Can We Withdraw Cash From an FCRA Account?
Funds in an FCRA account are designated for specific purposes and can only be accessed via bank transfers or cheques, as outlined by account registration. The Ministry of Home Affairs (MHA) advises organizations to refrain from using ATMs or debit cards linked to FCRA bank accounts. If any organization possesses such a card, it should not be used for cash withdrawals or online transactions in accordance with MHA guidelines.
Cash Transactions Under FCRA Account
According to Section 40A(3)(a) of the Income Tax Act, any cash payment for expenses exceeding ₹10,000 per day, excluding payments made via account payee checks or drafts, is not eligible for deduction.
Additionally, the regulatory framework governing foreign funding for FCRA-registered entities has established specific norms. Cash expenses and withdrawals should not exceed ₹2,000 on any single day. This provision aims to minimize cash transactions among FCRA-registered organizations, promoting both transparency and accountability. Non-compliance with these guidelines may lead to scrutiny and penalties from relevant regulatory authorities.
Understanding FCRA Accounts
An FCRA (Foreign Contribution Regulation Act) bank account is a specific type of account that must be maintained by non-governmental organizations (NGOs) and entities in India to receive funds from foreign contributors. The MHA regulates these accounts in alignment with the Foreign Contribution Regulation Act, 2010, and FCRA registration is necessary for this purpose. This framework ensures that foreign contributions are allocated for legitimate charitable activities, preventing misappropriation of funds. It is crucial for NGOs receiving international funding to have a thorough understanding of the FCRA’s rules and policies to ensure compliance. FCRA bank accounts can be categorized into three types:
Statutory Designated Account
This account must be opened with the State Bank of India, Main Branch, located at 11 Sansad Marg, New Delhi, specifically for transactions outlined in the Foreign Contribution (Regulation) Act 1996 and its accompanying rules.
De Facto Designated Account
This account may be opened with any Scheduled Bank to manage funds received on behalf of a Statutory Designated Account. It is primarily for accounting and operational ease, adhering to legal limits.
FCRA Funds Utilisation Account
To handle and utilize FCRA funds, an account can be established with any scheduled bank. Notably, this account cannot receive any domestic funds.
Types of Transactions Allowed From FCRA Accounts
Using Foreign Contributions
Once an association receives foreign contributions in its authorized FCRA bank account, it is permitted to open a separate account known as the Utilisation Account for managing these funds. This utilization account can be maintained at one or more banks. While associations can transfer specific amounts from their designated FCRA account to these utilization accounts, no other forms of deposits or receipts are allowed in these accounts. They are strictly for funds received as foreign contributions and are designed for use in accordance with established guidelines.
Redepositing Unutilised Funds
Any withdrawn amounts that remain unutilised must be redeposited by NGOs/associations. Documentation for both the withdrawals and the absence of expenditures must accompany these transactions. This mechanism is also applicable for refunds from cancelled services or tickets, ensuring a clear record of financial movement.
Debiting Funds
Debits are permissible only if there are remaining balances in the account, and they require appropriate approval from the Ministry of Home Affairs (MHA).
Cash Withdrawals
FCRA-registered associations can execute cash withdrawals, provided they do not exceed the limit of ₹2,000 per day.
Restrictions on Cash Withdrawals
FCRA-registered organizations are subject to a daily cash withdrawal limit of ₹2,000, as stipulated by the Foreign Contribution (Regulation) Act (FCRA) guidelines. These restrictions aim to diminish cash transactions, ensuring compliance with regulations and mitigating the potential for legal scrutiny. The use of ‘Account Payee’ cheques for all transactions is strongly recommended over cash withdrawals.