Regulating foreign funding: the FCRA regime

Detail

Key terms

• Foreign contribution: a gift of money, goods or securities from a foreign source. A foreign source can be a foreign government, a foreign company, a foreign trust or a foreign citizen.
• NGO (non-governmental organisation): a voluntary group that works for social causes and is not run by the government. Examples are trusts, societies and Section 8 companies.
• FCRA registration: a certificate from the Ministry of Home Affairs (MHA). It lets an association receive foreign money for any of its approved purposes. It is valid for five years and can be renewed.
• Prior permission: a one-time approval to receive a fixed amount from a named donor for one stated project. It is meant for groups that are not registered.
• Sub-granting: when an NGO that receives foreign money passes part of it on to another NGO.

Evolution of the law

• FCRA 1976:
• It was passed during the Emergency (1975–77).

• The fear was that foreign money could shape Indian politics, elections and the media.

• 1984 amendment: associations had to register before they could receive foreign money.

• FCRA 2010: it replaced the 1976 Act and came into force in May 2011. The MHA runs it through its Foreigners Division (FCRA wing).
• Finance Act 2016 and Finance Act 2018: these were retrospective amendments (changes that apply to past years as well).
• They changed the meaning of "foreign source" for Indian companies that have foreign shareholding.
• As a result, political parties could keep donations they had already taken from such companies (see the electoral-reforms note).

Who can never take foreign money

Provision	Who is covered
Section 3 (complete bar)	election candidates; legislators (MPs and MLAs); political parties and their office-bearers; judges; government servants and employees of government-controlled corporations; owners, editors and publishers of newspapers and news-media companies (including those producing news for TV and digital media)
Section 3, as amended in 2020	"public servant", as defined in Section 21 of the Indian Penal Code [2]
Section 5	organisations of a political nature, as notified by the Central Government

How everyone else is regulated

• Entry: an association must get registration (five years, renewable) or prior permission for a single project.
• Banking: all foreign money must come into one designated FCRA account. It cannot be mixed with money raised in India.
• Reporting: the association must file an annual return (Form FC-4) showing what it received and how it spent it.
• Penalties:
• The government can suspend a registration (s.13) or cancel it (s.14).
• A cancelled association cannot apply again for three years.
• Under s.35, a person who breaks the Act can be jailed for up to five years.

FC(R) Amendment Act 2020

The Bill was introduced in the Lok Sabha on 20 September 2020. The Lok Sabha passed it on 21 September 2020 and the Rajya Sabha on 23 September 2020 [2].

Change	Before 2020	After 2020
Transfer of funds (s.7)	A registered NGO could pass funds to another registered NGO	No sub-granting: funds cannot be transferred to any other person [2]
Administrative expenses (s.8)	Up to 50%	Up to 20%. At least 80% must go to the purpose for which the money was given [2][6]
Receiving account (s.17)	Any bank the NGO chose	Only an "FCRA account" at the SBI New Delhi Main Branch. The NGO may open a second account in any scheduled bank to keep and spend the money [2][6]
Identification (s.12A)	—	Aadhaar of all office-bearers, directors and key functionaries. Foreigners give a passport or OCI card [2]
Barred list (s.3)	—	"Public servant" added [2]
Suspension (s.13)	180 days	180 days plus up to 180 more = 360 days [2]
Surrender (s.14A)	—	An NGO can give up its certificate voluntarily, with government permission [2]
Renewal	—	The government may make an inquiry before renewal to check the NGO is genuine and has not misused funds [2]

• FCRA Amendment Rules, 1 July 2022:
• Money from relatives abroad no longer needs to be reported to the government up to ₹10 lakh a year. The earlier limit was ₹1 lakh.
• Where reporting is needed, the time to do it went up from 30 days to three months [5].

Noel Harper v. Union of India (8 April 2022)

• Bench: Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar.
• Holding: the Court upheld the 2020 amendments.
• There is no fundamental right to receive foreign contributions. Receiving foreign money is not part of Article 19(1)(c) or Article 19(1)(g) (the freedom to practise any profession or business).
• Foreign money can shape national policy and politics. So Parliament may regulate it strictly or even ban it completely.

• The sub-grant ban (s.7), the 20% administrative cap and the SBI-account rule are all valid. They help the government trace the money and keep the system clean.

• Reading down s.12A: the Court said Indian office-bearers could identify themselves with an Indian passport in place of Aadhaar.

• Reading down means the Court gives a law a narrower meaning so that it stays constitutional.

Enforcement record

• MHA data (July 2026):
• About 20,000 registrations were cancelled in the past decade.

• About 15,000 more lapsed. These are "deemed ceased": the NGO did not apply for renewal, or renewal was refused.

• 2024-25: about 16,200 active associations received about ₹22,963 crore in foreign contributions.

• High-profile actions:
• Greenpeace India (2015): registration suspended and its accounts frozen.
• Amnesty International India (September 2020): its bank accounts were frozen and it stopped working in India.

FC(R) Amendment Bill 2026

• Status:
• Introduced in the Lok Sabha on 25 March 2026.
• Referred to a Joint Parliamentary Committee (JPC) on 12 August 2026 [3].

• It is not yet law.

• Vesting of assets:

• A new Designated Authority will take control of foreign money and assets when an NGO stops holding a certificate. This happens if the certificate is cancelled or surrendered, if no renewal is sought, or if renewal is refused [3].
• "Vesting" means ownership passes to the government's authority.
• Vesting is first provisional. It becomes permanent if the certificate is not renewed, restored or granted fresh. If the certificate comes back, the unspent money and assets are returned [3].
• Assets built partly with foreign money also vest. The NGO may ask for the part it paid for with Indian money [3].

• If the asset is a place of worship, the Authority must keep its religious character [3].

• Revision and appeal: orders on vesting can be challenged before a district judge.

• Jail term: the maximum term falls from five years to one year [3].
• Investigations: the Central Government's prior approval is needed before any FCRA offence can be investigated. This stops state agencies from opening FCRA cases on their own [3].
• Gap:
• The Act allows an appeal against cancellation, but not against refusal of renewal.

• An NGO gets no hearing before renewal is refused [3].

• Liability: directors, trustees and members of the governing body are presumed responsible for an offence. They escape only if they prove they did not know of it or took due care [3].

FCRA Amendment Rules, 22 June 2026

• Purpose-specific registration:
• Each NGO must choose its work from an approved list of 105 activities.
• The list falls under five heads: cultural, economic, educational, religious and social.

• There is an extra ₹300 fee for each purpose [4].

• Area of work:

• Each NGO must name the states and UTs where it will work, with ₹300 for each extra state or UT.

• Any change needs fresh government approval [4].

• Renewal test:

• The NGO must show "reasonable activity".

• This means it used at least ₹10 lakh of foreign money over the previous two financial years [4].

• Key functionaries:

• The definition now covers directors, partners, trustees, HUF kartas and governing-body members.

• Foreign nationals (other than persons of Indian origin) cannot hold these posts without a government exception [4].

• Disclosures: the NGO must list its social media accounts and report its activities and funds used in the previous three years [4].

The debate

• Government's case: sovereignty, transparency and security.
• Foreign money could be used to shape policy, fund protests against development projects, or support religious conversion and terror financing.
• FATF Recommendation 8: the FATF (Financial Action Task Force) is a global body that fights money laundering and terror financing. Recommendation 8 asks countries to stop non-profits being misused for terror financing.

• Other democracies have similar laws:

  • US: Foreign Agents Registration Act (FARA), 1938
  • Australia: Foreign Influence Transparency Scheme
  • UK: Foreign Influence Registration Scheme
  • Canada: foreign influence registry

• Critics' case: freedom of association and space for civil society.

• Chilling effect: NGOs avoid advocacy and dissent because they fear losing their licence.
• Small grassroots NGOs lost money they used to get from larger NGOs through sub-grants.
• The SBI-only account and the 20% cap make running costs high, for example for staff and audits.

• UN Special Rapporteurs have said the law is used to silence human-rights groups.

• Constitutional balance:

• Art. 19(1)(c) protects the freedom to form associations.
• Art. 19(4) allows reasonable restrictions on this freedom in the interest of the sovereignty and integrity of India, public order or morality.
• In Noel Harper (2022), the Court let the State control the funding of associations without breaching the right to form them.

Prelims Hooks

• The first FCRA was passed in 1976 (Emergency era). The current law is FCRA 2010, in force from May 2011, and is run by the MHA, not the Finance Ministry.
• 2020 amendment: administrative expenses cut from 50% to 20%, the sub-granting ban, the SBI New Delhi Main Branch account and suspension of up to 360 days.
• Barred under s.3: candidates, legislators, judges, government servants, newspaper editors, owners and publishers, and public servants (added 2020). Organisations of a political nature are barred under s.5.
• FCRA registration is valid for five years. Prior permission covers one specific amount from one donor for one project.
• Noel Harper v. Union of India (2022): there is no fundamental right to receive foreign contributions. An Indian passport may be used in place of Aadhaar.
• 2022 Rules: money from relatives abroad needs no reporting up to ₹10 lakh a year (earlier ₹1 lakh). Where reporting is needed, the time limit is 3 months (earlier 30 days).
• FC(R) Amendment Bill 2026:
• asset vesting in a Designated Authority
• maximum jail term cut from 5 years to 1 year
• Centre's prior approval for investigations

• referred to a JPC (August 2026)

• 2026 Rules: 105 approved activities in five categories. The "reasonable activity" test for renewal is ₹10 lakh over two years.

• Trap: FCRA bars political parties from foreign money, but the 2016 and 2018 Finance Act amendments changed the meaning of "foreign source" for companies with retrospective effect.

Mains Points

• Regulation vs. freedom of association:
• The State has a real interest in sovereignty, transparency and FATF Recommendation 8.
• Noel Harper (2022) accepted that interest.

• But Art. 19(4) allows only reasonable restrictions. Wide discretion, refusal of renewal without a hearing and no appeal against non-renewal [3] raise due-process concerns (the requirement of a fair procedure before the State takes away a right).

• Effect on the civil-society ecosystem:

• The sub-grant ban cut off the main channel through which foreign money reached small grassroots NGOs and SHG-support groups.
• The 20% cap and the purpose and state limits of the 2026 Rules [4] make compliance costly.

• Together, these risk shrinking the space for advocacy and for watchdog work by pressure groups.

• 2026 reforms are a mixed package:

• Fewer crimes and lighter penalties: the jail term falls to one year, and the Centre must approve investigations, which stops harassment by state agencies [3].
• More control over assets: assets now vest in a Designated Authority when registration lapses [3].
• Reform ideas:
  • a time-bound renewal process
  • an independent appellate tribunal
  • a hearing before refusing renewal
  • checks matched to the level of risk, as FATF advises, instead of the same rules for every NGO