The Foreign Contribution (Regulation) Act, 2010 ("FCRA" or the "Act") has, since its enactment, occupied a narrow regulatory lane: it governs the acceptance and utilisation of foreign contribution by persons and associations in India by a “foreign source”[1], with the stated object of ensuring that such contributions do not adversely affect national sovereignty, security, public order, or the integrity of the State. A foreign contribution may be in the form of an article, currency or a foreign security[2] and also includes income arising from such contributions.[3]

2026 has seen two distinct regulatory interventions layered onto this framework:

(i) the Foreign Contribution (Regulation) Amendment Rules, 2026, notified by the Ministry of Home Affairs on 22 June 2026 (S.O. 3272(E)) and in force with immediate effect[4] (“2026 Rules” or “Rules”), and

(ii) the Foreign Contribution (Regulation) Amendment Bill, 2026 (“Bill”), introduced in the Lok Sabha on 25 March 2026 and, as of this writing, referred to a 31-member Joint Parliamentary Committee following sustained political and stakeholder opposition, with its report expected in the first week of the Winter Session[5], still pending Parliament's consideration[6].

This distinction matters: the Rules are in force yet the Bill is not law. Where this article refers to the “Designated Authority”, provisional or permanent vesting, or the new Chapter IIIA, it describes a proposal before Parliament not the existing legal position. Read together, however, the two instruments raise a question that goes beyond a mere list of amendments:

• Is the FCRA still, in substance, a statute for regulating foreign money, its receipt, accounting and expenditure or is it evolving into a broader regulatory framework governing the identity, activities, geography, governance, and even the assets of organisations that happen to receive foreign contribution?

What follows sets out the Government's stated rationale alongside the concerns raised by affected organisations and civil society, and identifies the legal questions that remain unresolved.

II. Framework Before 2026

Under the Act, an association seeking to receive foreign contribution required either registration (valid for 5 (five) years, and renewable) or case-specific prior permission. Registration was, therefore, purpose-based but only in a broad sense, i.e., an association had to be engaged in a "definite cultural, economic, educational, religious or social programme" but this was not tied to a closed schedule of activities, nor to specific States or Union Territories (“UTs”). Section 14 permitted cancellation of registration where, among other grounds, an association had not engaged in any "reasonable activity in its chosen field for the benefit of society" for 2 (two) consecutive years, a phrase the Act never defined, leaving its content to administrative discretion.

On the consequences of cancellation or surrender, the existing Section 15 already provides that foreign contribution and assets created from it vest in an authority prescribed by the Government, which may manage the organisation's activities in the public interest, use the foreign contribution, or dispose of assets where funds prove insufficient, with restoration of funds and assets if the organisation is subsequently re-registered[7]. What Section 15 has historically lacked is procedural detail: a defined process for taking custody, managing, and disposing of vested property. This gap is the stated starting point for the 2026 Bill's asset-vesting provisions, discussed below.

III. 2026 Rules & Present Framework

The changes brought about by the 2026 Rules cluster around four themes: where organisations can work and on what; who counts as a key functionary; how “reasonable activity” is measured; and how non-compliance is penalised:

a. Where you work, and on what?

The 2026 Rules states that the certificate of registration shall specify the purpose and the States or UTs for which registration is granted. The purposes are specified in the Schedule to the Rules and limited to religious, cultural, economic, educational and social[8]. This statutorily restricts the duties of the association/organisation to tasks specified in the grant of permission. In other words, the Rules control the organisation, not the money. Existing registered associations have been given 1 (one) year to furnish this information through Form FC-6A through FC-6E and are not required to seek fresh registration merely for this purpose.

The objective, as clarified by the Government, is to give associations greater clarity regarding their permitted scope of work and to enable activity and location-based monitoring[9]. However, this also creates a new compliance overhead for the organisations to deal with, thereby requiring an organisation to plan the entire extent and scope of its operations at the time of seeking permission and if such scope does not fit the pigeonholes provided in the Schedule, the organisation risks its registration being revoked.

The categories do not cover the evolving scope of work extending to climate advocacy, digital awareness or work by policy think tanks. Geography-based compliance may hinder organisations from expanding their operations beyond State borders. Organisations functioning pan-India or across multiple categories could face the brunt of fee multiplication for seeking permission for their activities.

b. An expanded and more accountable governance class

NGOs are required to disclose their activities, the geographical scope of their programmes, their websites, social media accounts, and publications. Further, they must now also pay separate fees for each category, State and UT they operate in, as opposed to the previous single fee under the 2010 Act.[10]

The new Rules ensure transparency, enabling the Government to verify whether the money received through foreign contribution was utilised and whether it was utilised for the purpose for which it was sought, thereby preventing the persistent issue of fund parking, where foreign contributions remain unspent for extended periods, increasing the risk of diversion or financial mismanagement[11]. This increases public trust in the organisations and creates an accountability framework for organisations towing the line.

The 2026 Rules expand the “Key Functionaries” from directors and office bearers to include Karta of HUF, trustees, partners, governing-body members, persons exercising control and management thereby creating a mechanism similar to the doctrine of lifting of the corporate veil in order to hold wrongdoers personally liable for their acts of potential statutory violations. The Rules create a bar on considering organisations which have a foreign national as a key functionary for grant of registration under the Act, or for permission to receive foreign funds.

c. Measurable activity and utilisation thresholds

The Rules create an objective benchmark for determining whether an organisation registered under this Act is genuinely active in the field it sought permission for, and create a presumption that if Rupees 10 lakhs (or more) received as foreign contribution by an organisation is utilised over the preceding 2 (two) financial years, it will be deemed to have undertaken “reasonable activity”. This establishes a measurable statutory standard for determining “reasonable activity” and ensures that the organisation actually utilises the funds it receives rather than just accumulating foreign funds behind the garb of conducting non-profit activities. It also enables the organisation to prove that it has conducted “reasonable activity” in the field in which it sought registration. This threshold helps create a uniform mechanism to cancel or renew registration under the Act.

d. A restructured, percentage-based penalty regime

Any use of funds for purposes other than those for which they were received can attract a penalty of up to 30% of the amount misused or ₹1 lakh, whichever is higher[12]. Similarly, using foreign funds for purposes or in areas not covered under the NGO’s approval or registration also invites a fine of 30% of the amount or ₹1 lakh, whichever is higher. In addition, spending beyond the permitted administrative expense limit or engaging in speculative use of funds is penalised with fines calculated as a percentage of the amount involved, subject to a minimum of ₹1 lakh.

IV. Asset Vesting Mechanism Under The Proposed 2026 Bill

Proposed Section 14B introduces "cessation" of an FCRA certificate as a trigger provision, applying where a certificate expires without a renewal application being made, or where a renewal application is refused, or where the certificate is otherwise not renewed before expiry. This provision expands the circumstances under which an asset could be vested beyond the existing routes of cancellation and voluntary surrender[13].

The proposed amendment omits Section 15 from the 2010 Act by creating a framework of provisionally vesting the asset created from foreign contributions with the “Designated Authority” upon its certificate being cancelled, surrendered or ceased under a new Chapter IIIA of the Bill. The Government’s justification rests on the Supreme Court’s decision in Noel Harper v. Union of India[14], which held that, “There is no fundamental right vested in anyone to receive foreign contribution (donation) or foreign exchange”.[15] No concrete method has been specified in the Bill for the process of vesting of assets, but complete discretion has been afforded to the “Designated Authority” to prescribe the manner. During provisional vesting, the “Designated Authority” may take possession of the relevant assets and manage the organisation’s activities, including using its foreign contribution. The vesting, at this stage, is temporary in character, but the organisation loses the ability to deal with the affected property as it previously could. This directly affects NGOs and religious trusts running schools, hospitals and community projects funded by foreign contributions, since there is no established compensation mechanism for assets which are vested with the “Designated Authority” and later transferred or sold; and creates an open-ended uncertainty over asset disposition, without a clear entitlement to value in exchange.[16]

It is immaterial whether the asset has been created wholly by foreign contributions or partly from foreign contributions and partly from other/domestic sources. If the part of the asset created by other/domestic sources is separable from the rest of the asset, the same may be returned on application to the “Designated Authority”.[17]

Upon renewal, restoration or grant of a new certificate, the “Designated Authority” shall return the unutilised foreign contribution and assets provisionally vested with it. If the person/organisation/association fails to do so, the asset is deemed to have permanently vested with the “Designated Authority”. This creates a cycle of compulsory registration by the organisation in order to retain the asset. If the organisation’s foreign funding shrinks as a consequence of the 2026 amendments, it may fail to meet the renewal threshold under the Act, leading to the asset being vested with the “Designated Authority”. Should the organisation be able to run the asset created by foreign contribution solely based on domestic funds, it may still need to constantly seek registration to ensure its retention of assets, creating an endless bureaucratic cycle.

Neither the existing Act nor the Bill creates a statutory appeal mechanism against the Central Government’s refusal to renew an FCRA certificate, unlike the appeals route available against certain other FCRA decisions, nor is there an express requirement for a hearing before such refusal.

The Authority’s own accountability is constrained in two ways: firstly, decisions of the “Designated Authority” are challengeable only before a court of law, not before any independent quasi-judicial body; secondly, the Bill neither prescribes a compensation mechanism for assets transferred or sold, nor stipulates timelines within which the Authority must act.

The Government’s stance is that the mechanism of vesting of the asset existed under the 2010 Act under Section 15, and the proposed Chapter IIIA simply brings in operational detail in the form of a statutory system of supervision, management and disposal which the current framework lacks.

V. Practical Compliance For NGOs And Trusts

Before applying for FCRA registration or accepting a foreign contribution, an NGO or trust should first audit its key functionaries to confirm none are foreign nationals, since Section 12A bars registration where a key functionary is a foreign national[18]. Organisations should budget for compliance costs at the outset, since registration under the 2026 Rules has become activity- and geography-specific, requiring applicants to select precise purposes from a Schedule of 105 prescribed activities and specify the States or UTs in which they intend to operate. Expanding into a new State or activity later requires a governing body resolution and incremental filing fees of ₹300 per additional State or purpose added, and cannot simply be folded into the next annual return. Mapping planned programmes against the applicable categories in such Schedule before filing is, therefore, essential, not optional.

Applicants should also be prepared for the procedural mechanics of the application itself: Section 12(1) applications require opening a designated FCRA account under Section 17, filed electronically in Form FC-3A with an affidavit from each office bearer and key functionary in Proforma AA. Applications for prior permission under Section 11(2) follow the same affidavit requirement but are filed in Form FC-3B instead.[19]

VI. Conclusion

The material examined here does not permit a definitive answer to whether the FCRA is still, in substance, a statute for regulating money. While the Bill remains before the Joint Parliamentary Committee, the direction indicated by the Rules and the Bill together is reasonably clear. The Bill, if enacted in its current form, would add a dangerous consequential layer such that an organisation's assets, including those built in part with domestic funds, could pass to a Government appointed authority as a consequence of registration status, independent of any proved finding of financial wrongdoing. The numerous unresolved legal questions arising out of the proposed amendment, coupled with the headstrong backlash by the organisations affected by the amendment, are likely to remain contested until the Joint Parliamentary Committee reports and the Bill's final text is settled.

[1]Section 2(j) Foreign Contribution (Regulation) Act 2010.

[2]Section 2(h) Foreign Contribution (Regulation) Act 2010.

[3]Foreign Contribution (Regulation) Act Transparency, Sovereignty and Democratic Accountability FAQs; 22 JUL 2026 by PIB Delhi, available at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2287845&reg=48&lang=2

[4]Ministry of Home Affairs, Foreign Contribution (Regulation) Amendment Rules, 2026, S.O. 3272(E), notified 22 June 2026, see https://fcraonline.nic.in/home/PDF_Doc/fc_gaz_23062026.pdf; see AZB & Partners, "FCRA Amendment Rules, 2026: India Revamps the FCRA Regime", https://www.azbpartners.com/bank/fcra-amendment-rules-2026-india-revamps-the-fcra-regime/; Pacta, "FCRA Rules 2026 Amendments: What Changed and What It Means", https://www.pacta.in/post/fcra-2026-amendments-what-changed-and-what-it-means.

[5]Lawbeat, "FCRA Amendment Bill 2026: What It Proposes, Why It Is Controversial And What Happens After JPC Referral", https://lawbeat.in/top-stories/fcra-amendment-bill-2026-what-it-proposes-why-it-is-controversial-and-what-happens-after-jpc-referral-1621669

[6]PRS Legislative Research, Bill Track, "The Foreign Contribution (Regulation) Amendment Bill, 2026", https://prsindia.org/billtrack/the-foreign-contribution-regulation-amendment-bill-2026.

[7]The Print, "'Designated authority', takeover clause: What FCRA Amendment Bill means for NGOs under govt lens" (theprint.in), https://theprint.in/india/governance/designated-authority-takeover-clause-what-fcra-amendment-bill-means-for-ngos-under-govt-lens/2889236/

[8]New Kerala, "New FCRA Rules 2026: Tighter Compliance, Wider Scope", https://www.newkerala.com/news/a/centre-notifies-mendments-fcra-rules-tightens-compliance-expands-992.htm;

[9]IFCCL, "FCRA Amendment Rules 2026: Compliance Guide for NGOs" https://www.caindelhiindia.com/blog/fcra-amendment-rules-2026/

[10]Key Amendments Proposed to the Foreign Contribution (Regulation) Act, 2010; 14 May 2026; https://acuitylaw.co.in/key-amendments-proposed-to-the-foreign-contribution-regulation-act-2010/

[11]NGOs receiving foreign funds face higher penalties under revised FCRA rule; 23 June 2026; DT Next; https://www.dtnext.in/news/national/ngos-receiving-foreign-funds-face-higher-penalties-under-revised-fcra-rules; Govt revises penalties under FCRA involving receipt of foreign contributions by NGO; 23 June 2026, The Economic Times; https://economictimes.indiatimes.com/news/india/govt-revises-penalties-under-fcra-involving-receipt-of-foreign-contributions-by-ngos/articleshow/131933664.cms?from=mdr

[12]VisaVerge, "FCRA Amendment Bill 2026: Asset-Vesting Process Could Seize Foreign-Funded Assets", https://www.visaverge.com/news/fcra-amendment-bill-2026-asset-vesting-process-could-seize-foreign-funded-assets/.

[13]Noel Harper v. Union of India, (2023) 3 SCC 544.

[14]Ishita Jaitley; Custodial Turn In India's Foreign Contribution Regulation Amendment, 2026; 23 July 2026; https://www.livelaw.in/lawschool/articles/custodial-turn-india-foreign-contribution-regulation-amendment2026-542389

[15]Vageesha Shrivastaval; What Is The FCRA Bill 2026 And Why Is It Changing India's Foreign Funding Rules?; 28th July 2026, brut.media

[16]ICNL, "India's FCRA Amendment Bill, 2026: What Civil Society and Donors Need to Know", https://www.icnl.org/post/news/india-fcra-amendment-bill-2026

[17]Shruti Mishra; FCRA Amendment Rules 2026- Foreign Contribution, Foreign Nationals, and What Every NGO Must Do Now; 18 July 2026; https://bsamrishindia.com/fcra-amendment-rules-2026-foreign-contribution-foreign-nationals/

[18]Noshir H. Dadrawala; Impact of Foreign Contribution (Regulation) Amendment Rules, 2026; 10 July 2026; https://capindia.in/impact-of-foreign-contribution-regulation-amendment-rules-2026/

[19]Section 12(1A) of FCRA, 2010 substituted vide Foreign Contribution (Regulation) Amendment Act, 2020 w.e.f. 29 September 2020 and Rule 9(1)(a) of FC(R) (Regulation) Rules, 2011 as amended on 10 November 2020. Chetan Kulasri, https://www.taxmann.com/post/blog/registration-for-accepting-foreign-contribution/;

Registration for Accepting Foreign Contribution (FCRA); 16 February, 2024; https://www.taxmann.com/post/blog/registration-for-accepting-foreign-contribution/