Foreign Funding Rules for Nonprofits in India

How India's Foreign Contribution (Regulation) Act governs donations from abroad to Indian nonprofits, and how recent changes affected the sector.

Many Indian nonprofits receive donations from foreign foundations, charities and individuals. These are regulated by the Foreign Contribution (Regulation) Act, known as FCRA.

The law

The FCRA was first passed in 1976, replaced by a new Act in 2010, and significantly amended in 2020. It requires organisations that want to receive foreign contributions to:

Register with the Ministry of Home Affairs, or obtain prior permission for specific donations.
Receive foreign funds only in a designated account.
Use funds for the stated purposes and report on them.

The government’s stated aim is to ensure foreign money does not harm national interests or public order.

The 2020 amendments

The 2020 amendments introduced major changes:

All foreign contributions must first be received in a designated account at the State Bank of India’s main branch in New Delhi.
Organisations can no longer transfer foreign funds to other nonprofits, which ended many partnerships where large organisations passed funds to smaller grassroots groups.
Administrative expenses using foreign funds were capped at 20 percent, down from 50 percent.

Effects

Thousands of organisations have had FCRA registrations cancelled or not renewed over the past decade, for reasons including non-compliance with rules. Supporters say this improved accountability. Critics, including many civil society groups, argue the rules have reduced funding for legitimate work, especially small organisations, and can be applied restrictively.

The end of sub-granting

Before 2020, a large foreign-funded nonprofit might receive a grant and pass portions to several small village organisations running health or education programmes. After the amendments banned such transfers, many small groups lost access to these funds unless they obtained their own FCRA registration, which can be difficult for small organisations.

Implications for nonprofits

Indian nonprofits seeking foreign funding must invest in compliance: careful accounting, timely filings and clear records. Many have shifted toward domestic funding, including CSR and individual donors.

Thinking FCRA bans foreign donations

FCRA regulates foreign contributions rather than banning them. Registered organisations can receive foreign funds, but must follow detailed rules on accounts, use and reporting.

Key takeaways

FCRA regulates foreign contributions to Indian nonprofits.
Organisations must register, use a designated account and report on funds.
2020 amendments required an SBI New Delhi account, banned transfers to other nonprofits and capped administrative spending at 20 percent.
Many registrations have been cancelled, and nonprofits have shifted toward domestic funding.