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The concept of Foreign Source under FCRA 2010.

Case 1 : A citizen of USA is holidaying in India. He has exchanged his USDs into INR currency. While in Delhi, suppose he visited the Akshardham Temple. He decided to donate Rs. 5,000 to the temple. Will this be a Foreign Contribution or a Domestic Contribution?

Case 2 : An Indian Citizen - Mr. Amit is residing in UK for last 4 months for his IT company's on site project. His college which is situated in India has started a campaign to raise funds for providing scholarships to needy students. Mr. Amit decided to donate 500 Pounds to this campaign. Will this be a FC fund or domestic fund?

Cases like above are very common. It is often mistaken that if someone is donating in INR then it is Domestic contribution and if the currency is not-INR then it is FC fund. Let us examine both the cases in light of the provisions of FCRA 2010.

Section 2(h) of the FCRA 2010 defines "Foreign Contribution". The definition says that donation in Indian currency or foreign currency, donation in Kind or interest received on such donation shall be foreign contribution.

In this definition, the crucial condition is that the donation should be given by a "Foreign Source". The concept of Foreign source is defined in section 2(j).

Accordingly following are included in the concept of foreign source

In the above definition , the last point is relevant for the cases we discussed above. That is, a "foreign citizen" is treated as a foreign source. And donation from "foreign citizen" can only be called as foreign contribution.

Therefore, while accepting donations from individual, an organization should ensure to get a copy of his/her passport to correctly classify the donation.

Further the FAQs published by FCRA also make the above quiet clear.

Question 8 of the FAQ is : whether donation given by Non-Resident Indians (NRIs) is treated as ‘foreign contribution’?

To this, the FCRA department has clarified:

Contributions made by a citizen of India living in another country (i.e., Non-Resident Indian), from his personal savings, through the normal banking channels, is not treated as foreign contribution. However, while accepting any donations from such NRI, it is advisable to obtain his/her passport details to ascertain that he/she is actually an Indian citizen.

To further clarify the FCRA department in its FAQs has said:

Whether donation given by an individual of Indian origin and having foreign nationality is treated as ‘foreign contribution’?

Answer: Yes. Donation from an Indian origin person who has acquired foreign citizenship is treated as foreign contribution. This will also apply to PIO / OCI cardholders. They are foreigners. However, this will not apply to 'Non-resident Indians', who still hold Indian citizenship as they are not foreigners.

The above clearly emphasizes that:

  1. Residential Status does not matter

  2. Currency of Donation Does not matter

  3. Country of Origin Does not matter

  4. Only Citizenship is the deciding factor.

We hope the above note summarily clarifies the ambiguity around classification of donation.

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