While reiterating section 2 (1) (h) of the FCRA Act, 2010, the communication, sent earlier this month, reviewed by ET, notes, “Attention has also been drawn to the provision of section 2 (1) (h) which states that any kind of income or interest or income that is derived from foreign contribution or interest earned becomes part of foreign contribution. Therefore, it will be credited back into the foreign contribution account to be utilised strictly as per the provision of the FCRA, 2010.”
Further, the letter stated that, “…It can be concluded that the fixed deposits created or investment in financial instruments out of foreign contribution in FCRA utilisation account, on maturity or returns of such investment shall be credited into a FCRA utilisation account of the association maintained in any bank provided such investment made by the NGOs is not falling under the category of speculative activities as defined under rule 4 of the Foreign Contribution (Regulation) Rules, 2011.”
As per FCRA, 2011, a speculative is defined as any activity or investment that has an element of risk of appreciation or depreciation of the original investment, linked to market forces, including investment in mutual funds or in shares, participation in any scheme that promises high returns like investment in chits or land or similar assets not directly linked to the declared aims and objectives of the organisation or association. However, a debt-based secure investment shall not be treated as speculative investment.
The rules also required every NGO to maintain a separate register of investments which can be submitted for audit before MHA. The Foreign Contribution (Regulation) Amendment Act 2020 mandates each FCRA NGO has to compulsorily open an ‘FCRA account’ in SBI, main branch, New Delhi, for initial remittance and receipt of foreign contribution (FC).
