Advocate Ms. Lubna Arif
Recent Amendments and Clarifications issued under Foreign Contribution (Regulation) Act, 2010 and The Foreign Contribution (Regulation) Rules, 2011
Introduction:
The Foreign Contribution (Regulation) Act, 2010, as amended (“FCRA”) and the Foreign Contribution (Regulation) Rules, 2011, as amended (“FCRR 2011”), read with other notifications etc., issued there under from time to time, serves as an integral regulatory framework governing receipt and utilization of Foreign Contributions by certain non-governmental organizations and other entities in India.
To further strengthen this regime, the Ministry of Home Affairs (“MHA”) has recently issued notifications to carry out various amendments to the FCRA and FCRR 2011 and also issued clarifications thereunder, thereby introducing significant changes to the regulatory framework governing receipt and utilization of the Foreign Contributions in India. This Article briefly highlights such recent amendments and clarifications issued under FCRA and FCRR 2011.
Amendments to the FCRA Regime:
In the recent past, the MHA has notified:
1. The Foreign Contribution (Regulation) Amendment Rules, 2024[1] (“FCRR 2024”), effective from January 1, 2025, and
2. The Foreign Contribution (Regulation) Amendment Rules, 2025[2] (“FCRR 2025”), effective from May 26, 2025, to introduce changes in various forms filed under FCRR 2011.
Further, the MHA issued the following public notices to provide clarification regarding:
1. Refund of TDS pertaining to Foreign Contribution[3] (“Public Notice 1”);
2. Processing of prior permission application under FCRA[4] (“Public Notice 2”); and
3. Payment of Compounding and Fees from FCRA Bank Account of FCRA association whose validity has expired [5] (“Public Notice 3”).
(i) Amendment of Form FC-4, an annual return mandatorily required to be filed annually with the FCRA Wing, MHA by every person in receipt of Foreign Contribution. Briefly, amendments in Form FC-4 made by FCRR 2024 and Public Notice 1 are discussed below:
(a) Carry forward of unspent part of allowable administrative expenses – Administrative expenses, amongst others, includes (i) salaries, wages, travel expenses or any remuneration realised by the members of the executive committee or governing council of the person; (ii) all expenses towards hiring of personnel for management of the activities of the person and salaries, wages or any kind of remuneration paid, including cost of travel, to such personnel; (iii) all expenses related to consumables like electricity and water charges, telephone charges, postal charges, repairs to premise(s) from where the organisation or association is functioning, stationery and printing charges, transport and travel charges by the members of the executive committee or governing council and expenditure on office equipment; (iv) legal and professional charges; (v) rent of premises, repairs to premises and expenses on other utilities etc[6]. Further, FCRA imposes a cap on administrative expenditures for entities registered or having prior permission under FCRA, limiting such expenses to a maximum of 20% of the total Foreign Contribution received during the financial year. Administrative expenses that exceed this stipulated limit of 20% of Financial Contribution may be defrayed with prior approval of the Central Government.[7]
Prior to FCRR 2024, carry forward of unspent part of allowable administrative expenses was not explicitly allowed and associations had to utilize the allowable administrative expenses within the same financial year.
Now, FCRR 2024 adds a new proviso to Rule 5 thereby giving the association an option to carry forward the unspent part of allowable administrative expenses in a financial year to the immediately succeeding financial year. This is permitted subject to the association providing reasons in Form FC-4. If unspent part of allowable administrative expenses in a financial year is not utilized (whole or part) in the immediately succeeding financial year, then such unutilized allowable administrative expenses will lapse. For instance, the unspent administrative funds of an association at the end of financial year 2024-25, can now be carried over to financial year 2025-26, provided the association gives valid reasons in Form FC-4. Hence, FCRR 2024 allows flexibility in utilization of administrative expenses thereby reducing financial pressure on associations to utilize funds by financial year end.
(b) Transfer of Foreign Contribution part of income-tax refund from non-FCRA bank account – Prior to FCRR 2024, associations receiving income tax refunds in their non-FCRA bank accounts faced legal challenges in transferring proportionate income tax refund pertaining to Foreign Contribution back to their FCRA accounts.
Explanation 2 to Section 2(1)(h) of the FCRA i.e. definition of Foreign Contribution provides that the interest accrued on the Foreign Contribution deposited in any bank referred to in sub-section (1) of Section 17 or any other income derived from the Foreign Contribution or interest thereon shall also be deemed to be Foreign Contribution within the meaning of this clause. Accordingly, any refund of tax deduction at source deducted on any such Foreign Contribution is also considered as Foreign Contribution, and needs to be deposited in the FCRA bank account.
Post FCRR 2024, in case the consolidated income tax refund is received in non-FCRA bank account, the proportionate income tax refund pertaining to FCRA account needs to be transferred back to FCRA bank account and such transfer will not be treated as a violation of FCRA. Further, it has been clarified that at the time of TDS deduction on interest accrued on the Foreign Contribution deposited in any bank referred to in sub-section (1) of Section 17 or any other income derived from the Foreign Contribution or interest thereon, such amount of TDS may be accounted as ‘utilization of Foreign Contribution’ and upon receipt of proportionate income tax refund pertaining to FCRA account from non-FCRA bank account, such amount will be considered as ‘other income’ and shall be reported in Form FC-4.[8] Reporting of income tax refunds related to Foreign Contributions from non-FCRA accounts is now mandatory. Accordingly, Form FC-4 has been suitably amended to disclose such refunds separately.
This enhanced reporting in Form FC-4 will enhance transparency and ensure that all Foreign Contributions are accounted for, regardless of the source account. Further, associations can now transfer FCRA-related component of tax refunds to FCRA bank account without facing any legal issues. However, associations need to ensure accurate calculation and documentation of Foreign Contribution components in income tax refunds before initiating such transfer.
(c) Details of Chartered Accountants certifying Form FC-4 – Details of Chartered Accountants certifying Form FC-4 are now required to be given in Form FC-4. These details such as name of the Chartered Accountant, address, member registration number, e-mail address, date of issue of certificate and in case any violation of FCRA has been pointed out in the certificate, details thereof need to be specified in Form FC-4.
(d) Format of Chartered Accountants Certificate – Prior to FCRR 2024, Chartered Accountants were required to certify compliance of FCRA and FCRR 2011 by person/associations, but with fewer details. Post FCRR 2024, Chartered Accountants are required to provide additional certifications, including specific details of compliance or violations under FCRA. Now, Chartered Accountants Certificate also needs to state that there are no violations of FCRA or FCRR and in case there are any violations, details of violations need to be specified in the Chartered Accountant Certificate.
This expanded role of Chartered Accountants in certifying compliance has put more accountability on Chartered Accountants. However, at the same time, this ensures that persons/ associations will comply with applicable law and risk of misuse of funds will be reduced.
(ii) Amendment of Form FC-3A, Form FC-3B, Form FC-3C, Form FC-4, Form FC-6A, Form FC-6B, Form FC-6C, Form FC-6D and Form FC-6E made by FCRR 2025 are discussed below:
(a) Amendment of Form FC-3A (Application for registration under FCRA) and Form FC- 3C (Application for renewal under FCRA)
Prior to FCRR 2025, applicants seeking registration under FCRA had to submit audited statement of accounts and activity report for last three years. FCRR 2025 has increased documentation and enhanced procedural and disclosure requirements.
Post FCRR 2025, the applicants at the time of registration must submit financial statements and audit reports of last three financial years, including the statement of assets and liabilities, receipts and payments account, and income and expenditure account. If these do not contain activity-wise expenditure, a chartered accountant’s certificate in prescribed format specifying the activity-wise amount spent by the association is required to that effect, duly reconciled with the income and expenditure account and the receipt and payment account. Additionally, year-wise activity reports of last three years must be submitted.
In case the association is engaged in publication-related activities or if publication activities are among its aims and objectives as stated in the Memorandum of Association or trust deed, an undertaking is required from the Chief Functionary regarding compliance with section 3(1)(g) of FCRA[9] affirming that they are not involved in the publication of news or current affairs content. Further, if the publication of the association is registered with the Registrar of Newspaper for India (RNI), they must obtain a certificate from RNI stating that they are “Not a Newspaper”.
An affidavit in proforma “AA” from each key functionary of the association is required to be submitted affirming their citizenship and disclosing any pending legal cases. Also, if the FCRA registration has expired or been cancelled, the applicant must submit an affidavit regarding receipt and utilisation of Foreign Contribution after expiry or cancellation of registration certificate and a copy of the FCRA designated and utilisation bank account statements from the date of expiry or cancellation till date, duly certified by an officer of the bank. The aforesaid requirement of affidavit submission now applies to renewal applications as well.
Also, if an applicant’s expenditure on its aims and objects is less than Rs. 15 lakhs in last three financial years, an affidavit regarding the inclusion of capital investments in assets like land, building, other permanent structures, vehicles under Rule 9(1)(f)(ii) must be filed.
The requirement of submission of additional documentation and undertakings will ensure to increase accountability and transparency in the use of foreign funds for approved purposes only.
(b) Amendment of Form FC-3B (Application for seeking ‘prior permission’ under FCRA)
Post FCRR 2025, applicants seeking prior permission under FCRA to receive Foreign Contribution for a specific project or activity must submit a commitment letter from the donor, with the amount committed in the letter matching the donation amount mentioned in Form FC-3B. They must also submit project report including a detailed breakup of proposed expenses to be incurred from the Foreign Contribution to be received, along with a declaration that administrative expenses will not exceed 20% of the Foreign Contribution. They must also submit an undertaking confirming adherence to the Good Practice Guidelines of the Financial Action Task Force. Also, a letter from Chief Functionary is required to be submitted providing point wise details in respect of each item of guidelines for prior permission issued by the MHA.
(c) Amendment of Form FC-4 (An annual return of receipt of Foreign Contribution)
I. Detailed Disclosures regarding Movable and Immovable Assets – Pursuant to FCRR 2025 amendments have been made in Form FC-4 to capture more information regarding purchase of fresh assets, movable and immovable properties/assets created out of Foreign Contribution. As part of Form FC-4 filing with the MHA, the address or location of each fresh asset and movable asset created out of Foreign Contribution must also be disclosed. In case of immovable properties, along with details such as size, address, location, and value as per balance sheet, the value at the beginning of the financial year, value of assets acquired during the financial year, and value of assets disposed during the financial year must also be disclosed.
II. Chartered Accountants Certificate – The Chartered Accountant’s certification must now include project-wise and location-wise details of receipt and utilisation of Foreign Contribution, in both cash and kind, detailing opening balance, receipts, utilisation, and closing balance for each activity.
(d) Amendment of Form FC-6A, Form FC-6B, Form FC-6C, Form FC–6D and Form FC–6E
Prior to FCRR 2025, an undertaking from Chief Functionary for intimating changes in name, address, nature, aims and objects, registration with local/ relevant authorities, FCRA Account, additional FC-utilisation bank account or key members was sufficient. Post FCRR 2025, compliances for intimating such changes in the aforesaid forms has been strengthened. Now, both an undertaking and supporting documents such as internal resolutions, authority approvals, bank letters, affidavits in Proforma “AA”, as applicable, depending on the nature of the change are required to be submitted.
(iii) Public Notice 2 – Processing of prior permission application under FCRA
Previously, the period for which prior permission of MHA is valid for both receiving and utilising the Foreign Contribution was not explicitly defined under FCRA. Now, MHA has specified the validity period for receiving and utilising Foreign Contribution for prior permission approvals and which is as follows:
I. Validity period for receiving Foreign Contribution shall be three (3) years from the date of approval of the application for prior permission.
II. Validity period for utilising the said Foreign Contribution shall be four (4) years from the date of approval of the application for prior permission.
Further, in respect of prior permission applications which have already been approved and where the remaining period of the approved project/ activity in the prior permission is more than three (3) years, the aforesaid time limit shall be counted from the date of issue of the Public Notice i.e April 7th, 2025 and not from the date of approval of the application for prior permission. Furthermore, the MHA may, in its discretion, allow extension of the aforesaid validity periods on a case by case basis, considering the merits of each case. Any receipt or utilisation of Foreign Contribution beyond the specified time limits will be considered a violation of FCRA and lead to necessary punitive action.[10]
(iv) Public Notice 3 – Payment of Compounding and Fees from FCRA Bank Account of FCRA association whose validity has expired
MHA has allowed associations whose FCRA registration validity has expired to pay only the compounding penalty and fees from their FCRA bank account held with the State Bank of India, New Delhi Main Branch through FCRA online portal by introducing “SBI Branch Payment” option. Further, it has been clarified that any other receipt / utilisation from FCRA bank account, while the registration validity remains expired will be considered a violation of FCRA and could lead to penal action.[11]
Conclusion
No doubt, these amendments and clarifications reflect MHA’s continuous efforts to strengthen the FCRA regime, aiming for greater transparency and accountability in receipt and utilization of Foreign Contribution, providing operational flexibility, strengthen compliance, encourage timely execution of foreign funded projects while aligning with international standards nonetheless they also pose certain challenges for persons/ associations, particularly for smaller associations with limited resources and compliance infrastructure. The detailed reporting and compliance requirements may increase the administrative burden for person/associations and also lead to higher operational expenses.
Entities are encouraged to review their internal processes, streamline documentation and ensure strict adherence to these revised legal requirements to avoid penalties and ensure smooth receipt and utilization of Foreign Contributions.
Referance
[1] Notified vide Ministry of Home Affairs Notification dated 31st December, 2024.
[2] Notified vide Ministry of Home Affairs Notification dated 26th May, 2025.
[3] Public Notice No. II/21022/23(12)/2020-FCRA-III dated 31st December, 2024.
[4] Public Notice No. II/21022/36(0025)/2025/FCRA – II dated 7th April, 2025
[5] Public Notice No. II/21022/58(10)/12/2025-FCRA (MU) dated May 14, 2025
[6] Rule 5 of Foreign Contribution (Regulation) Rules, 2011.
[7] Section 8 of Foreign Contribution (Regulation) Act, 2010.
[8] Public Notice No. II/21022/23(12)/2020-FCRA-III dated 31st December, 2024.
[9] Section 3(1)(g) states that no foreign contribution shall be accepted by any association or company engaged in production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode, or any other electronic form.
[10] Public Notice No. II/21022/36(0025)/2025/FCRA – II dated 7th April, 2025.
[11] Public Notice No. II/21022/58(10)/12/2025-FCRA (MU) dated May 14, 2025
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Author Lubna Arif is a Principal Associate at Kapil Sapra & Associates
