We have received several inquiries about whether Canadian charities and non-profits can continue working with nongovernmental organizations (NGO)s in India in light of recent heightened enforcement of Indian laws that regulate charitable funding coming into the country from foreign sources. This post discusses the Indian regulations on foreign charitable contributions into India, and does not address the obligations of Canadian registered charities conducting foreign activity pursuant to the Income Tax Act.
What exactly is the FCRA, and what are the implications of it?
The Foreign Contribution Regulation Act (FCRA) is an Indian law which regulates foreign donations into the country. The FCRA, which was initially introduced in 1976, requires (amongst other things) NGOs to have an FCRA registration in order to accept foreign funds. In 2020, Prime Minister Modi’s administration implemented an amendment to the FCRA which hindered Indian NGOs’ ability to receive foreign contributions by increasing the significant compliance obligations and making it more difficult to receive and maintain FCRA registrations.
As well, the changes precluded groups who had the FCRA registration from sub-granting to another individual or group. This was a way that smaller groups received the benefits of foreign charitable funding, and it is no longer available.
The Modi administration claimed the amendments were needed to ensure accountability in the sector, but critics have claimed it has been used as a political weapon used to silence or punish organizations that have in any way challenged the government. Critics have also asserted it is driven in part by a cash-grab, as one of the many obligations now imposed upon the NGOs is a requirement to open bank accounts with the State Bank of India, which is government-owned. Undeniably, there has been a recent crackdown on NGOs and a significant increase in the number of NGOs that have had their FCRA registrations cancelled.
The total number of FCRA registrations has declined from about 22,700 to 16,800. If one considers that there might be about 3 million registered NGOs in India, you can see that many NGOs in India will not be able to receive funds from a Canadian or other foreign charity.
Can Canadian organizations continue supporting Indian NGOs?
Many Canadian charities and non-profits have groups they work with in India that they would like to continue providing funds. The crackdown has resulted in significantly fewer organizations in India that can legally accept foreign charitable funds. From an FCRA-compliance perspective, if these groups hold active FCRA registrations, Canadian organizations can continue to work with them. India’s Ministry of Home Affairs has a database that one can search to determine if an organization has an FCRA registration. You can find the database here.
We note that Canadian registered charities will still need to comply with the Income Tax Act, which will involve either maintaining direction and control over the funds or making a grant to grantee under the qualifying disbursement rules when dealing with non-qualified donees. You can see many blogs that we have posted on foreign activities and global giving.