NGO Bank Account for FCRA Funds

NGO's Bank Account for FCRA Funds

Ozg FCRA Consultant

Ozg Center, New Delhi, INDIA

As per Section17 (1), every organisation, which has either registered itself with the Central Government in accordance with the FCRA rules or has obtained prior permission, shall receive foreign contribution only through one such bank account as specified in its application for registration for prior permission.

Form FC-3 and Form FC-4 which deals with the application for registration and prior permission respectively; require the mention of separate bank account number and the branch of the bank in which the Foreign Funds will be received.

No funds other than foreign contribution shall be received or deposited in the above bank accounts.

Change of Bank Account

Further, Form FC-3 & FC-4 requires an undertaking from the chief functionary of the organisation. The relevant text of the undertaking is as follows, "not to change the bank or branch of the bank without prior permission of the Central Government. The reasons for change of bank or branch of bank shall have to be relevant and justifiable". In the light of aforesaid, it seems that there can be only one bank account of the association for receipt of foreign contributions and there should not be any change in the bank or branch of the bank without prior permission of the Central Government.

Procedure for change of Bank Account

When a change of bank account becomes a necessity by virtue of relevant and justifiable reasons the following procedure may be followed:

(i) A new bank account which is proposed to be designated bank account should be opened by depositing the minimum amount required for opening of the account which should be out of local funds.

(ii) An application to the FCRA authorities should be made by citing the relevant and justifiable reasons for such change along with complete details of the old account as well as the new account should be provided in the application

(iii) After receiving the permission from FCRA authorities, the entire balance from the old designated account should be transferred to the new account.

(iv) It is not necessary to close the old account. Therefore, the organisation may use the old account as a domestic account. But it is desirable to close the old account, to ensure that even by mistake the foreign funds are not credited to the old account

The FCRA department has given a correction form for the change in bank account, which is given in Annex. 1

Change in signatory of bank account

Change in signatories of bank accounts is a routine procedural issue and therefore need not be informed to the FCRA authorities. The undertaking given by the Chief functionary in the form FC-3 for informing the changes in the bank account is only about change of the bank or branch of the bank. Any procedural changes in the same bank account do not require an approval of the FCRA authorities.

Change in account number due to computerization

Many designated FC bank account numbers have been changed due to computerization. In such cases, it is advisable to inform the FCRA authorities about such changes. The new account number should be used for all subsequent reporting and correspondence purposes.

Separate Bank Account for Separate Donors

It has been seen that some donors insist of maintenance of separate bank account specifically for their grant and utilisation thereof. But under FCRA, all foreign contribution should be received in one designated bank account only. Therefore, under no circumstances, separate bank account should be opened for receiving funds from various donors. However, for UTILIZATION purpose separate bank account can be opened for separate donors.

Having more than one account for project purposes

The person may open one or more accounts in one or more banks for the purpose of utilizing the foreign contribution after it has been received and, in all such cases, intimation on plain paper shall be furnished to the Secretary, Ministry of Home Affairs, New Delhi within fifteen days of the opening of any account.

Interest Earned is part of foreign contribution

The interest accrued on the foreign contribution deposited in any bank or any other income derived from the foreign contribution or interest thereon shall also be deemed to be foreign contribution.

Reporting by banks of receipt of foreign contribution

Every bank shall send a report to the Central Government within thirty days of any transaction in respect of receipt of foreign contribution by any person who is required to obtain a certificate of registration or prior permission under the Act, but who was not granted such certificate or prior permission as on the date of receipt of such remittance.

The report shall contain the following details: -

(a) Name and address of the donor.
(b) Name and address of the recipient.
(c) Account number.
(d) Name of the Bank and Branch.
(e) Amount of foreign contribution (in foreign currency as well as Indian Rupees).
(f) Date of receipt.
(g) Manner of receipt of foreign contribution (cash/cheque/electronic transfer etc.).

The bank shall send a report to the Central Government within thirty days from the date of such last transaction in respect of receipt of any foreign contribution in excess of one crore rupees or equivalent thereto in a single transaction or in transactions within a duration of thirty days, by any person, whether registered or not under the Act and such report shall include the following details:-

Creation of fixed deposits

As far as the creation of fixed deposits of FCRA funds is concerned, there does not seem to be any bar on it. All the funds are required to be received in the designated bank account but any temporary surplus funds may be placed in fixed deposits with the bank, pending utilisation for the objects for which they were received. Care should be taken that the investments are in compliance with the section 11(5) of the Income Tax Act.

In this context, it may further be noted that, since, the interest earned is considered as FC receipts such interest earning should be deposited in the designated bank account.

Any asset created out of foreign funds should be recorded in the FC books of account only. And FC asset will continue to remain an FC asset irrespective of time factor or closure of the project. At times it may so happen that a portion of the asset is funded from domestic sources.

For instance, a building constructed on a land purchased from domestic sources. In such cases, the cost of the land should be reflected in the domestic books of account and the cost of the building should be shown in the FC books of account. Only the consolidated, statement will show the total cost of land and building together.

Sale of fixed assets

If an asset purchased out of FCRA funds is sold, then the amount received on sales of such asset should be shown as foreign receipts. There might be circumstances where assets are created out of both FCRA as well as domestic funds. In such cases, apportionment of the sale receipts should be made on a suitable and reasonable basis out of the sale consideration receipt and the amount, pertaining to foreign contribution portion of the asset should be considered as foreign contribution receipt.

The funds generated from a FC asset being a FC receipt should be deposited in the designated bank account.

Annexure: 1

Application form for change of Bank Account/Bank

[Application form for seeking change in the designated Bank Account/Bank of the association granted registration/prior permission under FCRA.

No..................................................................... Date.......................................

To
The Secretary to the Government of India
Ministry of Home Affairs, Jaisalmer House,
26, Man Singh Road, New Delhi-110 011

Subject : Application for change in the designated Bank/ Bank Account of association registered/ granted prior permission under Foreign Contribution (Regulation) Act.

Sir,

I ____________________ on behalf of the Association, whose details are given below, apply for change in the designated Bank Account/Bank of association registered/granted prior permission under the Foreign Contribution (Regulation) Act,1976/Foreign Contribution (Regulation) Act, 2010.

1. Name of the association and its complete postal address:

Name :
Address :
Town/City :
District :
State :
PIN Code :
Phone/Fax No.:
e-Mail :

2. FCRA Registration No./Prior Permission letter No..............................dated................... (Copy of the registration/prior permission letter to be enclosed)

3. Nature of Association:

(a) religious (b) cultural (c) economic (d) educational (e) social

Note : If religious association, state whether – (a) Hindu (b) Sikh (c) Muslim (d) Christian (e) Buddhist (f) Others.

4. Name and addresses of the members of the Executive Committee/Governing Council etc. of the association, including the Chief functionary in the following manner:

Sl. No	Name	Name of Father/ Husband	Nationality	Occupation	Office held in the association	Relationship with office bearers, if any	Address

5. Please indicate date of submission of Last three Annual FC-3 returns.

6. Please indicate whether the Association Is functioning as editor, owner, printer or publisher of a Publication required to be registered as 'newspaper' under the Press and Registration of Book Act, 1867.
If so, the details thereof.

7. Please indicate whether the association has close links with another association, or its unit or branch which has been-

(a) refused registration under the Act;
(b) Prohibited from accepting foreign contribution.

8. Please indicate- Existing Proposed

(i) The name and address of the branch of the bank through which foreign contribution is to be received.
(ii) The account number in the said branch of the Bank.

9. Justification for proposed change

Yours faithfully,

Signature of the Applicant

(Name of the Chief Functionary or authorised office Bearer)
(with the seal of the association)

Declaration and Undertaking

I hereby affirm that the information furnished above is correct.
Place:
Date:

Signature of the Applicant

(Name of the Chief Functionary or authorised office Bearer)
(with the seal of the association)

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