I am an OCI (Overseas Citizen of India) residing in India with a resident Indian bank account. I do not have NRO / NRE nor overseas bank accounts. My income is entirely India sourced and I submit yearly tax returns. Any income is deposited in my resident Indian bank account. I would like to contribute regularly form my India-taxed income to certain Indian nonprofits. Some of these nonprofits are FCRA compliant and some are not. My queries are the following : 1. Are donations from OCIs considered as “foreign sourced” even if from OCIs like myself who reside in India and donate from their tax paid India sourced income deposited in a resident Indian account ? 2. Can these donations be sent only to the FCRA designated account of FCRA compliant nonprofits or can they also be sent to the nonprofits local Indian account ? 3. If donations are to be sent only to the FCRA designated account, is it possible to send from a resident bank account or does it have to be an NRO / NRE account (which I do not have) ? 4. If donations are allowed, can I receive 80G exemption ?
Answers to your queries:
1) Yes, the donations are still considered as "foreign sourced" for donations from OCIs, whether resident in India or not and whether paid from Indian income or not.
2) Donations have to go to the FCRA designated accounts of FCRA compliant NPOs only.
3) Yes. You can remit from a resident bank account also but only to the FCRA designated accounts only
4) Yes. If the donations are made from Indian income.
Foreign Source Status: Yes, any donation from an Overseas Citizen of India (OCI) is considered a "foreign contribution" under Indian law. This is because the FCRA defines a "foreign source" to include a foreign citizen, and an OCI is a citizen of a foreign country. Your residency status in India or the fact that the income is India-sourced and tax-paid does not change this classification.
Donation to FCRA Non-profits: These donations must be sent only to the specific bank account designated by the non-profit for receiving foreign contributions (the "FCRA account"). You cannot donate to their general local or domestic account. Consequently, you can only contribute to non-profits that are FCRA-compliant.
Sending from a Resident Account: Yes, you can transfer the donation from your resident Indian bank account to the non-profit's designated FCRA account. There is no requirement to use an NRO or NRE account for this purpose.
80G Tax Exemption: Yes, you are eligible to claim a deduction under Section 80G of the Income Tax Act for your donations. Eligibility for this deduction is dependent on the income being taxed in India, which applies in your case. Ensure the recipient non-profit provides you with a valid receipt and is approved for 80G deductions.
Appreciate the answers here. I have an update here that perhaps you could shed some light on : I remitted funds from my resident Indian account to the nonprofit's FCRA acct only to have the transaction immediately reversed by the bank. When I did so from my family member's NRO account to the same FCRA acct, the transaction was successful. Any thoughts on this would be appreciated.
The transaction reversal you experienced when remitting from your resident Indian bank account to the nonprofit’s FCRA account, while the transfer succeeded from your family member’s NRO account, is a known practical banking issue despite FCRA rules allowing such transfers from resident accounts. Here are the key points explaining this:
FCRA and Foreign Source Classification:
Your OCI status classifies you as a foreign source under the Foreign Contribution (Regulation) Act (FCRA), so your donations are foreign contributions regardless of the source income being India-taxed or held in a resident account.
Bank Compliance Practices:
Although FCRA mandates that foreign contributions be received only in the nonprofit’s FCRA account, it does not explicitly require that the donor’s bank account must be NRO or NRE for OCIs. Legally, you can donate from a resident Indian account to an FCRA account.
Why the Reversal Happens:
Many banks, during compliance and KYC checks, detect an OCI status and treat remittances from resident accounts by OCIs as suspicious or non-compliant with foreign remittance rules. They may then reverse the transaction automatically. However, when the remittance is made from an NRO (Non-Resident Ordinary) account, the system clearly recognizes the source as foreign/NRI-related, allowing the transaction.
Bank Discretion and Due Diligence:
Banks have internal rules, sometimes more stringent than the regulatory minimum, for handling such transactions. Some banks may allow OCI donations from resident accounts if adequately informed and after enhanced due diligence, while others do not.
Practical Suggestion:
If you want less hassle and guaranteed acceptance, remitting from an NRO account (which OCIs are eligible to open) is advisable. Alternatively, liaise with your bank’s compliance team to seek permission or confirmation about donations from your resident account to the FCRA account.
In summary, the reversal is due to bank-level compliance filters reacting to your OCI status combined with the type of account used for remittance. The law allows resident account remittances, but many banks prefer or enforce transfers via NRO accounts for foreign donors like OCIs.
If you want, assistance in drafting a clarification request to your bank can be provided.