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CS Professional · CSR and Social Governance · Foreign Funding to Non-Corporate Entities

Asha Seva Trust holds an FCRA registration certificate and receives a foreign contribution of Rs 20 lakh from a donor in Germany. The trustees decide to hand over Rs 5 lakh of this amount to Gramin Vikas Society, an unrelated NGO, to help it run a literacy project. Under the Act as it now stands, what is the position of this proposed transfer?

The transfer is prohibited. Under Section 7 of the FCRA, 2010, a registered person or one with prior permission who receives foreign contribution cannot transfer it to any other person. The Act makes no exception for charitable purpose, small amounts or bank intimation.

  1. APermitted, because the recipient NGO is working for a charitable purpose
  2. BPermitted, if the Trust informs the bank in writing
  3. CProhibited, because a registered person who receives foreign contribution cannot transfer it to any other personCorrect
  4. DPermitted, if the amount is less than one-fourth of the contribution received

Explanation

Section 7, as substituted in 2020, says no person who is registered or has prior permission and who receives foreign contribution shall transfer it to any other person. It has no exception for charitable purpose, notice to the bank or a small proportion. So the Rs 5 lakh transfer is barred.

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