Update: Amendments to FCRA Rules Address Long-standing Operational Challenges Faced by NGOs

The Foreign Contribution (Regulation) Act, 2010 is the statute governing the acceptance and utilization of foreign contributions by individuals, associations, and NGOs in India. Over the years, the rules under FCRA have been amended to ensure transparency and accountability in foreign funding. The latest amendment, FCRA Amendment Rules 2024 effective 1 January 2025, introduces several changes to the handling of unspent administrative or management related expenses in a particular financial year, and reporting of tax refund.

Key Takeaways from FCRA Amendment Rules 2024:

• Carry Forward of Unspent Administrative Expenses

i. Associations receiving foreign contributions now have the option to carry forward any unspent portion of their allowable administrative expenses from one financial year to the next.
ii. The reason for carrying forward such expenses must be specified in Form FC-4.

• Changes to Form FC-4

i. A new category is added to include reporting of transfer of foreign contribution received as part of a TDS refund from a non-FCRA bank account to FCRA bank account. The TDS deducted can be treated as utilization of FCRA funds, and the refund received in FCRA bank account shall be treated as other income and shall not be considered an FCRA violation.
ii. A detailed format is introduced to report the carry-forward of unspent administrative expenses, including the brought-forward amount, current year’s expenses, and reasons for carry forward.
iii. A new section is introduced for providing details of the Chartered Accountant issuing the required certification under Rule 17(5) of FCRA Rules 2011, including their name, address, registration number, and details of any violations noted.
iv. The Chartered Accountant’s certification now requires explicit confirmation on whether the association has complied with or violated the Foreign Contribution (Regulation) Act, 2010, with details of violations if any.

The FCRA Amendment Rules 2024 aim to improve financial transparency, enhance accountability, and prevent misuse of foreign contributions in the following manner:
i. Enhanced monitoring and accountability.
ii. Reduction in financial pressure and enable strategic planning.
iii. Better transparency through real-time reporting.
iv. Certification by a Chartered Accountant brings further credibility and reducing misrepresentation to the required filings.

However, while the amendment seeks to addresses operational issues faced by the recipients of foreign contributions, it now requires them to adopt stricter compliance measures to ensure transparency with regards to unspent administrative expenses, tax refunds and TDS accounting.