch. VII.

Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008
e-mail: socio-research@sma.net.in;
website: http://www.srr-foundation.org

Posted in CSR | Comments Off on Clarifications provided by Government regarding CSR

Clarification about filing NGO Tax Return

Dear sir,

Our NGO registered under societies Act is working since 2005 , We does not take any financial contribution. NGO activities mostly related to awareness building and advocating efficient water use practices & educating primary class students and village farmers about economic use of water. we also give our suggestions to Govt & local bodies on the issues related to water.

our yearly income from personal contribution by members & supporters remains under Rs.50000/-& all expenses are vetted and approved in general body meeting.

Presently we are filling our work report with annual balance sheet to Collector & Registrar of Societies

Do we require to file a tax return ? and to apply for PAN & to get audit our balance sheet through a CA.

please advice.


Resource Person -Waterpeople
Water Resource Consultancy firm
45-A-Subash Nagar
Ajmer Road

Posted in FCRA, TAX, LEGAL | 5 Comments


Budget is generally a disappointment for the NGO community, with only a very few benefits.

CSR expenditure of companies not to be tax deductible. Thus a big disappointment for companies, who now may resort to camouflage it under other sections. Or it may benefit NGOs who have S.35AC registration.

Other provisions for NGOs (generally referred to as Charitable Trusts)

Clarification provided for ‘substantially financed’

Certain educational & medical institutions registered under S. 10(23) (under sub-clauses iiiab & iiiad) are exempt from tax if ‘substantially financed by the Govt.’ Currently substantial has not been defined in the Act and courts interpret this based on other provisions in the Act. Govt will now specify exact % of total receipts (including donations, etc., if any), which will entitle the concerned institution to claim exemption from its entire income.

Claim both for Depreciation as well as cost of asset not to be allowed

A Trust which has included acquisition cost of an asset in the application amount, canot again claim depreciation.

Claims under multiple sections not allowed

If a charitable Trust has been registered / approved under. 12AA / S. 10(23), it cannot claim benefit under any other clause of S. 10, except for agriculture income.

Additional powers given to Commissioner for cancellation of S. 12AA registration

Commissioner given additional power to cancel S.12AA registration under following circumstances:

  1. If  income/property of Trust, applied for the benefits of specified persons, like trustee
  2. If funds are invested in prohibited modes.
  3. It is found that charitable trust is generally not applying the income of Trust for public in general.

Relief in case of delayed S.12AA registration

In case of delayed registration under S. 12, any pending assessment on the date of registration would be considered for providing benefit under S. 12A, but not the assessments which are already complete.

Anonymous Donations

Tax calculation method on anonymous donations modified to streamline the same.

Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008
e-mail: socio-research@sma.net.in;
website: http://www.srr-foundation.org

Posted in General | 4 Comments

Is FIRC necessary, if funding agency based in India?

Dear Sir,

If a Funding Agency based in India gives Donation to us in our FCRA Account, since the source of Funding is Foreign based. The transfer of money will be from their FC Account to our FC Account through RTGS. Do we still need the FIRC copy from the Bank? Or, getting a certification from our Funding Agency is sufficient?

Looking forward for the response.

Pragya Sekar

Posted in FCRA, TAX, LEGAL | 6 Comments

Democratic India must show maturity in dealing with Dissent

For last week or so, media, both print as well as electronic, has been abuzz with how Indian NGOs are trying to sabotage the Indian economy by decelerating economic pace, as if they are the neo Jaichands in the new political order. Most of this coverage is based on a secret report of Intelligence Bureau (IB). (The report seems to be secret only from the NGO community and freely provided access to media.) Thus it is clear that the intention of this publicity blizz is not to seek a debate on the issues identified in the report but to build a negative environment against the NGOs. The report goes on to even predict how in coming years these NGOs will further decelerate the economy by targeting IT industry through e-waste, mining, among others. Thus painting these NGOs as anti-nationals working against the interests of the country (the campaign just fell short of calling them spies.) These NGOs have not been accused of breaking any law.

It may be worth summarizing how the legislation which regulates foreign donations, namely Foreign Contribution Regulation Act 2010 (FCRA for short) operates. No NGO can receive foreign funds without prior permission / registration from the central government. Getting such permission or registration from the government is no cakewalk. One needs to wait endlessly, often without any specific information why permission or registration is being delayed. Although the legislation requires that normally permission be granted within 90 days, but if one is lucky, it could come within 6 months to a year, but generally speaking there are no norms and one has to wait endlessly without any way of knowing what could be the reason for delay. More often than not permissions are not granted even after 2 years or more of applying. It may be worth mentioning that earlier version of FCRA Act made it obligatory on the Government to issue permission within 120 days, after which it would be deemed that the permission has been granted. Courts also upheld this provision (Sarvjivan Unnati Bodhini vs Secretary to GoI 2011). However this measure of accountability was removed in 2011 by the Government, leaving NGOs totally in dark. It may be mentioned that permission or registration are not granted just by a simple case of application, NGOs are subjected to a thorough field inspection by an IB officer, who validates all supporting records/information submitted by NGO, antecedents of the promoters and the NGO. In addition to above, these days the information is also sought from the concerned ministries about the proposal, thus further delaying the permission.

It may be mentioned, such delays often cause foreign donors to move to other NGOs who already have FCRA registration or even to other countries, thus country loosing foreign funds meant for social causes. It is well-known that foreign donors are finding India as one of the least attractive country for giving grants, because of the red-tapism involved. In last decade or so, innumerable donor agencies have closed shops in India or even moved away from Indian development sector. This is a direct loss to Indian social sector. Unknown to Ministry of Home mandarins, there is innumerable documented evidence on how Indian social sector has moved away from charity (giving direct benefits) to rights based support. These developments, while one does not give carte blanche credit to foreign development agencies, however their contribution in this aspect cannot be wished away. Many of such developments have been even accepted and adopted by the Government of India. That is why today we have Right to Information, Right to Education or Right to Food.

It is not that once permission is granted, NGOs are free to undertake work without any restrictions. They are regularly monitored, are required to file online, as well as, signed copy of return alongwith a large number of documents, including audited accounts, bank statements, etc.

S. 3 of the FCRA Act prohibits certain persons from receiving foreign funds, logic being that country’s decision-makers and policy-makers, such as legislature, political parties, judges, government servants, should not receive foreign funds, as this may compromise their decision-making. Not only this, even TV and newspapers (who are otherwise allowed to receive upto 26% of FDI under the automatic route and proposed to be enhanced to 49% by Arvind Mayaram Committee), under FCRA are not allowed to receive any foreign contribution. How the two laws reconcile themselves is anybody’s guess. Ministry of Home Affairs has never tried to enforce this prohibition against the news media, perhaps too afraid of a backlash. Even journalists, cartoonists, etc. are prohibited from receipt of any foreign funds, MoH fearing that media and journalists can influence the policies in the country through their TV channels and publications, although no evidence of this has ever been made available.

Recent IB report seems to have taken this fear-mongering to a new level, the Government now even seems to fear debates and protests. FCRA came into being wayback in 70s, in the backdrop of coup in Chile in 1970 allegedly through CIA’s shenanigans, raising ripples through a number of countries, including India. At the time a number of MPs raised the concern and even the then Deputy Home Minister made reference to it while discussing FCRA in the parliament. However 2014 is not late 60s or early 70s, when India was still a fledgling democracy. The strength of our democracy and robustness of our media is envy of the world and it certainly can withstand any outside pressures. Maturity of a democracy can be gauged only when the country allows open discussion on all issues, even opinions with which it may be uncomfortable with. India has had history of diverse opinions, that is why it is credited with first major elected communist government anywhere in the world, when US was using McCarthyism against left-wing sentiments.

To say that an argument is bad simply because it is supported by some foreign organisations is no argument. From what seems to appear in the press, IB authorities feel that the right based approach is the culprit for slow down in the economy and they feel it is the NGOs who are the culprits to start it all. For example, the argument that NGOs who filed petition in the supreme court for Right to Food were acting against national interest, simply because they have received foreign funds. Dare I say, such an argument is heresy, considering judges and government of the day ultimately also agreed with the argument and the enacted legislation will help millions of poor who cannot afford food.

Similarly Right to Information was enacted only after a long struggle and has been acclaimed as one of the strongest law that the country has ushered to contain the endemic corruption. Similarly banning NGOs or stopping their resources for raising agitations against mining or even nuclear energy are simply wrong. After all, it is the NGOs who started campaign against plastics in the rivers, much before it was adopted by the Government. Sunderlal Bhauguna, a national icon, started campaign against the big dams, long before it became fashionable to talk against the same.

Government often argues that there is no problem if Indian funds are used for such agitations, fully knowing that no one will fund the agitations against the government. Major donors in India are either the Government or the corporates. Which government or corporate would fund agitations which are against them only? Hence if Indian NGOs are able to raise resources from outside India, why stop them, if the government believes that these organisations are wrong, fight such agitations using democratic means and not the reprisals and witch-hunt that MoH seems to have adopted.

One also needs to question the relevance of FCRA Act, which currently has become an instrument to stifle the civil society voices which are different from those of establishment. India during 2012-13 receive around USD 125 billion including remittances from NRIs, compared to that under FCRA total funds received by around 17000 organisations comes to less than USD 2 billion, which works out to around an average contribution of around Rs 60 lakh only. Can India really be destablized using such kind of funds or is FCRA just an instrument to coerce the dissenting voices into submission. The Government is plainly wrong in running such a coercive campaign against foreign funded NGOs and NGOs must fight this.

As always every negative has a positive side, perhaps this campaign has brought a larger message for the NGO community, that there are no easy solutions to the communities financial vulnerabilities. The government headed by a master strategist knows that it is easy to win this battle against NGOs simply because of negative connotations of foreign funding perceptions amongst the public at large. Perhaps the NGO community has to start introspecting and innovate in finding resources locally, more so from the communities that they serve. CSR (Corporate Social responsibility) funds would never be an answer, since no corporate would like to associate with any campaign which is critical of the government of the day. It may be a long and hard struggle, but could provide the lasting solution to the NGOs financial struggles. After all as Mathew Cherian documents in his very lucid and informative book ‘A Million Missions’ that over 1.2 million voluntary organisations spread all over the country are a force to reckon with.

Subhash Mittal is a Chartered Accountant and Secretary, Socio Research Reform Foundation, New Delhi. These are his personal views only.

Posted in FCRA, TAX, LEGAL | 3 Comments

Less activism, more research

www.thehindu.com · Since all NGOs are required to be registered within the same set of laws, legally and in public perception, think tanks and the more activist NGOs are often perceived to be the same

The geneis of present so-called NGO is Voluntary Organisation. These were organisations with people driven by extreme Marxists to Gandhian philosophies besides religious motivations that includes conversion. Till seventies, they were driven by patriotism also. They held certain ideal values, at least those who initiated and are leading them, lived with grass root issues and found humanitarian, development and change oriented responses. Think tanks born out of these experiences upheld similar values. But, these present think tank NGOs- most of them have lost their foot on the ground and function with corporate style, luxury and do not anymore represent the ground reality in many cases. All said and done, with all appreciation of their good work, the reality is the goings in NGOs are not comfortable and they have become corrupt. Instead of making hue and cry, there is a need for reflection among these NGOs And some of them out of guilt persist to call themselves as Voluntary.


Chatti Mahatma Gandhi Aashramam,
Chatti Post, Chinthur Mandal, Khammam District,
Andhra Pradesh, Pin Code: 507129.

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