Foreign Contribution Regulation Act, Objectives, FCRA Rules
Gajendra Singh Godara
Oct 1, 2025
20
mins read
India’s Foreign Contribution (Regulation) Act (FCRA) is a law enacted to regulate foreign donations to individuals, associations or NGOs, ensuring they do not compromise national interests. FCRA mandates that no person or organization may accept any foreign contribution without government permission.
In effect since 2011 (replacing the 1976 law), it requires NGOs to register with the Home Ministry and abide by strict rules on how foreign funds are handled. Its stated aim is to prevent foreign money from being used for activities “detrimental to the national interest”.
Recently, the Union Home Ministry revoked the FCRA licence of the Students Educational and Cultural Movement of Ladakh (SECMOL), founded by climate activist Sonam Wangchuk.
FCRA stands for Foreign Contribution (Regulation) Act. It was first enacted in 1976 and was replaced by the current FCRA 2010 (passed in Parliament in 2010 and enforced from 2011). The 2010 Act consolidated and tightened the 1976 provisions. Over time, FCRA has been amended (notably in 2020 and 2022) to further restrict and monitor foreign funding of NGOs.
The FCRA’s key objectives are to protect India’s sovereignty and integrity and ensure accountability of foreign funds. It explicitly seeks to ensure that foreign contributions do not adversely affect national interest. For example, FCRA rules require that foreign funds must not be used against India’s sovereignty, public order or democratic processes.
It also promotes transparency: foreign-funded NGOs must maintain detailed accounts and report on donations and expenditures to the government. In sum, FCRA aims to safeguard national security and public interests from undue foreign influence, while imposing transparency and accountability requirements on recipients of foreign donations.
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Registration & Prior Permission: Any NGO, association or individual seeking to receive foreign contributions must obtain prior approval or registration under FCRA from the Home Ministry. Operating without registration is illegal. New organizations can apply for a one-time prior permission to receive a specific foreign grant, but ongoing funding requires full registration.
Designated Bank Account: All foreign contributions must be received into a single designated bank account at the State Bank of India, New Delhi (Parliament Street Branch). NGOs may open other accounts only for utilising these funds, but no foreign money or unrelated funds can be deposited outside the designated FCRA account. Mixing foreign contributions with domestic funds is prohibited.
Eligible Recipients & Prohibitions: Registered NGOs, trusts, societies and Section-8 companies working in cultural, economic, educational, religious or social fields can receive foreign contributions. However, certain persons and bodies are barred. FCRA explicitly forbids election candidates, members of parliament or state legislatures, judges, government servants, and journalists or media companies from receiving any foreign funds. Political parties and organizations of a political nature are also excluded.
Utilisation & Restrictions: Foreign funds must be used only for the NGO’s stated objectives. FCRA forbids using foreign donations for speculative or profit-making activities (e.g. mutual funds). All expenditures must align with the organization’s aims and objectives, and capital assets bought with FCRA money must be registered in the NGO’s name. Transfers of foreign funds to other organizations are generally prohibited unless the recipient is also FCRA-registered (with prior government approval).
Administrative Expenditure Cap: The law caps the portion of foreign funds that can be spent on administrative costs. Under the 2020 amendments, NGOs can spend at most 20% of their foreign contribution on salaries, overheads and administrative expenses (down from 50% earlier). This strict limit is intended to ensure most aid goes directly to programs.
Reporting & Disclosure: FCRA mandates rigorous reporting. NGOs must maintain separate books and a register of foreign contributions. An annual return (Form FC-4) must be filed every year (by Dec 31) with detailed audited accounts of foreign receipts and expenditures.
Penalties for Violation: Non-compliance can lead to severe action. FCRA provides for suspension or cancellation of registration, seizure of foreign funds, and legal penalties (fines or imprisonment) for offences such as fund misuse, false reporting, or accepting banned sources. Even technical breaches (like not intimating a bank change) may invite penalties. Cancelled organizations are barred from reapplying for registration for up to three years.
Existence & Track Record: To qualify, an NGO must be legally registered in India (under the Societies Act, Trust Act or Companies Act) and have a proven track record. Generally it must have existed for at least 3 years and have spent a minimum amount on its activities during that period. Under current rules, an NGO must have spent at least ₹10 lakh on its objectives in the past three years (excluding admin costs).
Legal Cleanliness: The NGO and its leaders must have a clean profile. They must not be “fictitious or benami”, nor convicted of offences such as financial irregularities, promoting forced religious conversion, communal disharmony or sedition. Any past FCRA violations, or failure to file returns, can disqualify the application.
Application Process: The organization applies online on the FCRA portal (using Form FC-3A for registration or FC-3B for one-time permission). Required documents include its constitution/Memorandum of Association, PAN, registration certificate, detailed list of office-bearers (with address proofs and Aadhaar), and board resolutions authorizing foreign funding.
Financial Documents: Crucially, the NGO must submit its audited financial statements for the last three years, including balance-sheets, income-expenditure statements, and receipts/payments details.
Approval Timeline: After submission, the Home Ministry (with Intelligence Bureau vetting) reviews the application. The Ministry is required to approve or reject the registration within 90 days (or else inform the NGO of delays/shortcomings).
Renewal: FCRA registration is granted for 5 years. NGOs must apply for renewal (using Form FC-3C) well before expiry - typically at least 6 months prior - along with updated documents and audited accounts. Failure to renew on time causes the certificate to lapse, and the NGO must stop receiving or spending foreign funds until re-registered.
Purpose Restrictions: Any foreign donation must be used strictly for the purpose for which it was received. NGOs cannot divert funds to unrelated activities. FCRA explicitly prohibits using foreign contributions for profit-oriented investment schemes; donations must instead go towards the NGO’s welfare or charitable objectives.
Separate Accounts & Books: NGOs must maintain separate accounts and books for FCRA funds. All foreign contributions are required to be deposited in the designated SBI, New Delhi account, and cannot be mixed with domestic funds. Cash withdrawn from the FCRA account must remain distinctly separate from local cash, and a separate ledger is maintained.
No Sub-Grants Without Approval: Generally, an NGO cannot pass on foreign funds to another NGO unless the recipient is also FCRA-registered, and even then only with prior government approval. This prevents unregulated “cascading” of foreign money. The law allows only up to 10% transfer of total foreign contributions per year to an unregistered entity, and that too requires filing Form FC-10 and government sanction.
Asset Ownership: Any asset (e.g. land, equipment) purchased with foreign contributions must be held in the name of the NGO (not in an individual’s name). The NGO remains its legal owner.
FCRA identifies several classes of persons and organizations ineligible to receive foreign funds:
Political Entities: Candidates in elections, political parties or groups of a political nature are barred.
Government Affiliates: Judges, members of Parliament or state legislatures, and government servants cannot accept foreign donations.
Media Persons and Outlets: Editors, journalists, media companies and trusts engaged in news or broadcast media are prohibited from receiving any foreign contribution.
Others: Any organization of a political character, and conversely, NGOs must not use foreign funds for political purposes.
Additionally, the law gives the government discretion to stop funds to any NGO it deems engaged in “anti-national” or harmful activities. While broadly defined (“detrimental to national interest”), this clause has been used to justify cancellations.
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An organization is FCRA compliant when it strictly follows all FCRA rules in letter and spirit. This entails:
Maintaining a valid FCRA certificate or permission at all times (and renewing it on time).
Receiving all foreign contributions only into the designated SBI, New Delhi bank account and keeping separate books for those receipts.
Not commingling foreign funds with domestic donations or personal funds.
Using donations strictly for declared objectives, not diverting them for other projects or speculative investments.
Ensuring administrative expenses do not exceed 20% of total foreign contributions.
Filing annual returns (Form FC-4) and audited statements with the Home Ministry on schedule.
Informing the government of any major changes - e.g. change of address, key personnel (>50% turnover), or bank account - within 15 days (via Form FC-6).
Reporting fully and truthfully, and not making any false statements or hiding information in FCRA applications or returns.
1976: Original FCRA enacted (Act No. 49 of 1976). It set up the framework to regulate foreign donations.
2010 (FCRA 2010): The old 1976 Act was repealed and replaced by the Foreign Contribution (Regulation) Act, 2010. FCRA 2010 expanded the scope, tightened compliance and increased oversight (e.g. mandatory use of FC for welfare purposes, annual reporting etc).
2016-17: Through the Finance Act 2016 (and later approvals), Indian subsidiaries of foreign companies were allowed to contribute funds to NGOs under CSR (up to 7.5% of profits). Also, in 2016 the government introduced a requirement (later incorporated) that NGOs must get Aadhaar numbers for their office-bearers.
2020 Amendments: In September 2020 Parliament passed a major FCRA Amendment Act. Key changes included: requiring Aadhaar for NGO office-bearers; empowering the Centre to conduct “summary enquiries” into FCRA misuse; banning all sub-granting of foreign funds to other NGOs; capping admin expenses at 20%; and mandating that all FC contributions be received in a single SBI, New Delhi branch account. This marked a significant tightening of the law.
2022 Amendments: In mid-2022 the government amended the FCRA Rules (via Gazette notifications). Among other tweaks, it raised the threshold for intimation of contributions from relatives (₹10 lakh per year exemption) and, importantly, removed the requirement for quarterly donor disclosure. Now organizations only need to file an audited annual report on foreign funds (once per year) instead of quarterly updates.
2025 Updates: New FCRA Amendment Rules notified in May 2025 further increased compliance: applicants must submit detailed audited statements for the last 3 years (balance sheets, P&L, receipts/payments), along with year-wise project reports and affidavits for unspent funds. These recent changes make the FCRA process even more stringent.
Overall, FCRA has progressively become stricter since its inception (1976 → 2010 → 2020, and with further rules in 2022-25), reflecting the government’s growing focus on monitoring foreign funding.
FCRA has been widely criticized by NGOs, activists and international observers. Key issues include:
Burdensome compliance: Many NGOs complain that FCRA’s rules are so detailed and complex (numerous forms, tight deadlines, multiple checks) that they become a major administrative burden. Opening only one SBI branch account and strictly segregating funds, along with compulsions like Aadhaar for all leaders, make routine transactions cumbersome.
Restrictive limits: The heavy cap on administrative costs (20%) and ban on sub-grants have been branded as draconian. Critics say such limits are unrealistic for development NGOs, some of which legitimately need funds for capacity-building and supporting grassroots partners.
Chilling effect on dissent: Perhaps most contentiously, FCRA enforcement has sometimes appeared arbitrary. Numerous human-rights and advocacy NGOs have had their FCRA licences cancelled or renewal denied on murky grounds. Critics argue FCRA is being wielded to penalize NGOs that expose social issues or criticize the government: as one report notes, since 2016 hundreds of NGOs (including Lawyers’ Collective, Greenpeace India, Amnesty India, Sabrang Trust, Navsarjan Trust and others) have had their FCRA certificates cancelled or refused.
Transparency vs. freedom: While FCRA’s intent is accountability, opponents say its implementation sometimes prioritizes control over genuine scrutiny. For example, freezing an NGO’s foreign funds during long investigations can cripple its work, even if charges are later unproven. There have also been instances of multiple agencies (Income Tax, CBI/ED, local authorities) targeting the same NGO under FCRA or related laws, leading to allegations of harassment.
Experts suggest reforms to strike a better balance between accountability and ease of doing good:
Simplify procedures: The FCRA renewal and reporting process could be made more user-friendly. One idea is to streamline online submissions and make renewal almost automatic (as if renewing a passport) if NGOs have clean records. Providing clear checklists and reducing duplicative paperwork would help small NGOs focus on their work.
Relax restrictive rules: Some call for revisiting stringent rules that serve little clear benefit. The single-branch SBI mandate is also seen as avoidable; allowing other SBI branches (or certified banks) to handle foreign contributions could ease banking congestion.
Focus on misuse, not donors: Policymakers could focus enforcement on genuine abuses rather than blanket compliance. This means respecting the privacy and autonomy of NGOs that have clean audits and no adverse reports.
Capacity-building: The government and industry bodies could help NGOs become compliant - by offering training on FCRA accounting, quicker helpdesks, or even a self-certification scheme for NGOs with spotless records.
Stakeholder dialogue: Maintaining ongoing dialogue between regulators and civil society can build trust. NGOs should have a say in how rules are formulated and implemented, ensuring that the regulations are fair and clear.
UPSC Previous Year Questions
Q. Examine critically the recent changes in the rules governing foreign funding of NGOs under the Foreign Contribution (Regulation) Act (FCRA), 1976. (2015).
Frequently Asked Questions(FAQs)
Q. What is FCRA Act?
A. The Foreign Contribution (Regulation) Act (FCRA) is an Indian law that regulates the acceptance and utilisation of foreign contributions (donations) by individuals, associations, NGOs, etc., to ensure such funds are used transparently and not misused against India’s sovereignty or public interest.
Q. What is FCRA full form?
A. FCRA stands for Foreign Contribution (Regulation) Act.
Q. What is FCRA registration?
A. FCRA registration is the Home Ministry’s approval (a 5-year licence under FCRA) that permits an NGO or association in India to legally receive foreign contributions.
Q. What does FCRA compliant mean?
A. Being FCRA compliant means the organisation follows all provisions of the Act. This includes having a valid FCRA certificate, receiving foreign donations only into the designated SBI-New Delhi account, keeping separate accounts for those funds, spending funds only on stated objectives, capping administrative expenses (20%), filing annual returns, and fulfilling all audit and disclosure requirements.
Q. What are FCRA requirements for NGOs in India?
A. Key FCRA requirements include: obtaining mandatory registration (or prior permission); maintaining a designated SBI bank account in New Delhi for all foreign funds; submitting audited financial statements and yearly returns on time; keeping administrative costs ≤20% of foreign funds; and not mixing foreign and local contributions.
Conclusion
The Foreign Contribution (Regulation) Act remains a cornerstone of India’s NGO funding landscape. It embodies the state’s effort to prevent foreign influence over domestic affairs, while demanding transparency and accountability of charitable organizations. Over time, the Act has evolved through major amendments (1976→2010→2020 and beyond) to tighten these controls. While FCRA’s intentions are clear, its implementation has sparked debate: critics say that vague terms and onerous requirements have sometimes stifled legitimate social work, whereas supporters argue strict oversight is necessary for security. Ultimately, as debates continue, there is widespread agreement that any enforcement of FCRA must be necessary and proportionate - safeguarding India’s sovereignty without strangling the invaluable contributions of NGOs.
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