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

FCRA Compliance for NGOs: Foreign Funding Rules

Updated 11 October 2026 · Fact-checked

FCRA 2010 controls how NGOs, trusts and other non-corporate entities receive and use foreign contribution. A person with a certificate or prior permission must receive it only in an FCRA Account at the specified State Bank of India branch, New Delhi, and keep other funds out. Solve questions by applying provision, facts, conclusion.

Understand Foreign Funding to NGOs: Compliance and Practical Issues

Foreign money can influence public life, so the Foreign Contribution (Regulation) Act, 2010 regulates it. 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 Indian companies or bodies corporate (Section 1).

For an NGO or trust, the first question is: who may take foreign contribution at all? Section 3 bars certain persons and bodies, such as election candidates, members of a Legislature, political parties and their office-bearers, public servants, Judges, Government servants, and registered newspaper personnel. It also bars companies engaged in producing or broadcasting news or current affairs programmes. An ordinary NGO is not in that list, but it still needs a certificate or prior permission under Section 12 before it receives foreign contribution.

The second question is: how must the money move? Under Section 17, a person with a Section 12 certificate or prior permission must receive foreign contribution only in an account designated an FCRA Account. It is opened in the branch of the State Bank of India at New Delhi that the Central Government notifies. The NGO may open another FCRA Account in a scheduled bank of its choice to keep or use funds received from that first account. It may also open one or more accounts in scheduled banks to which it transfers funds for use. No funds other than foreign contribution may be received or deposited in any such account.

The banks also report. The specified SBI branch, the scheduled bank branch, or the authorised person in foreign exchange must report to the specified authority the prescribed amount of foreign remittance, its source and manner of receipt, and other particulars in the prescribed form and manner. So the NGO's records must match what the banks report.

The Central Government has further powers. Under Section 9 it can prohibit a person or organisation from accepting foreign contribution, or require prior permission or intimation, but only if satisfied that acceptance is likely to affect prejudicially sovereignty and integrity of India, public interest, fairness of elections, friendly relations with a foreign State, or harmony between groups. If a certificate is cancelled or surrendered, Section 15 vests the foreign contribution and assets created out of it in a prescribed authority. For social governance, these rules push NGOs towards transparent, traceable and purpose-bound funding.

Key rules to remember

Extent and application (Section 1): Whole of India + citizens of India outside India + associate branches or subsidiaries outside India of Indian companies or bodies corporate; Do not say the Act applies only to entities inside India.
Receipt only through FCRA Account (Section 17(1)): Certificate or prior permission under Section 12 → receive foreign contribution only in the designated FCRA Account at the notified SBI branch, New Delhi; Applies to a person granted a certificate or prior permission under Section 12.
Other accounts (Section 17(1) provisos): Another FCRA Account in a scheduled bank + one or more utilisation accounts in scheduled banks; no funds other than foreign contribution; These are for keeping or using funds received in the SBI FCRA Account. No mixing with local funds.
Bank reporting (Section 17(2)): Prescribed amount, source and manner of receipt, other particulars → report to specified authority; Done by the SBI branch, the scheduled bank branch or the authorised person in foreign exchange.
Central Government powers (Section 9): Prohibit, or require prior permission or intimation, only if satisfied of prejudice to sovereignty and integrity, public interest, fair elections, friendly relations with foreign State, or communal harmony; The satisfaction condition is the exam point.
Pass-through bar (Section 3(3)): Money received on behalf of a Section 9 person or class → deliver only to the person for whom it was received; Do not hand it to anyone else, or to someone likely to pass it on to another.
Vesting on cancellation or surrender (Section 15): Foreign contribution and assets created out of it → vest in prescribed authority; returned if the person is later registered; Applies to cancellation under Section 14 or surrender under Section 14A.

How to solve Foreign Funding to NGOs: Compliance and Practical Issues questions

Use this order for any case question on foreign funding to an NGO or trust. Write provision, facts, conclusion.

1Identify the entity and the money: is it an NGO, trust or society, and is the money foreign contribution?
2Check Section 3 first: is the entity or person in the prohibited list, such as a political party, public servant, Judge or news company?
3Check whether the entity holds a Section 12 certificate or prior permission. If not, say it must obtain one before receiving.
4Check how the money was received: was it in the FCRA Account at the notified SBI branch, New Delhi?
5Check how it was held and used: any second FCRA Account or utilisation account must be in a scheduled bank, and no local funds may be deposited.
6Check onward movement: Section 3(2) and 3(3) bar delivery to prohibited persons or to anyone other than the intended recipient.
7Check Section 9 and Section 15 if the facts mention government prohibition, cancellation or surrender.
8Conclude clearly: compliant or not, the consequence, and one practical step such as closing the mixed account or reporting.

Quickest way: Four-gate check

When to use it: Use when time is short and the case has several facts about an NGO's foreign funds.

Gate 1, who: prohibited under Section 3, or holds a Section 12 certificate or permission?
Gate 2, where: received in the SBI New Delhi FCRA Account?
Gate 3, how held: only foreign contribution in every linked account, and only scheduled banks?
Gate 4, onward: passed to a prohibited person or the wrong recipient? Then state the breach and the fix in one line each.

Common mistakes in Foreign Funding to NGOs: Compliance and Practical Issues

Saying any bank account can receive foreign contribution first.
Students remember that scheduled banks are allowed and forget the first receipt rule.
Fix: State that first receipt is only in the FCRA Account at the notified SBI branch, New Delhi. Scheduled banks are for keeping or using funds transferred from it.
Allowing local donations into the FCRA Account.
Students think one account is more convenient.
Fix: Quote the proviso: no funds other than foreign contribution may be received or deposited in any such account.
Treating Section 9 power as unrestricted.
Students read it as a general ban power.
Fix: State that the Central Government must be satisfied of likely prejudice to one of the five listed interests.
Forgetting that the Act applies to Indian citizens abroad and overseas branches.
Students assume it covers only entities within India.
Fix: Quote Section 1(2) in any applicability point.
Ignoring what happens to assets on cancellation.
Students focus on receipt and skip the exit rules.
Fix: Add Section 15: foreign contribution and assets created from it vest in the prescribed authority, and are returned if the person is later registered.
Citing section numbers or rules not in the text, such as renewal periods or limits on administrative expenses.
Students recall them from other notes.
Fix: Use only rules you are sure of. State other practical points in plain words without invented numbers.

Worked examples

Example 1

Asha Foundation, a charitable trust in Pune, holds a Section 12 certificate. It received a foreign donation in its account at a local scheduled bank and also deposits local donations in the same account. Advise on compliance.

Show the solution

Provision: Section 17(1) requires a certificate holder to receive foreign contribution only in the FCRA Account at the notified SBI branch, New Delhi.
Facts: the donation was received in a local scheduled bank account, not the SBI New Delhi account.
A scheduled bank account is allowed only for keeping or using funds received from the SBI FCRA Account, not for first receipt.
Facts: local donations are deposited in the same account. The proviso bars funds other than foreign contribution in any such account.
Conclusion: both practices breach Section 17. The trust should route foreign donations to the SBI FCRA Account and keep local funds in a separate account.

Answer: Asha Foundation breaches Section 17 on two counts: it received foreign contribution outside the SBI New Delhi FCRA Account, and it mixed local funds in an FCRA-linked account. It should correct both.

Example 2

Seva Trust loses its certificate through cancellation under Section 14. It holds foreign contribution and a building bought with it. What happens, and can it be recovered?

Show the solution

Provision: Section 15(1) vests foreign contribution and assets created out of it, in the custody of a person whose certificate is cancelled, in the prescribed authority.
Facts: the cancelled certificate brings the unused funds and the building within this rule.
Section 15(2): the authority may, if it considers necessary and in public interest, manage the trust's activities for the period and in the manner the Central Government directs. It may use the funds or dispose of the assets if adequate funds are not available.
Section 15(3): if the trust is subsequently registered under the Act, the authority must return the foreign contribution and assets vested in it.
Conclusion: the trust loses control now, but can get back what remains if it is registered again.

Answer: The funds and the building vest in the prescribed authority, which may manage the activities and, if funds are inadequate, use the funds or dispose of assets. If Seva Trust is registered again, the authority must return the foreign contribution and assets vested in it.

Exam tips

Write provision, facts, conclusion in every case answer. Name the section when you are sure of it.
Learn Section 17 in two parts: first receipt in the SBI New Delhi FCRA Account, then onward accounts in scheduled banks.
Always mention that no non-foreign funds go into FCRA accounts. Examiners look for the third proviso.
For Section 9 answers, list the five grounds of prejudice. Missing the satisfaction condition costs marks.
Add a practical compliance line: separate accounts, reconcile with bank reports, keep purpose-wise records.

Practice questions from Foreign Funding to Non-Corporate Entities

Foreign Funding to NGOs: Compliance and Practical Issues: frequently asked questions

How do NGOs receive foreign contribution legally in India?

An NGO must first hold a certificate or prior permission under Section 12. It must then receive foreign contribution only in its FCRA Account at the notified State Bank of India branch, New Delhi. It may use other accounts in scheduled banks only for funds transferred from that account.

Can an NGO keep foreign and local funds in one FCRA account?

No. Section 17 says no funds other than foreign contribution may be received or deposited in any such account. Keep local funds in a separate account.

Who is prohibited from accepting foreign contribution?

Section 3 lists, among others, election candidates, members of a Legislature, political parties and their office-bearers, public servants, Judges, Government servants, registered newspaper personnel, and companies engaged in news or current affairs broadcasting.

What happens to foreign funds if an NGO's certificate is cancelled?

Under Section 15, the foreign contribution and assets created from it vest in a prescribed authority. That authority may manage the NGO's activities in public interest. It must return them if the NGO is later registered under the Act.