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FCRA Squabble: Experts Bat for Rationalization of Admin Expenses

The recently amended Foreign Contribution (Regulation) Act (FCRA) has capped the 'Admin' expenses at 20 per cent if NGO receives foreign funding. But CSR funds to NGO continues the cap on admin expense at 5 per cent. Experts want rationalization.

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Much has already been written about the hurriedly passed Bills in the recently concluded session of Parliament. Now that the Foreign Contribution (Regulation) Amendment Bill has become the Foreign Contribution (Regulation) Act (FCRA), 2020 - experts have pointed out to certain anomaly between 'foreign funding' of NGO and CSR funding of same NGOs.  

For example: FCRA has reduced the administrative expenditure limit to maximum 20 per cent from the earlier limit of 50 per cent for an NGO receiving foreign contribution. However, the same NGO, when receiving CSR funds from Indian companies, will have to manage administrative expenses at 5 per cent. This rule remains unchanged in the recently amended CSR provisions. "If 20 per cent expenses on administrative work is considered for one set of funds, the same should also be considered for domestic funds and the disparity should be removed or such expenses should be rationalized at 10 per cent,” says Makarand Joshi, partner with MMJC and Associates - a corporate compliance firm.  

Amitabh Behar, CEO, Oxfam India, termed the amended law as a 'devastating blow'. "Red carpet welcome for foreign investments for businesses but stifling and squeezing the non-profit sector by creating new hurdles for foreign aid which could help lift people out of poverty, ill health and illiteracy," he had Tweeted the day Lok Sabha had passed the amendments to FCRA. Two days later, it was passed by the Rajya Sabha.  

What has irked several in the non-governmental organization is the introduction of more authority to the officials and perhaps more power too.  

For example: The new avatar of FCRA makes Aadhaar cards a mandatory identification document for all office-bearers, directors and other key functionaries of NGOs or associations eligible to receive foreign donations. It also the limits the usage of foreign contributions for administrative purposes which is now reduced to 20 per cent from 50 per cent of the overseas funds. This move has also angered a number of NGOs. However, Neeraj Bhagat, a Delhi-based reputed tax consultant and the head of his own Chartered Accountant firm has a different take. Bhagat said: "It will minimize the illicit and fraudulent usage of overseas funds. Moreover, inclusion of public servants in prohibited list under section 3 will significantly address the ills and reduce corruption in the economy,” said Bhagat.

The Voluntary Action Network India (VANI), an association of development organisations, had termed the amendments a “death blow” to the development relief, scientific research and community support work of the NGO community as, they said, it prohibits collaboration with other Indian organisations. They had issued a statement on September 21 (a day after it was introduced in the Lok Sabha). VANI’s statement said the FCRA amendments assume that all NGOs receiving foreign grants are guilty, unless proven otherwise. It said the amendments would make it impossible for NGOs to function and lead to possible harassment of these groups. 

Nityanand Rai, the Minister of state (MoS), home affairs, who had moved the bill for passage in the Upper House, had said during the discussion that the FCRA was a law for national and internal security that was aimed to ensure that foreign funds do not dominate the political and social discourse in India.


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