Law Guide · Funding & Compliance

The FCRA for the Social Sector

A plain-English guide to the Foreign Contribution (Regulation) Act, 2010 — the law that decides whether your organisation can receive foreign money at all.

FCRA 2010 2020 Amendment NGOs · Trusts · Section 8 companies

Not legal advice. This guide is an educational explainer for practitioners. FCRA compliance has serious consequences — cancellations are common and appeals are slow. Always confirm specifics with a lawyer or CA who handles FCRA matters, and check the latest MHA notifications at fcraonline.nic.in.

Registration

or Prior Permission — mandatory before receiving any foreign contribution

5 years

validity of an FCRA registration; renew at least 6 months before expiry

20%

cap on administrative expenses from foreign contribution (was 50% before 2020)

SBI Delhi

all foreign contribution must first land in a designated account at SBI New Delhi Main Branch

Section 01

Why this law decides your funding strategy

The Foreign Contribution (Regulation) Act, 2010 (FCRA) regulates who in India may receive "foreign contribution" — money, securities, or articles from a foreign source — and how it must be received, used, and reported. It is administered by the Ministry of Home Affairs (MHA), not the tax department, and it treats foreign funding as a national-security question, not a charity question. That framing explains almost everything about how strictly it is enforced.

For the social sector the stakes are existential: thousands of NGO registrations have been cancelled or allowed to lapse over the past decade, including some of India's largest organisations. An organisation that loses FCRA registration cannot legally accept foreign grants — and after the 2020 amendment, it cannot receive them indirectly through another registered NGO either.

Section 02

The Act in six points

Two doors in: registration or prior permission. Regular FCRA registration (normally requires a 3-year track record and ₹15 lakh spent on your core activities) lets you receive foreign contribution on an ongoing basis. Prior Permission (PP) is a one-off approval for a specific amount from a specific donor for a specific project — the usual route for younger organisations.
"Foreign contribution" is broader than you think. It covers money, articles, and securities from any "foreign source" — foreign governments, foreign companies, foreign citizens, international agencies, and in some cases Indian companies with majority foreign shareholding. The donor's location matters less than their nationality or control: a US citizen donating in rupees from Mumbai is still a foreign source.
One gateway account. Since the 2020 amendment, every rupee of foreign contribution must first be received in an "FCRA Account" at the State Bank of India, New Delhi Main Branch (Sansad Marg). You can then move it to another FCRA account or utilisation accounts, but the first landing point is fixed by law.
No sub-granting. Section 7, as amended in 2020, prohibits transferring foreign contribution to any other person — including to other FCRA-registered NGOs. The older model of one large NGO receiving foreign funds and re-granting to smaller grassroots partners is no longer legal.
Spending is policed. Administrative expenses are capped at 20% of foreign contribution utilised in a year. Speculative investments are barred. Funds must be used for the purposes (cultural, economic, educational, religious, social) stated in your registration.
Some people can never receive it. Election candidates, journalists and media companies, judges, government servants, legislators, and political parties are prohibited recipients under Section 3.

Section 03

Does this apply to you?

Registered NGO receiving foreign grants · FCRA registration required

Trusts, societies, and Section 8 companies taking money from foreign foundations, bilateral agencies, diaspora donors, or international NGOs need valid registration or prior permission before the first rupee arrives.

Grassroots partner of a funded NGO · the sub-granting ban bites here

If your budget used to come as sub-grants of foreign money from a larger Indian NGO, that pipeline is closed. Your options: obtain your own FCRA registration/prior permission, restructure the relationship (see gray areas), or shift to domestic funding.

Domestically funded organisation · FCRA does not apply — mostly

CSR money from Indian companies, Indian philanthropy, and government grants are not foreign contribution. But check the source's ownership: money routed from an entity that qualifies as a "foreign source" can still trigger the Act.

Consultant or service provider · fees are not contribution

Money received as genuine fees for services rendered (consultancy, research contracts, training delivered at market rates) is generally not foreign contribution. The line between a "fee" and a disguised grant is scrutinised — paper it properly.

Section 04

Your compliance checklist

Nine steps that cover the recurring obligations of an FCRA-registered organisation. Tick them off — progress is saved in your browser.

0 of 9 steps done

Confirm your FCRA registration is live and note the expiry date — file renewal (Form FC-3C) at least six months before it lapses. Verify your designated FCRA account at SBI New Delhi Main Branch is the first receipt point for every foreign remittance. Keep foreign and domestic funds in separate accounts and separate books — no mixing, ever. File the annual return (Form FC-4) with audited statements by 31 December for the previous financial year — file a NIL return even in years with no receipts. Publish quarterly details of foreign contribution received on your website or the FCRA portal. Track administrative expenses against the 20% cap using the MHA's definition of "administrative" — not your accountant's. Ensure no foreign contribution is transferred to any other person or organisation — restructure any legacy sub-granting arrangements. Report changes (office bearers, address, bank accounts, name, aims) to MHA within the prescribed window via the relevant FC-6 form — most changes within 45 days. Collect Aadhaar (or passport/OCI for foreigners) for all office bearers, directors, and key functionaries as required since 2020.

Saved locally in your browser only — nothing is uploaded.

Section 05

What can go wrong

MHA can suspend a registration for up to 360 days pending inquiry — during which you cannot receive foreign contribution and can spend only a fraction of unutilised funds with permission. It can cancel registration for violations, "activities against national interest," or inactivity; a cancelled organisation must wait three years to reapply. Criminal penalties and compounding of offences also apply, and banks report FCRA-account transactions to MHA, so discrepancies surface quickly.

In practice, the most common triggers are mundane: late or missing annual returns, receiving funds in the wrong account, unreported changes of office bearers, and admin-expense breaches. Boring compliance failures, not dramatic ones, cost most organisations their registration.

Section 06

Gray areas practitioners argue about

Which Indian companies count as a "foreign source"?

Post-2016 amendments to the definition (aligning with FEMA), an Indian company with foreign shareholding within sectoral FDI caps is generally not a foreign source — which legitimised CSR from many foreign-owned Indian subsidiaries. But the analysis is entity-specific and the history is messy. Get the donor's ownership structure in writing before classifying the money.

Collaboration after the sub-granting ban

Larger NGOs now engage grassroots partners as vendors or implementing contractors (paying for defined services) rather than sub-grantees. Whether a given arrangement is a genuine service contract or a disguised transfer of foreign contribution is a judgment call that MHA has not fully clarified — document deliverables, invoices, and market-rate pricing.

Crowdfunding and diaspora donations

Small online donations from foreign citizens — including NRIs holding foreign passports and OCI cardholders — are foreign contribution. Donations from NRIs who remain Indian citizens are not. Most crowdfunding platforms cannot reliably screen this for you; you remain responsible.

In-kind support, volunteers, and fellowships

Foreign-funded fellowships, sponsored travel, donated equipment, and seconded staff can constitute foreign contribution or hospitality depending on structure. The Act's definitions cover "articles" and "hospitality," and the safe-harbour thresholds are low — take advice before accepting.

Section 07

Frequently asked questions

We have no foreign donors. Do we need FCRA registration?

No — and do not apply "just in case." Registration brings a permanent compliance burden (annual returns, account restrictions, inspection exposure) that is pointless without foreign funding. Apply for Prior Permission when a specific foreign grant is actually on the table.

Can we accept CSR funds from the Indian subsidiary of a multinational?

Usually yes, without FCRA registration — if the subsidiary does not qualify as a "foreign source" under the amended definition (foreign shareholding within FDI limits). Ask the company for a written confirmation of its FCRA-source status; well-run CSR teams have this ready.

Our registration lapsed. Can we spend the foreign funds already in our account?

Not freely. Once registration lapses or is cancelled, unutilised foreign contribution comes under MHA control and spending typically requires specific permission. Treat renewal deadlines as existential, not administrative.

Is money from a UN agency foreign contribution?

The UN and certain multilateral bodies notified by the government are excluded from the definition of "foreign source," so their funds are generally not foreign contribution. Confirm the specific agency appears in the notified exclusions before relying on this.

Can foreign contribution pay salaries?

Yes — programme staff salaries are a legitimate use. But salaries of purely administrative personnel count towards the 20% administrative cap, so classify roles carefully and keep the rationale on file.

Suggested citation

ImpactMojo (2026). "The FCRA for the Social Sector." ImpactMojo Law Guides. Retrieved from https://impactmojo.in/law-guides/fcra-social-sector.html

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