Foreign Loan
Guest
(Querist) 25 March 2008
This query is : Resolved
Can a Society registered under the Foreign Contribution Regulation Act borrow a loan from abroad ? What would be the treatment in Form FC-3 and in the Final Accounts for the Principal and the Interest component? Also please let me know the treatment of the foreign loan refund.
Prakash Yedhula
(Expert) 25 March 2008
An association having a definite cultural, economic, educational,religious or social programme can receive foreign contribution after it obtains the prior permission of the Central Government, or gets itself registered with the Central Government.
Interest earned from foreign contribution will be considered as foreign contribution.The interest earned out of such deposit should be shown as second / subsequent foreign contributions receipt in the FC-3 returns during the year in which it is earned.
An association permitted to accept foreign contribution is required under law to maintain separate set of accounts and records exclusively for the foreign contribution received and utilised and submit an annual return, duly certified by a Chartered Accountant, giving details of the receipt and purpose-wise utilisation of the foreign contribution. The return is to be filed for every financial year (1st April to 31st March) within a period of four months from the closure of the year i.e. by 31st July of each year. Submission of even a ‘Nil’ return if there is no receipt/utilization of foreign contribution during the year, is mandatory, under law. The return is to be submitted, in prescribed Form FC – 3, duly accompanied with the balance sheet and statement of receipt and payment, which is certified by a Chartered Accountant.
Guest
(Querist) 25 March 2008
Dear Sir,
Thank you for your reply but my actual question regarding foreign loan still remained unanswered.
Mahendra Bagaria
Rajesh Kumar
(Expert) 26 March 2008
It is not possible to answer the query without all details- nevertheless i should try.
Foreign Contribution regulation Act delas with foreign contribution- a loan cannot be treated as contribution and hence the act, or its form like FC-3 is not very relevant for its treatment.
Foreign Loans, by anybody- including an NGO is a capital account transaction in foreign exchange and as such you should refer to FEMA for its treatment, whether it is permissible or not, or whether RBI permission is required or how much interest can be paid etc.
Hiralal Das
(Expert) 07 April 2009
Thanks all of you the ld. members and the author.
I think your valuable opinions will assist everybody to solve their problem/matter in question properly.
