Recent issues with the FCRA act and impact on the NGOs

♤ On July 24, 2018, the Union Minister of State for Home Affairs in a reply to Lok Sabha said that, FCRA registration of nearly 19,000 NGOs have been cancelled from 2011 till now and they have been barred from receiving foreign funds. He also told the House that as on date, 2,547 NGOs have not adhered to the government orders to submit their pending annual returns -- income and expenditure, receipts of funds from abroad and balance sheets.

♤ Of all the total funds that are coming, 13% is for contentious issues like religious institutions and awareness campaign. Government is terming both as anti-national activity as religious institutions are fueling terrorist activities and awareness campaign are targeting developmental projects of Government

♤ Experts have signaled towards a paradox where India promotes FDI but throttles contribution to NGOs. In the past, similar bans were put by communist countries like Russia and Hungary.

♤ An IB report blamed NGOs for slump in India’s GDP. It is also accused that some Christian NGOs are engaged in proselytization. US based NGO Compassion International was put on ‘priority list’ by the government.

Recent Amendments in FCRA to exempt political parties

♤ Finance Bill 2016, inserted an amendment that shielded political parties from violating the norms of FCRA. The amendment was brought after a case was filed in Delhi High Court regarding donations made to BJP and INC by London based multinational Vedanta.

♤ In March 2018, the parliament through Finance Bill 2018 amended the repealed Foreign Contribution Regulation Act (FCRA), 1976 retrospectively. The aim is to exempt political parties from scrutiny of funds they have received from abroad since 1976.

♤ In June 2018, the government relaxed penalties on NGOs violating FCRA norms. From now on, instead of suspension or cancellation of licenses, hefty fines will be levied on NGOs. These fines will not be applicable retrospectively.

♤ It must be reiterated that the Representation of the People Act and the FCRA bar political parties from receiving foreign funds.

♤ Foreign firms can now fund NGOs in India as well as the political parties.

♤ Impact of the amendment: More NGOs will try to become political parties. As the political donations are tax free. Under Section 13A of the Income Tax Act, political parties are 100% tax exempt for income derived from any source, including business income.