an initiative of FMSF & CPA

       
 

BOOK ACCOUNT, INVESTMENT & FIXED ASSETS

Opening of Bank Account

As per Section17 (1), Every person who has been granted a certificate or given prior permission under section 12 shall receive foreign contribution in a single account only through such one of the branches of a bank as he may specify in his application for grant of certificate:

Provided that such person may open one or more accounts in one or more banks for utilising the foreign contribution received by him:

Provided further that no funds other than foreign contribution shall be received or deposited in such account or accounts.

Form FC-3 which deals with the application for registration and prior permission; require the mention of separate bank account number and the branch of the bank in which the Foreign Funds will be received.

Procedure for change of Bank Account

When a change of bank account becomes a necessity by virtue of relevant and justifiable reasons the following procedure may be followed:

i. A new bank account which is proposed to be designated bank account should be opened by depositing the minimum amount required for opening of the account.
ii. The proposed account, since it is subject to approval, should not be made operational. It should be treated as a multiple bank account opened with FC balance.
iii. An application in Form FC-6 should be submitted electronically available at the FCRA website with complete details of the new account within fifteen days.
iv. The online form should be submitted alongwith uploading of the following documents:

a. Copy of letter granting Registration/Prior Permission;
b. Certificate from the Bank for the Account to be opened/ opened exclusively for FCRA purposes.
c. Signature of the Chief functionary and seal of the association within the prescribed specifications.
v. After receiving the permission from FCRA authorities, the entire balance from the old designated FC account should be transferred to the new account.
vi. It is not legally necessary to close the old account. Therefore, the organisation may use the old account as a domestic account. But it is desirable to close the old account, to ensure that even by mistake the foreign funds are not credited to the old account.

Change in signatory of bank account

Change in signatories of bank accounts is a routine procedural issue and therefore need not be informed to the FCRA authorities. Any procedural changes in the same bank account do not require an approval under FCRA 2010.

Change in account number due to computerization

Many designated FC bank account numbers have been changed due to computerization. In such cases, it is necessary to inform the FCRA authorities about such changes. The new account number should be used for all subsequent reporting and correspondence purposes.

Separate Bank Account for Separate Donors

It has been seen that some donors insist of maintenance of separate bank account specifically for their grant and utilisation thereof. But under FCRA, all foreign contribution should be received in one designated bank account only. Therefore, under no circumstances, separate bank account should be opened for receiving funds from various donors. However, for UTILIZATION purpose separate bank account can be opened for separate donors.

Having more than one account for project purposes

The person may open one or more accounts in one or more banks for the purpose of utilizing the foreign contribution after it has been received and, in all such cases, intimation in form FC-6 shall be submitted online at the FCRA website within fifteen days of the opening of any account.

Interest Earned is part of foreign contribution

The interest accrued on the foreign contribution deposited in any bank or any other income derived from the foreign contribution or interest thereon shall also be deemed to be foreign contribution.

Reporting by banks of receipt of foreign contribution

According to the Rule – 16 of the FCRR, 2011, as amended by FC(R)A Amendment Rules, 2015 mandates the reporting by bank on receiving of foreign contributions:

3. The bank shall send a report to the Central Government within 48 hours any transaction in respect of receipt or utilization of any foreign contribution by any person, whether registered or not under the Act and such report shall include the following details:-

(a) Name and address of the donor.
(b) Name and address of the recipient.
(c) Account number.
(d) Name of the Bank and Branch.
(e) Amount of foreign contribution (in foreign currency as well as Indian Rupees).
(f) Date of receipt.
(g) Manner of receipt of foreign contribution (cash/cheque/electronic transfer etc.).

Creation of fixed deposits

As far as the creation of fixed deposits of FCRA funds is concerned, there is no bar on it. All the funds are required to be received in the designated bank account but any temporary surplus funds may be placed in fixed deposits with the bank, pending utilisation for the objects for which they were received. Care should be taken that the investments are in compliance with the section 11(5) of the Income-tax Act. It should further be ensured that the investments are not speculative in nature.

Creation of Fixed Assets

Any asset created out of foreign funds should be recorded in the FC books of account only. And FC asset will continue to remain an FC asset irrespective of time factor or closure of the project. At times it may so happen that a portion of the asset is funded from domestic sources.

For instance, a building is constructed from FCRA funds on a land purchased from domestic sources. In such cases, the cost of the land should be reflected in the domestic books of account and the cost of the building should be shown in the FC books of account. Only the consolidated statement will show the total cost of land and building together.

Sale of fixed assets

If an asset purchased out of FCRA funds is sold, then the amount received on sales of such asset should be shown as foreign receipts. There might be circumstances where assets are created out of both FCRA as well as domestic funds. In such cases, apportionment of the sale receipts should be made on a suitable and reasonable basis out of the sale consideration receipt and the amount, pertaining to foreign contribution portion of the asset should be considered as foreign contribution receipt.

The funds generated from a FC asset being a FC receipt should be deposited in the designated bank account. Such receipts should be shown under the head “interest or any other receipt during the year” in FCRA annual returns i.e. Form FC-4.