Commercial's The Foreign Contribution (Regulation) Act, 2010

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The Foreign Contribution (Regulation) Act, 2010 (FCRA, 2010) has undergone recent amendments to enhance transparency and provide greater operational flexibility for organizations receiving foreign contributions. The Foreign Contribution (Regulation) Amendment Rules, 2024, effective from January 1, 2025, introduce several key changes:

1. Carry Forward of Unspent Administrative Expenses

• Previous Rule: Organizations were required to utilize the allowable administrative expenses (up to 20% of the total foreign contributions received) within the same financial year.

• Amended Rule: Organizations are now permitted to carry forward the unspent portion of allowable administrative expenses to the immediately succeeding financial year. The reasons for carrying forward these expenses must be specified in Form FC-4.

2. Transfer of Foreign Contribution Component from Tax Refunds

• Clarification: If an organization receives an income tax refund in a non-FCRA bank account, the portion of the refund attributable to foreign contributions must be transferred back to the FCRA-designated bank account. Such transfers will not be considered a violation of Section 17 of the FCRA Act, 2010.

3. Accounting Treatment of TDS and Tax Refunds

• At the Time of TDS Deduction: The Tax Deducted at Source (TDS) amount should be recorded as utilization of foreign contribution.

• At the Time of Refund: Upon receiving the TDS refund in the FCRA account, it should be treated as 'Other Income'.

4. Additional Declaration by Chartered Accountants

• New Requirement: Chartered Accountants issuing certificates under Form FC-4 must now provide detailed information, including their name, address, email address, and a declaration stating whether the organization has violated any provisions of the FCRA or its rules.