Economic, Commercial and Intellectual Property Laws · Law relating to Foreign Contribution Regulation

FCRA 2010: Definitions, Extent and Scope Explained

Updated 11 October 2026 · Fact-checked

The Foreign Contribution (Regulation) Act, 2010 regulates foreign contribution received by individuals, associations and companies in India. To solve questions, identify the donor (foreign source), the thing given (currency, security or article), the receiver (person), and any exclusion, such as fees for goods or services. Then state the conclusion.

Understand FCRA 2010: Introduction, Definitions and Scope

The FCRA 2010 controls money, securities and articles that come into India from foreign donors. Its aim is to stop foreign funds from influencing sensitive areas such as elections, the media and public service. The definitions in section 2 decide whether a receipt falls under the Act at all.

Section 1 gives the scope. The Act extends to the whole of India. It also applies to citizens of India outside India, and to associate branches or subsidiaries, outside India, of companies or bodies corporate registered or incorporated in India. It came into force on 1 May 2011.

Foreign contribution (section 2(1)(h)) means a donation, delivery or transfer made by a foreign source of: (i) an article, not being an article given to a person as a gift for his personal use, if its market value in India on the date of gift is not more than the sum specified by the Central Government by rules; (ii) any currency, Indian or foreign; or (iii) any security as defined in the Securities Contracts (Regulation) Act, 1956, including a foreign security under FEMA. Three explanations widen and narrow it. Funds passed on by someone who got them from a foreign source, directly or through others, are also foreign contribution. Interest and other income from foreign contribution are also foreign contribution. Amounts received as fees or as the cost of goods or services in the ordinary course of business, trade or commerce are excluded.

Foreign source (section 2(1)(j)) is a wide list. It includes a foreign government and its agencies, international agencies (except the United Nations, its specialised agencies, the World Bank, the IMF and others notified), foreign companies, foreign corporations, multi-national corporations, foreign trusts and foundations, foreign trade unions, foreign clubs and societies, and any citizen of a foreign country. It also includes an Indian company if more than one-half of its nominal share capital is held by foreign governments, citizens, corporations, trusts or foreign companies. A proviso says such a company is not a foreign source where its shareholding is within the foreign investment limits under FEMA.

Other definitions you must know: person includes an individual, a Hindu undivided family, an association and a section 25 company under the Companies Act, 1956. Association means an association of individuals, incorporated or not, having an office in India, and includes a society and any other organisation. Candidate for election means a person duly nominated for election to any Legislature. Legislature is defined widely and includes Parliament, State Legislatures, municipalities and panchayats. Political party and foreign hospitality are also defined. Section 3 then bars certain persons, such as candidates, members of a Legislature, political parties and registered newspaper staff, from accepting foreign contribution.

Key rules to remember

Foreign contribution: Foreign source + donation, delivery or transfer + (currency OR security OR an article that is not a personal-use gift and whose market value in India on the date of gift is not more than the notified sum); Section 2(1)(h). All three parts must be present. For articles, follow the wording of clause (i): not a gift for personal use, and market value not more than the sum specified by the Central Government by rules.
Deemed foreign contribution: Pass-through receipts + interest + income from foreign contribution = foreign contribution; Explanations 1 and 2 to section 2(1)(h). Funds received from a foreign source through one or more persons are covered.
Exclusion: Fees or cost of goods/services in ordinary course of business, trade or commerce = NOT foreign contribution; Explanation 3. Includes fees charged by Indian educational institutions from foreign students and amounts from a foreign source's agent.
Indian company as foreign source: Share capital held by foreign holders > one-half (nominal value) = foreign source; Section 2(1)(j)(vi). Proviso: not a foreign source if the holding is within FEMA foreign investment limits.
Extent: Whole of India + citizens of India outside India + overseas associate branches or subsidiaries of Indian companies or bodies corporate; Section 1(2).
Persons barred by section 3(1): Candidate, registered newspaper staff/owners, public servant or Government/ Government-controlled corporation employee, Legislature member, political party or office-bearer, organisation of a political nature, audio/audio-visual news or current affairs company and its staff; No foreign contribution can be accepted by these persons.

How to solve FCRA 2010: Introduction, Definitions and Scope questions

Use this order for any definition, scope or application question on FCRA 2010.

1Read the facts and list the parties: who gives, who receives, and what is given.
2Test the donor against section 2(1)(j). Is it a foreign government, foreign company, foreign citizen, foreign trust or an Indian company with more than half foreign share capital?
3Test the item against section 2(1)(h). Is it currency, a security, or an article that is not a personal-use gift and meets the value condition in clause (i) (market value not more than the notified sum)?
4Check the explanations: pass-through receipts, interest or income, and the fee or cost-of-goods exclusion.
5Check the receiver. Is it a person, an association or a company, and does it fall in the section 3(1) barred list?
6Check the scope under section 1(2) if a citizen or branch is outside India.
7Write the conclusion in ICSI style: the provision, the facts applied, then a clear answer.

Quickest way: Donor, Item, Receiver check

When to use it: Use this for short-note or case-study questions when time is tight.

Write D, I and R on your answer sheet.
D: Is the donor a foreign source under section 2(1)(j)? Write the matching sub-clause.
I: Is the item currency, a security or a qualifying article? Note any exclusion.
R: Is the receiver a barred person under section 3(1)?
Conclude in one line: foreign contribution or not, and whether acceptance is prohibited.

Common mistakes in FCRA 2010: Introduction, Definitions and Scope

Treating every foreign receipt as foreign contribution.
Students forget Explanation 3 of section 2(1)(h).
Fix: Check whether the amount is a fee or the price of goods or services in the ordinary course of business. If so, it is excluded.
Treating an Indian company as never being a foreign source.
Students think foreign source means only foreign entities.
Fix: Remember section 2(1)(j)(vi): an Indian company with more than one-half nominal share capital held by foreign holders is a foreign source, subject to the FEMA limit proviso.
Counting every article received as foreign contribution.
Students ignore the personal use gift and market value condition.
Fix: An article counts only if it is not a gift for personal use and meets the value condition as worded in section 2(1)(h)(i): its market value in India on the date of gift is not more than the sum specified in the rules.
Ignoring interest and income on foreign contribution.
Students focus only on the original receipt.
Fix: Under Explanation 2, interest and other income derived from foreign contribution are also foreign contribution.
Saying the Act covers only people in India.
Students skip section 1(2).
Fix: State that it also applies to citizens of India outside India and to overseas associate branches or subsidiaries of Indian companies or bodies corporate.
Treating the United Nations or World Bank as a foreign source.
Students read 'international agency' without the carve-out.
Fix: Section 2(1)(j)(ii) excludes the UN and its specialised agencies, the World Bank, the IMF and agencies the Central Government notifies.

Worked examples

Example 1

Meghdoot Trust, an Indian association, receives ₹5,00,000 from Hans Muller, a German citizen, as a donation for running a school. Is this foreign contribution under FCRA 2010?

Show the solution

Donor: a citizen of a foreign country is a foreign source under section 2(1)(j)(x).
Item: the amount is currency, which falls under section 2(1)(h)(ii). Currency has no value threshold.
Nature: it is a donation, not a fee or payment for goods or services, so Explanation 3 does not exclude it.
Receiver: an association having an office in India is a person under section 2(1)(m).

Answer: Yes. The ₹5,00,000 is foreign contribution because a foreign citizen, who is a foreign source, donated currency to a person. It is not covered by the fee or cost-of-goods exclusion.

Example 2

Bharat Learning Pvt Ltd, an Indian education company, charges ₹2,40,000 as tuition fee from Emma, a foreign student studying in India. Is the fee foreign contribution?

Show the solution

Donor: Emma is a citizen of a foreign country, so she is a foreign source under section 2(1)(j)(x).
Item: the money is currency, so prima facie section 2(1)(h)(ii) applies.
Exclusion: Explanation 3 to section 2(1)(h) excludes any amount received from a foreign source in India by way of fee, including fees charged by an educational institution from a foreign student.
The fee is for services rendered in the ordinary course of business, so the exclusion applies.

Answer: No. The ₹2,40,000 is a fee for services and is excluded from foreign contribution by Explanation 3 to section 2(1)(h).

Exam tips

Learn the section 2(1)(h) three-part test and the three explanations; they are asked most often.
For foreign source, remember the Indian company limb and its FEMA proviso, plus the UN and World Bank carve-out.
In case studies, name the sub-clause you apply and end with a clear conclusion.
Link definitions to section 3(1): a receipt that is foreign contribution may still be barred for that receiver.
Write section 1(2) on scope when the question mentions citizens or branches outside India.

Practice questions from Law relating to Foreign Contribution Regulation

FCRA 2010: Introduction, Definitions and Scope: frequently asked questions

What is foreign contribution under FCRA 2010?

It is a donation, delivery or transfer by a foreign source of currency, a security, or an article that is not given as a gift for personal use and whose market value in India on the date of gift is not more than the sum specified by the rules. Interest and income from it, and pass-through receipts, are also covered. Fees and the price of goods or services in ordinary business are excluded.

Who is a foreign source under FCRA 2010?

Section 2(1)(j) lists them, including foreign governments, foreign companies and corporations, multi-national corporations, foreign trusts, foundations, societies and clubs, foreign trade unions, and foreign citizens. An Indian company with more than half its share capital foreign-held can also be one, subject to the FEMA limits proviso.

Does FCRA 2010 apply outside India?

Yes, in part. Section 1(2) says it extends to the whole of India and also applies to citizens of India outside India and to associate branches or subsidiaries, outside India, of Indian companies or bodies corporate.

Is a gift of an article from a foreign friend foreign contribution?

No, if the article is given to you as a gift for your personal use. Section 2(1)(h)(i) leaves such a gift out. For any other article, apply the value test exactly as the clause words it: the market value in India on the date of gift must be not more than the sum specified by the Central Government in the rules. Check the current rules for that sum.