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Economic, Commercial and Intellectual Property Laws · Law relating to Foreign Contribution Regulation

FCRA 2010: Accounts, Audit, Returns and Disclosure

Updated 11 October 2026 · Fact-checked

Under the FCRA, 2010, every person holding a certificate or prior approval must keep an account of foreign contribution received and a record of how it was used (section 19). The Central Government can inspect, audit and seize records (sections 20, 23, 24). Offences may be compounded before prosecution (section 41).

Understand Accounts, Audit, Returns and Disclosure

Foreign contribution is allowed only if it is traceable. The Act therefore builds a paper trail. You must record what came in, and how it was spent. The State can then check that trail.

The core duty is in section 19. Every person granted a certificate or given prior approval must maintain two things, in the form and manner prescribed: (a) an account of any foreign contribution received, and (b) a record of the manner in which it was utilised. Note that the duty covers receipt and utilisation both.

The money trail starts at the bank. Under section 17, the person must receive foreign contribution only in an account designated "FCRA Account" in the specified State Bank of India branch at New Delhi. The person may open another FCRA Account in a scheduled bank for keeping or utilising funds received from that account. One or more other accounts may be opened for utilising funds. No funds other than foreign contribution may be received or deposited in any such account. The bank reports the prescribed remittance details, its source and manner to the specified authority. So the bank is a second check on your accounts.

The Government has three tools to verify. Audit (section 20): if a person fails to furnish an intimation on time, or the intimation is not in accordance with law, or after inspecting it the Government has reasonable cause to believe a provision is being contravened, it may authorise a Group A gazetted officer, or another officer, authority or organisation, to audit the books. Information obtained is confidential and used only for the purposes of the Act. Inspection (section 23): on grounds to suspect contravention, recorded in writing, by a political party, person, organisation or association, an inspecting officer may inspect any account or record. Seizure (section 24): after inspection, if there is reasonable cause to believe the Act or any foreign exchange law is or has been contravened, the officer may seize the account or record.

On returns, section 44 requires the prescribed authority to furnish to the Central Government such returns and statements as may be prescribed. The exact forms, such as the annual return, and their due dates are in the FCRA Rules, not in the sections supplied here. Check the current Rules before the exam, and state the form and date only if you are sure of them.

Key rules to remember

Duty to maintain accounts (s.19)
Account of foreign contribution received + record of how it was utilised
Applies to every person with a certificate or prior approval. Form and manner are prescribed.
Receiving account (s.17)
Receive only in FCRA Account at the specified SBI branch, New Delhi; no other funds in it
A second FCRA Account in a scheduled bank may be opened for keeping or utilising funds received.
Audit trigger (s.20)
Failure to furnish intimation on time, or defective intimation, or reasonable cause to believe contravention after inspecting it
Auditor: Group A gazetted officer or other officer, authority or organisation authorised by the Central Government. Information is kept confidential.
Inspection (s.23)
Ground to suspect contravention, recorded in writing, then inspection of any account or record
Entry at a reasonable hour, after sunrise and before sunset.
Seizure (s.24)
Reasonable cause to believe contravention after inspection, then seize and produce before the court, authority or tribunal
Return the record if no proceeding is brought within six months of seizure.
Returns (s.44)
Prescribed authority furnishes returns and statements to the Central Government as prescribed
Time, form and manner are set by rules.
Compounding (s.41)
Before prosecution; not an offence punishable with imprisonment only; not within 3 years of an earlier compounding
Compounded before prosecution means no prosecution for that offence.

How to solve Accounts, Audit, Returns and Disclosure questions

Use this method for any question on accounts, audit, returns or inspection under the FCRA.

  1. 1Identify who is involved: a person with a certificate or prior approval, a political party, organisation, association, the bank, or the prescribed authority.
  2. 2Name the duty or power in play: maintain accounts (s.19), FCRA Account (s.17), audit (s.20), inspection (s.23), seizure (s.24), returns (s.44) or compounding (s.41).
  3. 3State the provision in plain words, with its exact conditions, such as reasonable cause to believe or grounds recorded in writing.
  4. 4Apply the facts: check each condition against the case, such as whether the intimation was late or whether the grounds were recorded.
  5. 5Check the safeguards: sunrise and sunset limits, confidentiality of audit information, the six-month return of seized records.
  6. 6Give a clear conclusion in one or two lines, citing the section.

Quickest way: Match the power to its trigger

When to use it: Use for short case questions where you must say whether an officer can act.

  1. Ask what the officer wants to do: audit, inspect or seize.
  2. Audit needs a failed or defective intimation, or reasonable cause after inspecting the intimation.
  3. Inspection needs recorded grounds to suspect contravention.
  4. Seizure needs a prior inspection and reasonable cause to believe contravention.
  5. Write the conclusion with the section number.

Common mistakes in Accounts, Audit, Returns and Disclosure

  • Saying section 19 requires only an account of receipts.

    Students remember the word accounts and forget the second limb.

    Fix: Write both: an account of foreign contribution received and a record of how it was utilised.

  • Treating inspection, audit and seizure as the same power.

    All three involve officers checking books.

    Fix: Link each to its trigger: audit to intimation defaults (s.20), inspection to recorded suspicion (s.23), seizure to belief after inspection (s.24).

  • Forgetting that the grounds for inspection must be recorded in writing.

    Students focus on the officer's right to enter.

    Fix: Always state that the Central Government must record its reasons before authorising inspection.

  • Stating that seized records can be kept indefinitely.

    The proviso to s.24 is overlooked.

    Fix: State that records must be returned if no proceeding is brought within six months from seizure.

  • Quoting a return form name and due date from memory.

    Notes circulate these details without a source.

    Fix: These are in the FCRA Rules, not in the sections. Quote them only if you have checked the current Rules; otherwise say the form and time are prescribed.

  • Saying any offence can be compounded.

    Students read section 41 loosely.

    Fix: Compounding is only before prosecution, not for offences punishable with imprisonment only, and not within three years of an earlier compounding.

Worked examples

Example 1

Sahayog Trust, which holds an FCRA certificate, failed to furnish a required intimation within the time specified. Can the Central Government have its books audited? Can the information obtained be used for any purpose?

Show the solution
  1. Provision: section 20 allows audit where a person with a certificate or prior permission fails to furnish an intimation within the specified time.
  2. Facts: Sahayog Trust holds a certificate and failed to furnish the intimation on time. The trigger is met.
  3. Who audits: the Central Government may, by general or special order, authorise a Group A gazetted officer or another officer, authority or organisation. The officer may enter premises at a reasonable hour, after sunrise and before sunset.
  4. Use of information: the proviso says information from the audit is confidential and shall not be disclosed except for the purposes of the Act.

Answer: Yes. Under section 20 the Central Government can authorise an audit of Sahayog Trust's books. The information obtained is confidential and may be used only for the purposes of the Act.

Example 2

After inspecting the records of an association, an officer has reasonable cause to believe that the Act has been contravened. He seizes the records. No proceeding is brought for eight months. What is the position?

Show the solution
  1. Provision: section 24 lets the inspecting officer seize the account or record after inspection if he has reasonable cause to believe the Act, or any foreign exchange law, has been or is being contravened.
  2. Facts: inspection was done, reasonable cause existed, so the seizure was within the power.
  3. Proviso: the authorised officer shall return the record to the person from whom it was seized if no proceeding is brought within six months from the date of seizure.
  4. Application: eight months have passed, which is more than six, with no proceeding.

Answer: The seizure was valid, but because no proceeding was brought within six months, the records must be returned to the association under the proviso to section 24.

Exam tips

  • Write section numbers: 19, 17, 20, 23, 24, 44 and 41. The answer format rewards the provision first, then facts, then conclusion.
  • For 'differentiate' questions, build a small comparison of audit, inspection and seizure by trigger and safeguard.
  • Do not invent return forms or due dates. Say they are prescribed by the FCRA Rules unless you have verified them.
  • Case questions often hide a safeguard, such as unrecorded grounds or the six-month limit. Look for it first.

Practice questions from Law relating to Foreign Contribution Regulation

Accounts, Audit, Returns and Disclosure: frequently asked questions

What accounts must an FCRA-registered person maintain?

Under section 19, a person with a certificate or prior approval must maintain an account of foreign contribution received and a record of how it was utilised. The form and manner are prescribed.

What is the FCRA annual return due date?

The due date and form are set by the FCRA Rules, not by the sections in the Act covered here. Check the current Rules and notifications before you quote them in an exam.

Can the Government audit an NGO's books?

Yes, under section 20, if the NGO fails to furnish an intimation on time, furnishes a defective one, or the Government has reasonable cause to believe the Act is contravened after inspecting the intimation. The audit information stays confidential.

Can an FCRA offence be compounded?

Section 41 allows compounding before prosecution, for offences not punishable with imprisonment only. It does not apply to an offence committed within three years of an earlier compounding. Once compounded, no prosecution follows for that offence.