Foreign Donation to Hospitals & Medical NGOs – FCRA Compliance

Hospitals, medical colleges, charitable clinics, and medical NGOs are among the largest recipients of foreign aid in India—whether for disaster relief, public health programs, research grants, free surgeries, or medical equipment.

However, under the Foreign Contribution (Regulation) Act, 2010 (FCRA), healthcare entities are also among the most scrutinized.

A single compliance lapse—often unintentional—can lead to:

• Freezing of foreign funds
• Suspension or cancellation of FCRA registration
• Disruption of patient care and donor confidence

For hospitals, FCRA non-compliance is not merely a legal issue; it is an operational and reputational risk. Let us explore the finer nuances in this article as below:

1. “Foreign Contribution” for Hospitals?

For medical institutions, foreign contribution typically includes:

•  Foreign grants or donations from overseas foundations, governments, or individuals
• Medical equipment (MRI machines, ventilators, diagnostic tools) received free of cost
• Medicines and consumables donated by foreign entities
• Research funding from foreign universities or health agencies
• Disaster relief aid routed through international organisations

Importantly, even non-monetary donations (equipment, medicines) are treated as foreign contribution and must be properly disclosed and accounted for.

2. Registration vs Prior Permission — A Strategic Choice

Healthcare entities must evaluate the correct entry route:

(a) FCRA Registration

• Suitable for hospitals/NGOs with minimum 3 years of charitable medical activity
• Allows receipt of foreign contribution from multiple donors
• Requires demonstrable track record and compliance history

(b) Prior Permission (PP)

• Ideal for new hospitals, start-up medical NGOs, or one-time grants
• Restricted to specific donor, amount, and purpose
• Common for equipment donations or pilot health projects

Choosing the wrong route is one of the most common compliance mistakes in the healthcare sector.

3. Foreign Medical Equipment — The Most Ignored Risk Area

Many hospitals assume that equipment donations are exempt. They are not.

Key compliance points:

• Equipment must be valued at fair market value
• Proper donation agreements / gift deeds are essential
• Disclosure in Form FC-4 is mandatory
• Equipment must be used only for stated charitable purposes

Red flags often noticed by MHA:

• Equipment used for commercial (paid) services without clarity
• No valuation certificates
• Equipment routed through Indian intermediaries to mask foreign origin

4. The SBI FCRA Account — Operational Reality

Every FCRA-registered hospital must:

• Receive foreign contribution only in the designated SBI New Delhi Main Branch FCRA account
• Transfer funds to utilization accounts only after receipt
• Maintain complete linkage between receipt and utilization

Practical challenge:
Many hospitals struggle with internal fund-flow mapping, especially when grants are used across multiple departments or locations.

5. Utilization Rules — Where Hospitals Slip

Foreign contribution must be used strictly for the approved medical objectives.

Common violations:

• Using foreign grants for unrelated hospital infrastructure
• Mixing FCRA funds with domestic revenues
• Charging high administrative overheads (limit: 20%)
• Paying remuneration to trustees/doctors without documentation

For hospitals, the distinction between charitable activity and commercial healthcare must be clearly documented.

6. Annual FC-4 Return — Not a Routine Filing

Form FC-4 is the primary enforcement trigger for MHA scrutiny.

Healthcare-specific pain points:

• Incorrect classification of equipment donations
• Mismatch between utilization and objects clause
• Non-disclosure of interest income on FCRA funds
• Late filing (deadline: 31 December)

Once discrepancies appear in FC-4, inspection notices often follow.

7. Changes in Management & Governance — Silent Violations

Hospitals frequently change:

• Medical directors
• Trustees
• Board members
• Key functionaries

Under FCRA:

• Changes must be intimated within prescribed timelines
• Aadhaar / Passport details are mandatory
• Failure can result in suspension without hearing

This is a compliance area often overlooked during hospital restructuring or expansion.

8. Enforcement Trends:

Recent trends show:

• Greater scrutiny of faith-based medical charities
• Close monitoring of large equipment donations
• Increased cancellations due to “inactivity” or documentation gaps
• Focus on whether healthcare services remain genuinely charitable

The regulator’s approach is now preventive and surveillance-driven, not reactive.

9. Practical Compliance Takeaways for Hospitals & Medical NGOs

• Treat FCRA as a board-level compliance item
• Map every foreign grant to:
  • Object clause
  • Project documentation
  • Utilisation trail
• Maintain separate internal cost centres for FCRA funds
• Conduct annual internal FCRA compliance reviews
• Align legal, finance, and medical administration teams

Closing Remarks

For hospitals and medical NGOs, FCRA compliance is not about paperwork—it is about preserving trust, continuity of care, and long-term donor relationships.

In today’s regulatory climate, good intentions without compliance can still attract penalties. The institutions that thrive are those that integrate FCRA into their governance DNA.

******

In case you have any concern and queries or need any support under FCRA, FEMA, FDI, GST and International Taxation, you may like to contact us.

Abhinarayan Mishra, FCA, FCS; Managing Partner, KPAM & Associates, Chartered Accountants, Dwarka, New Delhi; +9910744992, ca.abhimishra@gmail.com