Interest and refund classification

Finin2min Summary — in 2 Minutes

Official source and legal ownership

What this covers

Interest accrued on foreign contribution held in the designated or utilisation accounts, and any other income derived from foreign contribution - including sale proceeds of assets created from it - is itself treated as foreign contribution and must be disclosed in the annual return, not classified as ordinary interest income outside the FCRA framework.

How refunds are classified

Similarly, refunds of amounts originally disbursed out of foreign contribution - for instance, a vendor refund on a cancelled purchase originally paid from FC funds - retain their character as foreign contribution when they come back, and must be credited back into the FCRA account structure rather than into a general or local account.

Why it matters

Because both interest and refunds "inherit" their foreign-contribution character rather than becoming ordinary income once earned or received, an organisation's bookkeeping needs a specific rule flagging these items for FC-account credit and FC-4 disclosure - a bank-interest credit swept automatically into a general operating account by default banking arrangements is a common, avoidable compliance gap.