New amendments made to Foreign Contribution (Regulation) Rules, 2011

NEW DELHI: The Union home ministry on Wednesday issued Foreign Contribution (Regulation) Amendment Rules, 2024, which shall come into force from January 1, 2025. The FCRA division of MHA noted that NGOs were facing difficulties over transfer of FCRA components of funds out of the refund of tax deducted at source (TDS) received in their non-FCRA accounts.

In the Foreign Contribution Regulation Rules, 2011, in Rule 5, after the second proviso, the following proviso shall be inserted, "Provided also that the association shall have the option to carry forward the unspent part of allowable administrative expended in a financial year to the immediately succeeding financial year, for reasons to be mentioned in Form FC-4." The MHA clarified that for Form FC-4, "Transfer of foreign contribution part of income-tax refund from non-FCRA bank account and carry forward of unspent part of allowable administrative expenses in a financial year". Explaining this through a notice, it added, ....In case of consolidated income-tax refund is received in non-FCRA bank account, the proportionate income-tax refund pertaining to FCRA accounts needs to be transferred back to the FCRA bank account. Such transfers would not be treated as a violation of section 17 of the FCRA Act, 2010..."

On accounting treatment of TDS and its refund, the notice said, it is clarified that at the time of deduction, such TDS may be accounted as utilisation of FC and upon receipt of refund in FCRA account, it may be considered as "other income".