The amendments to the Foreign Contribution Regulations Act (FCRA) by the government of India had put the NGOs on a tricky situation. The move that is considered by the government to target for-profit organizations that exploit tax shelters for non-governmental organizations (NGOs) - has been perceived by the civil society organizations as restrictive. The sector is especially concerned that what could be achieved through constructive monitoring and engagement has been addressed through a move that might penalize the entire sector for the erring few.
A RoundTable discussion was held in March 2011 with different stakeholders, including representatives of grass-root organisations, local and national NGOs, donor agencies, academicians & professionals and Institute of Chartered Accountants of India. A working group was formed to offer feedback on the Draft Rules for formulating a representation the Ministry (Representation Letter on DRAFT FCRA Rules 2011, Submitted to Joint Secretary, FCRA Department). . Some of the important issues are discussed here.
One of the contentious area is how ‘charity’ has been defined in the new law. Until now, charity, as defined by the Income-tax Act, covered relief to the poor, education, medical relief, and a fourth area that included the “advancement of any other object of general utility”. The new clause states, “Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business.” The implications for the NGOs is that any revenue generating activity that does not contribute specifically towards relief of the poor, education or medical relief would no longer enjoy tax protection. This is unacceptable to the NGOs in the context of dwindling fundraising situation and inadequate state support for developmental work.
As it is, getting FCRA is not an easy task- the NGO should have a proven record of social activities for around 3-4 years. Often if the NGO wants to start work by using funds from abroad, it is difficult to do as they do not have this experience to demonstrate. The registration process also involves an inspection from the intelligence bureau. They collect information about the NGO by visiting their area of operation and their office. Often newly formed NGOs apply for case wise prior permission for the first few times. This way, the NGOs try to establish their credibility and also develop some kind of familiarly of the department with their work. A certificate from the district collector or state government, is also considered helpful, though the civil society activists is vocal against this as it undermines the case of NGOs that might not enjoy a good relationship with the state machinery.
The new act is also against the organizations that habitually engage themselves in or employs common methods of political action like bandh or hartal, rasta roko, rail rook, jail bharo, etc. in support of public causes.. However, many of the civil society organizations undertake demonstration and dharna to draw attention to various causes, such a rule could be misinterpreted by the officials implementing these rules. Also, these are effective tools for public mobilization around issues. There is surely room for improvement by adding a qualifier that that as long as these are peaceful demonstration that do not engage in any kind of violence including damage to public property, these should be considered acceptable.
At the same time there are also certain positive developments in the Act like taking stipend and scholarships out of scope of FCRA and the transfer of funds to unregistered bodies. Several NGOs also point out that there is more transparency in the Act as the Govt. has now codified several of the procedures which were earlier internal practices of the Department. Organisations receiving more than Rs 1 crore would need to publish the same on their websites. Although some quarters have indicated their reservation for this process, however it will further add to the transparency in the sector. The Act is also considered to be overall better structured.
Do you think that the new FCRA rules need ‘qualifiers’ to better address the concerns of the NGOs?