CSR and Social Governance · Foreign Funding to Non-Corporate Entities

FCRA 2010: Scope, Applicability and Key Definitions

Updated 11 October 2026 · Fact-checked

The Foreign Contribution (Regulation) Act, 2010 regulates the acceptance and use of foreign contribution. It extends to the whole of India and also applies to Indian citizens outside India and to overseas associate branches or subsidiaries of Indian companies. To solve questions, test whether the money is a foreign contribution from a foreign source.

Understand FCRA 2010: Scope, Applicability and Key Definitions

The Foreign Contribution (Regulation) Act, 2010 (FCRA) controls how money, goods and securities from outside India are received and used in India. Its aim is to keep such funds from affecting national interest, politics and public life. For an NGO, trust or society, it is the first law to check before taking any overseas donation.

The extent is the whole of India. The Act also applies to two groups outside India: citizens of India outside India, and associate branches or subsidiaries, outside India, of companies or bodies corporate registered or incorporated in India. So a donation taken by an Indian citizen living abroad can fall under the Act. Different provisions can start on different dates. The Act came into force on 1 May 2011 (notification S.O. 909(E) dated 29 April 2011).

A foreign contribution is a donation, delivery or transfer made by a foreign source of three kinds of things. First, an article, unless it is a gift for personal use or its market value in India on the date of gift is not more than the sum the Central Government specifies by rules. Second, any currency, Indian or foreign. Third, any security as defined in the Securities Contracts (Regulation) Act, 1956, including a foreign security under FEMA.

Three explanations widen or narrow this. Money that passes through one or more persons after coming from a foreign source is still foreign contribution. Interest on it, and other income from it, is also foreign contribution. But an amount received in the ordinary course of business, trade or commerce as a fee or as the cost of goods or services is excluded. This includes fees charged by an Indian educational institution from a foreign student, and contributions received from an agent of a foreign source towards such fee or cost.

A foreign source is a wide list. It includes foreign governments and their agencies, international agencies (other than the UN and its specialised agencies, the World Bank, the IMF or others notified), foreign companies, foreign corporations, multi-national corporations, foreign trusts and foundations, foreign trade unions, foreign societies and clubs, and any citizen of a foreign country. It also includes an Indian company in which more than one-half of the nominal value of share capital is held by foreign holders. A proviso says such a company is not a foreign source if its share capital is within the limits for foreign investment under FEMA. A person includes an individual, a Hindu undivided family, an association and a company registered under section 25 of the Companies Act, 1956.

Key rules to remember

Extent and application (s. 1(2)): Whole of India + citizens of India outside India + associate branches or subsidiaries outside India of Indian-registered companies or bodies corporate; Learn all three limbs. The last two are what make the Act extra-territorial.
Commencement (s. 1(3)): Comes into force on the date the Central Government notifies; different dates may be set for different provisions; Notified date for the Act: 1 May 2011.
Foreign contribution (s. 2(1)(h)): Donation, delivery or transfer by a foreign source of (i) an article above the specified value, not a personal gift, (ii) any currency, or (iii) any security; All three need a foreign source. Currency has no minimum value.
Explanations to foreign contribution: Pass-through via others = included; interest and income from it = included; fee or cost for goods or services in ordinary course of business = excluded; Excluded fees include fees from foreign students of Indian educational institutions.
Foreign source: Indian company test: More than one-half of nominal share capital held by foreign holders = foreign source, unless within FEMA foreign investment limits; Holding is counted singly or in the aggregate. Exactly one-half does not meet the test.
Foreign hospitality (s. 2(1)(i)): Offer, not purely casual, in cash or kind by a foreign source for travel costs to a foreign country, or free boarding, lodging, transport or medical treatment; Separate from foreign contribution.
Other terms: Foreign company includes a subsidiary of a foreign company and a multi-national corporation; MNC = incorporated abroad with a subsidiary, branch or place of business, or operations, in two or more countries or territories; Association means individuals with an office in India, registered or not.

How to solve FCRA 2010: Scope, Applicability and Key Definitions questions

Use this order for any case question on applicability or definitions. Keep it to provision, analysis, conclusion.

1Identify who received or is to receive the money and where they are. Check if they are in India, an Indian citizen outside India, or an overseas branch or subsidiary of an Indian company.
2State the extent and application rule from section 1 in one or two lines.
3Identify the giver and test whether it falls in the foreign source list in section 2(1)(j). For an Indian company, compute foreign holding against one-half of nominal share capital and check the FEMA proviso.
4Identify what was given: currency, security, or article. For an article, check personal gift and the specified value.
5Apply the explanations: pass-through, interest and income, and the business fee or cost exclusion.
6Check if the receiver is a person under the Act, and whether the facts show foreign hospitality instead.
7Conclude clearly: is it foreign contribution, and does the Act apply? Mention that prohibitions and registration provisions are tested separately.

Quickest way: Three-question screen

When to use it: When you have under ten minutes for a short-note or a small fact pattern.

Who gave? If a foreign source under section 2(1)(j), go on. If not, it is not foreign contribution.
What was given? Currency, security, or an article above the specified value and not a personal gift. Otherwise, stop.
Was it a business fee or cost for goods or services? If yes, it is excluded. If no, it is foreign contribution, including its interest and income.

Common mistakes in FCRA 2010: Scope, Applicability and Key Definitions

Saying the Act applies only inside India.
Students remember only 'extends to the whole of India'.
Fix: Always add both limbs of application: citizens of India outside India, and overseas associate branches or subsidiaries of Indian-registered companies or bodies corporate.
Treating any donation from abroad as foreign contribution regardless of nature.
The business fee exclusion in Explanation 3 is overlooked.
Fix: Check whether the amount is a fee or cost for goods or services in the ordinary course of business. If so, it is excluded.
Ignoring interest and income on foreign contribution.
Students focus on the original receipt.
Fix: Remember Explanation 2: interest and other income derived from it are also deemed foreign contribution.
Calling an Indian company a foreign source just because it has some foreign shareholding.
The test is misread.
Fix: The test is more than one-half of nominal share capital held by listed foreign holders. Then check the FEMA limits proviso.
Applying a minimum value to currency or securities.
The article value limit is wrongly generalised.
Fix: The specified value applies only to articles. Currency, whether Indian or foreign, and securities have no such limit.
Quoting a rupee limit for articles.
Students memorise a figure from a rule.
Fix: The Act says the sum is specified by rules made by the Central Government. Say that, rather than quoting a figure you are unsure of.

Worked examples

Example 1

Asha Foundation, a society in Pune, receives ₹5,00,000 from a trust formed in Singapore. It deposits the amount in a bank and earns ₹12,000 interest. Is the interest also foreign contribution? Is the receipt covered?

Show the solution

Provision: foreign contribution means donation, delivery or transfer by a foreign source of currency, among other things. A society or association having an office in India is a person under the Act.
A trust formed or registered outside India is a foreign source, as a foreign trust or a society or other association formed outside India.
The ₹5,00,000 is currency donated by a foreign source, so it is foreign contribution.
Explanation 2 deems interest on foreign contribution, and any other income derived from it, to be foreign contribution.
Hence the ₹12,000 interest is also foreign contribution.

Answer: Yes. The ₹5,00,000 is foreign contribution from a foreign source, and the ₹12,000 interest is deemed foreign contribution under Explanation 2.

Example 2

Bharat Pharma Ltd, an Indian company, has a subsidiary branch in Dubai. A US citizen friend of an Indian director pays ₹80,000 to Bharat Pharma for medicines supplied in its ordinary business. Separately, Ravi, an Indian citizen working in London, accepts money from a foreign government for an Indian NGO. Discuss the Act's application and whether the ₹80,000 is foreign contribution.

Show the solution

Application: the Act 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. So it can apply to Ravi in London and to the Dubai branch or subsidiary.
A US citizen is a foreign source, as a citizen of a foreign country.
The ₹80,000 is payment for goods supplied in the ordinary course of business. Explanation 3 excludes such amounts from foreign contribution.
Ravi receives money from the government of a foreign country, which is a foreign source. Currency from it is foreign contribution, and as an Indian citizen outside India he is covered by the Act.
Whether Ravi's receipt is permitted depends on other provisions, such as the prohibitions and registration provisions, which should be checked separately.

Answer: The Act applies to Ravi and to Bharat Pharma's overseas branch or subsidiary. The ₹80,000 is a business payment for goods and is excluded from foreign contribution. Ravi's receipt from a foreign government is foreign contribution, and its permissibility must be tested under the other provisions.

Exam tips

Open every answer with the section 1 extent and application rule. Examiners reward the extra-territorial limbs.
Write the foreign contribution definition as three limbs, then add the three explanations. This is a ready scoring structure.
In case questions, show the one-half share capital calculation in numbers and mention the FEMA proviso.
Do not quote a rupee figure for article value. Say it is specified by rules.
Keep the definitions separate from prohibitions. If a question asks about both, use separate headings in your answer.

Practice questions from Foreign Funding to Non-Corporate Entities

FCRA 2010: Scope, Applicability and Key Definitions: frequently asked questions

Does FCRA 2010 apply to Indian citizens living abroad?

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

What is foreign contribution under FCRA 2010?

It is a donation, delivery or transfer by a foreign source of an article above the specified value (not a personal gift), any currency, or any security. Pass-through transfers and interest or income from it are also covered. Fees or cost for goods or services in ordinary business are excluded.

Who is a foreign source under FCRA 2010?

It includes foreign governments and agencies, foreign companies and corporations, multi-national corporations, foreign trusts and foundations, foreign trade unions, foreign societies and clubs, and foreign citizens. It also includes certain international agencies and an Indian company with more than one-half of its nominal share capital held by foreign holders.

When did FCRA 2010 come into force?

It came into force on 1 May 2011 by notification S.O. 909(E) dated 29 April 2011. The Central Government may appoint different dates for different provisions.