Introduction
In India’s evolving development ecosystem, foreign contributions continue to play a critical role in supporting non-governmental organisations, charitable institutions and civil society bodies across sectors such as healthcare, education and climate action. These inflows are regulated under the Foreign Contribution (Regulation) Act, 2010 (“FCRA”), which establishes a framework to ensure that such funding is received and utilised in a manner consistent with national interest and public accountability.
While the FCRA regime has been periodically strengthened through amendments, practical and regulatory gaps have emerged over time, particularly in relation to management of foreign contribution and assets upon cancellation or cessation of registration, procedural inefficiencies, and interpretational ambiguities.
Against this backdrop, the Foreign Contribution (Regulation) Amendment Bill, 2026 (“Bill”), introduced in the Lok Sabha on March 25, 2026, seeks to address these challenges by, inter alia, introducing a comprehensive framework for vesting and management of assets through a designated authority, prescribing timelines for utilisation under prior permission, clarifying treatment of assets during suspension, providing for cessation of registration, rationalising penalties, and requiring prior approval of the Central Government for initiation of investigations, with a view to enhancing regulatory clarity, oversight and administrative efficiency under FCRA.
Key proposed amendments under the Bill
1. Timelines for Prior Permission
The regulatory approach to prior permission under the FCRA has historically allowed flexibility in the receipt and utilisation of foreign contribution, with no prescribed outer timeline for deployment of funds. While this enabled implementation of long-term projects, it also resulted in regulatory ambiguity and potential risks of prolonged fund parking or misuse.
In this context, the Ministry of Home Affairs (“MHA”), through its notification dated April 7, 2025,1 introduced a defined validity framework prescribing a three-year period for receipt of foreign contribution from the date of approval, and a four-year period for its utilisation, with limited scope for extension in exceptional cases.
The Bill now seeks to formalise this position by introducing Section 12(7), which provides that prior permission granted under Section 12(3) shall be valid for a specific purpose and/or specified amount of foreign contribution, and that such contribution must be received and utilised within such period as may be prescribed.
2. Restriction on Dealing with Assets During Suspension
Under the existing framework, suspension of an FCRA registration restricts an organisation’s ability to utilise foreign contribution; however, there has been limited regulatory clarity on the treatment of assets created out of such foreign contribution during the suspension period. This has led to interpretational gaps and potential risks relating to the alienation or encumbrance of such assets.
The Bill seeks to address this by amending Section 13(2) to insert a new clause (c), which expressly provides that an organisation shall not alienate, encumber, or otherwise deal with any asset created out of foreign contribution during the period of suspension, except with the prior approval of the Central Government.
This creates a clear restriction on asset-level actions during suspension and limits operational autonomy. Organisations with ongoing projects or infrastructure assets may face constraints in restructuring, monetising, or otherwise managing such assets during this period.
3. Deemed Cessation of FCRA Registration
The Bill proposes to inset Section 14B to provide statutory clarity on the circumstances in which an FCRA registration shall be deemed to have ceased. Under the proposed provision, a certificate shall automatically cease upon expiry of its validity period in cases where: (a) no application for renewal has been made under Section 16(2); (b) an application for renewal has been made but is refused by the Central Government; or (c) the certificate is not renewed prior to its expiry.
The provision further clarifies that upon such cessation, the concerned person shall be prohibited from receiving or utilising any foreign contribution unless the certificate is subsequently renewed. This amendment seeks to eliminate ambiguity around the legal status of organisations post-expiry or non-renewal of registration, and introduces a clear, self-operative framework governing cessation and its immediate regulatory consequences.
4. Vesting of Foreign Contribution and Assets in a Designated Authority (Insertion of Chapter IIIA)
The Bill introduces a new Chapter IIIA to establish a comprehensive statutory framework governing the vesting, supervision, management and disposal of foreign contributions and assets created therefrom. It provides for the appointment of a “designated authority” (and, where required, an “Administrator”) to whom such foreign contributions and assets shall provisionally vest upon cancellation, surrender or cessation of registration. The designated authority is empowered to take possession of such assets, supervise and manage them, and, where necessary in public interest, continue the operations of the concerned entity. The framework also clarifies that assets acquired partly from foreign contribution shall vest wholly, subject to a limited right of the entity to seek return of identifiable portions funded from non-foreign sources. Further, in cases where registration is subsequently restored or renewed within the prescribed period, the unutilised foreign contribution and assets are to be returned, subject to conditions, as may be prescribed.
Further, where no such restoration or renewal is obtained within the prescribed timeline, the Bill clarifies that the foreign contribution and related assets shall permanently vest in the designated authority, to be applied for public purposes, including transfer to government bodies or disposal with proceeds credited to the Consolidated Fund of India. The Chapter also addresses transitional treatment of assets previously governed under the erstwhile Section 15 of FCRA, provides for vesting in cases where entities become defunct, and sets out an enabling framework for asset transfer, including issuance of conclusive certificates of sale or transfer. Detailed provisions prescribe the duties and powers of the designated authority (including civil court powers), obligations of affected entities and their key functionaries, mechanisms for revision and appeal, and overarching government oversight collectively aimed at ensuring transparency, safeguarding of assets, and effective regulatory control.
5. Rationalisation of Penalties
Under the existing framework, Section 35 of the FCRA prescribes penalties for contravention of the Act, including acceptance of foreign contribution in violation of its provisions, with imprisonment of up to five years, or fine, or both. The Bill proposes to substitute this provision to both expand its scope and rationalise the penalty structure, by expressly covering utilisation (in addition to acceptance) of foreign contribution in contravention of the Act, while reducing the maximum term of imprisonment to one year. The amended provision continues to extend to persons assisting in such contraventions and retains monetary penalties, reflecting a calibrated approach that broadens the ambit of non-compliances while moderating the severity of punishment.
6. Offences by Entities and Liability of Key Functionaries
Under the existing framework, Section 39 of FCRA attributes liability for offences committed by a “company” to persons in charge of and responsible for its conduct, including directors and officers, subject to defences of lack of knowledge or due diligence. The Bill proposes to substitute this provision to broaden its scope beyond companies to cover any “person other than an individual”, while introducing the concept of “key functionaries” as the relevant standard for attribution of liability. Accordingly, where an offence is committed by such person, both the entity and its key functionaries responsible for its operations shall be deemed liable, unless they demonstrate absence of knowledge or exercise of due diligence. Further, liability is expressly extended to cases involving consent, connivance or neglect of such key functionaries.
7. Prior Approval for Investigation
Under the existing framework, Section 43 empowers the Central Government to authorise specified authorities to investigate offences under the FCRA, with such authorities vested with powers akin to those of a police officer investigating a cognizable offence. The Bill proposes to strengthen procedural safeguards by amending this provision to require prior approval of the Central Government before initiation of any investigation for offences under the Act. This introduces an additional layer of oversight at the threshold stage, with a view to ensuring that investigative action is undertaken in a calibrated and controlled manner, and to minimise the risk of parallel or unwarranted proceedings.
8. Expansion of Rule-Making Powers and Power to Remove Difficulties
Section 48 of the FCRA empowers the Central Government to frame rules for carrying out the provisions of the Act. The Bill proposes to significantly expand and realign this framework to give effect to the substantive amendments, particularly in relation to timelines under the prior permission route and the newly introduced Chapter IIIA on vesting and management of foreign contribution and assets. Accordingly, a new clause enables prescription of timelines for receipt and utilisation under Section 12(7), while provisions linked to the erstwhile Section 15 are omitted. In parallel, an extensive set of rule-making powers has been introduced to operationalise the designated authority framework, including provisions relating to provisional vesting, asset management, restoration of registration, transfer or disposal of assets, reporting requirements, delegation of powers, appellate mechanisms, and exemptions—thereby creating a detailed delegated legislative architecture to support implementation.
In addition, the Bill amends Section 53 to strengthen the Central Government’s ability to address transitional and implementation challenges arising from the Amendment Act. A new sub-section (1A) empowers the Government to issue orders, within a period of two years from commencement, to remove difficulties in giving effect to the amended provisions, provided such orders are not inconsistent with the Act. This complements the expanded rule-making powers by ensuring administrative flexibility during the transition to the revised regulatory regime.
9. Expanded Definition and Liability of Key Functionaries
The Bill introduces a comprehensive definition of “key functionary” to include individuals responsible for the management and affairs of an organisation, such as directors of companies, partners in firms, trustees of trusts, karta of a Hindu undivided family, office bearers or members of governing bodies, as well as any other person exercising control or managerial responsibility, by whatever name called. This expanded definition aligns with the revised liability framework under the Act, particularly Section 39, to ensure that accountability extends beyond formal designations to all individuals exercising de facto control. Consequently, such key functionaries may be held liable for contraventions by the organisation, subject to the statutory defence of lack of knowledge or exercise of due diligence, thereby reinforcing governance and compliance obligations across organisational structures.
NDA Analysis
The Bill introduces a materially enhanced regulatory framework for not-for-profit organisations receiving foreign contributions under the FCRA, with significant implications for compliance architecture, asset control, and governance accountability.
A key structural shift lies in the formalisation of a regime governing the treatment of foreign contributions and assets created therefrom, particularly in cases of suspension, cancellation, or cessation of registration. The proposed vesting mechanism—operating on both a provisional and eventual permanent basis in favour of the designated authority substantially constrains the ability of organisations to deal with such assets. This elevates asset-related regulatory risk, especially for entities with capital-intensive or long-gestation programmes funded through foreign contributions, necessitating rigorous asset tracing, clear funding segregation, and defensible documentation.
The Bill also expands the scope of “key functionary” and correspondingly broadens the attribution of liability. Individuals in positions of control or management, including trustees, directors, and office bearers, may face direct exposure for organisational non-compliance. This marks a clear shift towards individual accountability, requiring strengthened governance protocols, active oversight mechanisms, and demonstrable compliance diligence at the decision-making level.
Further, the requirement of prior Central Government approval before the initiation of investigations indicates a move towards a more centralised enforcement model. This may recalibrate the procedural landscape by introducing an additional layer of administrative control in enforcement actions.
Taken together, the amendments signal a transition towards a more controlled and accountability driven regime, with a clear emphasis on safeguarding foreign contribution and tightening oversight across its lifecycle. Organisations will need to recalibrate internal compliance systems, governance frameworks, and asset management practices to mitigate regulatory exposure under the revised framework.
Sehar Sharma and Rahul Rishi
You can direct your queries or comments to the authors.
1https://fcraonline.nic.in/home/PDF_Doc/fc_notice_07042025.pdf