New Foreign Contribution Act prohibits foreign donations to political parties

The new Foreign Contribution Regulation Act has come into force. As per this new law, no political party can receive foreign funds as donation. According to a Home Ministry press release it will also facilitate regulation of foreign contributions and hospitality by individuals and organisations.

The Act, passed by both houses of Parliament, is aimed at consolidating the law to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals, associations and companies. The new Act, came into force from 1st of the May 2011. It was necessitated in the wake of changed internal security environment and large fund flow. The legislation will prevent powers which want to use foreign funds to divide the country on religious basis. The Act says that in case of any organisation receiving funds over Rs.10 lakhs, the bank will immediately inform the government to enable the agencies to track the funds.

The government estimates shows, there were over 40,000 organisations receiving foreign contribution in the country out of which only 18,000 report the inflow of funds and submit their accounts. Having been brought the banks under the ambit of the Act and every bank or authorised person in foreign exchange shall report to such authority prescribed amount of foreign remittance and the source and manner in which the foreign remittance was received.