Key Provisions of the Amendment

1. Prohibition on Transfer of Funds

Amended Section 7

The Act prohibits the transfer of foreign contributions to any other person.

Change from 2010 Act:

  • Earlier: A registered person could transfer funds to another person who was also registered to accept foreign contribution.
  • Now (2020): Complete ban on sub-granting or transferring foreign funds to any other individual or organization, even if they have an FCRA license.

2. Reduction in Administrative Expenses

Amended Section 8

The limit for using foreign contributions for administrative expenses has been reduced.

New Limit:

  • Old Limit: Up to 50% of foreign funds could be used for administrative expenses.
  • New Limit: Maximum 20% can be used for administrative expenses.
Note: This forces NGOs to spend 80% of foreign funds directly on the core welfare activities.

3. Mandatory 'FCRA Account' in SBI, Delhi

New Section 17

Foreign contributions must be received only in an account designated as an "FCRA Account" in a specified branch of the State Bank of India (SBI) at New Delhi.

Key Details:

  • No funds other than foreign contributions can be deposited in this account.
  • After receiving funds in the main SBI Delhi account, NGOs can open utilization accounts in any other scheduled bank of their choice.

4. Aadhaar for Registration

New Section 12A

The Act makes Aadhaar mandatory for all office bearers, directors, or key functionaries of a person receiving foreign contribution.

Identification Documents:

  • Indian Citizens: Aadhaar Number.
  • Foreigners: Copy of Passport or OCI Card.

5. Prohibition for Public Servants

Amended Section 3

The Act expands the list of persons prohibited from accepting foreign contributions.

Who is added?

  • "Public Servants" (as defined under Section 21 of the IPC) are now barred from receiving foreign funding.
  • This is in addition to election candidates, judges, MPs, MLAs, and political parties who were already barred.

Critical Analysis (UPSC Perspective)

Arguments in Favor (Government's Stand)

  • Sovereignty: Prevents foreign interference in India's internal affairs and political processes.
  • Transparency: Centralizing accounts in SBI helps real-time monitoring of fund trails to prevent money laundering.
  • Accountability: Ensures funds are used for the stated objective rather than high administrative costs (salaries, luxury travels).
  • National Security: Checks foreign funding for anti-national activities or religious conversions.

Arguments Against (Civil Society Concerns)

  • Impact on Small NGOs: The ban on sub-granting (transfer) cripples small grassroots NGOs that rely on funding from larger donor NGOs.
  • Ease of Doing Business: The requirement to open an account specifically in New Delhi creates logistical hurdles for NGOs located in remote parts of India.
  • Administrative Cap: Reducing the admin cap to 20% makes it difficult to pay salaries to staff, experts, and researchers, potentially reducing the quality of work.
  • Over-Regulation: Critics argue this is a case of "bureaucratic overreach" that stifles the voluntary sector.

Supreme Court Verdict (Noel Harper Case, 2022)

In Noel Harper vs. Union of India (2022), the Supreme Court upheld the validity of the FCRA Amendment Act 2020.

  • Reasoning: The Court held that receiving foreign contribution is not an absolute right.
  • Sovereignty First: Unregulated foreign funding can destabilize national policy and sovereignty.
  • Interpretation: The Court clarified that "administrative expenses" do not include costs incurred for the core activity (e.g., salary of doctors in a hospital, teachers in a school).