What are the mistakes to avoid during FCRA registration?

Introduction

The Foreign Contribution (Regulation) Act, 2010, holds significant importance in India as it governs the acceptance and utilization of foreign contributions by organizations. The FCRA registration process is a crucial step for organizations seeking to receive foreign contributions.  It is a complex and time-consuming process that requires careful attention to detail and compliance with regulations. In this article, we will discuss in detail the common mistakes to avoid during FCRA registration and the types of FCRA Registration.

What is FCRA Registration?

The full form of the FCRA is the Foreign Contribution Regulation Act. When any charitable institution, such as Trust, Society, or Section 8 Company, wants funds or donations from foreign entities or resources, they shall register themselves under the Foreign Contribution Regulation Act, 2010.

Types of FCRA Registration

There are two types of FCRA Registration in India.

1. FCRA Registration (FCRA Registration in the normal course):

• For getting FCRA Registration, the applicant must be registered and operating as an NGO for a minimum period of 5 years.

• The Non-Profit Organization must have spent a minimum of 10 Lakh rupees in the last 3 years for the furtherance of its main objectives (excludes administrative expenses).

• The applicant is also required to submit the financial statements for the last 3 years. Further, these financial statements must be audited by a qualified practicing Chartered Accountant.

• If a recently registered organization wishes to receive foreign contributions or donations, it can apply for approval from the Ministry of Home Affairs through the Prior Permission (PP) method. This application is made for a specific purpose, specific activity, and from a specific source.

• For FCRA Registration, Form FC-3A needs to be filed.

2. Prior Permissions Registration

• On the other hand, if a newly registered Non-Profit Organization is willing to receive any sort of foreign contribution, then it can apply for Prior Permission Registration.

• The Prior Permission Registration must be done for the funds that are to be used for a specific purpose only.

• Form FC-3B needs to be filed to get prior permission for FCRA Registration.

Common Mistakes to Avoid During FCRA Registration

There are a lot of mistakes that should be avoided during the FCRA registration process. Some of the major mistakes are listed below:

Mistake #1- Not understanding the eligibility criteria

Before applying for FCRA, it is important to understand the eligibility criteria set forth by the FCRA. Organizations that are not eligible for registration should not apply, as it will only lead to rejection and delay in the process. The eligibility criteria include aspects such as the nature of the organization, its objectives, and the source of its funding. It is essential to review these criteria before starting the process of registration.

Mistake #2- Incorrect documents

One of the most common mistakes made during the FCRA registration process is submitting incorrect or incomplete documents. It is important to ensure that all documents are in order and that they meet the required standards. The documents required for FCRA registration include the organization’s registration certificate, audited financial statements, and a list of office-bearers, among others. It is advisable to seek professional help to ensure that all necessary documents are in order and that they meet the required standards.

Mistake #3- Improper utilization of foreign contributions

Organizations that receive foreign contributions must use them only for the purpose for which they were received. Any deviation from this can lead to severe penalties, including the cancellation of the FCRA license. It is important to ensure that proper records of foreign transactions are maintained. The utilization of foreign contributions is transparent and in compliance with the FCRA regulations.

Mistake #4- Not filing annual returns

FCRA-registered organizations are required to file annual returns providing details of foreign contributions received and their utilization. Failure to file annual returns can result in the suspension or cancellation of FCRA registration. Organizations must ensure that annual returns are filed on time and that they provide accurate information.

Mistake #5- Not keeping records

Organizations should maintain proper records of all foreign contributions received and their utilization. Failure to keep records can lead to penalties and the cancellation of FCRA registration. Proper records should be maintained and made available for inspection by the government authorities.

Mistake #6- Delay in renewing registration

FCRA registration is valid for a period of five years and must be renewed before its expiration. A delay in renewing FCRA can lead to penalties and the cancellation of registration. Organizations must ensure that they renew their FCRA on time and avoid any delays.

Mistake #7- Not complying with regulations

FCRA-registered organizations must comply with all regulations set forth by the FCRA. Failure to comply with regulations can lead to penalties, suspension, or cancellation of FCRA registration. It is essential to ensure that the organization complies with all regulations and seeks professional help if required.

Conclusion

In conclusion, FCRA registration is an important process for organizations seeking to obtain foreign contributions in India. It is essential to avoid these common mistakes to ensure a smooth and hassle-free registration process. By following the guidelines and regulations outlined in the Foreign Contribution (Regulation) Act, 2010, organizations can avoid delays, rejections, and legal consequences. It is always advisable to seek professional help and guidance to ensure compliance with all FCRA regulations and avoid any errors or mistakes.