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

Prohibition on Transfer of Foreign Contribution under Section 7 FCRA

Updated 11 October 2026 · Fact-checked

Section 7 of the FCRA, 2010 says that a person who is registered, or has prior permission, and who receives foreign contribution must not transfer it to any other person. Since the 2020 amendment, the bar is absolute in the text. To answer a question, identify the person, confirm the status, check the transfer, then conclude.

Understand Prohibition on Transfer of Foreign Contribution

Foreign contribution is regulated so that it reaches only persons who have been checked by the Central Government. Registration or prior permission under the Act is that check. The recipient is vetted on its programme, its office bearers and its record.

Section 7 protects this check. A vetted recipient could otherwise pass the money to a person who was never vetted. The section blocks this. It applies to a person who (a) is registered and granted a certificate or has obtained prior permission under the Act, and (b) receives any foreign contribution. Such a person shall not transfer that foreign contribution to any other person.

The present section 7 was substituted by Act 33 of 2020 with effect from 29-9-2020. The substituted text has no exception. Earlier, the section allowed transfer to certain other registered persons, and it dealt with organisations of a political nature. For exams, use the current text. Mention the old position only if the question asks you to contrast it. Do not claim any carve-out that is not in the section as supplied.

Read the section with sections 11, 12 and 17. Under section 11, a person with a definite cultural, economic, educational, religious or social programme must hold a certificate of registration before accepting foreign contribution. A person who is not registered may accept it only after prior permission, which is valid for the specific purpose and the specific source. Under section 12(6), a certificate is valid for five years, while prior permission is valid for the specific purpose or specific amount. Under section 17, the person must receive foreign contribution only in an FCRA Account, and no other funds may be received or deposited in that account.

The practical result is simple. An NGO that receives foreign money cannot pass it on to a partner NGO, a trust or a sub-grantee, whether or not the other body is registered. If a question describes such a pass-through, your answer should be that section 7 bars it. Do not invent a condition under which it is allowed. The Act also lets the Central Government prescribe matters by rules under section 48. Do not quote any rule number unless you are sure of it.

Key rules to remember

Section 7 bar
Registered or prior-permission holder + receives foreign contribution → shall not transfer it to any other person
Both limbs (a) and (b) must be met for the section to apply. The substituted section applies from 29-9-2020.
Registration vs prior permission (section 11)
Registration = certificate for a person with a definite programme; prior permission = for an unregistered person, for a specific purpose and specific source
Section 7 covers both categories. It does not cover a person who has neither.
Validity (section 12(6))
Certificate: five years. Prior permission: specific purpose or specific amount
Section 11(2) describes prior permission as valid for the specific purpose and the specific source.
Account rule (section 17(1))
Receive only in an FCRA Account at the specified State Bank of India branch, New Delhi; no other funds in that account
Utilisation accounts in scheduled banks are allowed. Moving money among the holder's own accounts is not a transfer to another person.
Processing time (section 12(3))
Ordinarily within 90 days of receiving the application
If not granted in 90 days, the Government must communicate reasons to the applicant.

How to solve Prohibition on Transfer of Foreign Contribution questions

Use this method for any case-based question on transfer, sub-granting or pass-through of foreign contribution. Write it as provision, analysis, conclusion.

  1. 1Identify the person who received the money and what money it is. Check that it is foreign contribution.
  2. 2Check the status of the recipient: registered with a certificate, holding prior permission, or neither.
  3. 3State the rule: section 7 bars a registered or prior-permission holder who receives foreign contribution from transferring it to any other person.
  4. 4Find the act in the facts. Ask whether the money went to another person, such as a partner NGO, a trust or an individual.
  5. 5Separate it from internal movement. Moving funds between the holder's own FCRA Accounts or utilisation accounts under section 17 is not a transfer to another person.
  6. 6Check related duties: the FCRA Account rule in section 17 and the section 11 limits on the use of funds.
  7. 7Conclude clearly: the transfer is barred, or it is not a transfer to another person. Add a practical advice point, such as using the money directly for the approved programme.
  8. 8Do not cite a section number you are unsure of for penalties or procedure. State the consequence in plain words.

Quickest way: Four-line section 7 check

When to use it: Use when time is short and the question asks whether an NGO may pass foreign money to another body.

  1. Line 1: Is the giver registered or a prior-permission holder, and did it receive foreign contribution?
  2. Line 2: Is the receiver a different person from the giver?
  3. Line 3: If yes to both, write: section 7 prohibits the transfer.
  4. Line 4: Advise direct utilisation by the holder for the approved programme, with money kept in FCRA Accounts under section 17.

Common mistakes in Prohibition on Transfer of Foreign Contribution

  • Saying a registered NGO may sub-grant to another registered NGO.

    Students remember the older section, which had limited exceptions.

    Fix: Use the substituted section 7 (from 29-9-2020). It says no transfer to any other person.

  • Applying section 7 only to registered persons.

    The word registered is stressed in notes.

    Fix: The section covers a person who is registered and granted a certificate or has obtained prior permission. Both categories are covered.

  • Treating transfer between the NGO's own bank accounts as a breach.

    Students read transfer without asking to whom.

    Fix: Section 7 bars transfer to another person. Section 17 expressly lets the holder keep or use funds in further accounts it opens.

  • Mixing up registration and prior permission.

    Both allow the receipt of foreign contribution.

    Fix: Registration gives a five-year certificate. Prior permission is for an unregistered person and is tied to a specific purpose and source.

  • Quoting section numbers and penalties from memory.

    Students try to look thorough.

    Fix: Quote sections 7, 11, 12 and 17 only as you know them. Describe consequences in plain words.

  • Putting domestic funds in the FCRA Account.

    The NGO wishes to use one account for everything.

    Fix: Section 17(1) says no funds other than foreign contribution may be received or deposited in the account.

Worked examples

Example 1

Asha Vidya Trust holds a certificate of registration under the FCRA, 2010. It receives ₹40,00,000 of foreign contribution for a rural education programme. It wants to pass ₹10,00,000 to Gyan Sewa Society, a small NGO that runs a similar programme. Advise whether this is allowed.

Show the solution
  1. Provision: section 7 says that a person who is registered and granted a certificate or has prior permission, and who receives foreign contribution, shall not transfer it to any other person.
  2. Facts: Asha Vidya Trust holds a certificate and has received foreign contribution. Both limbs of section 7 are met.
  3. Analysis: Gyan Sewa Society is a different person. The proposed payment of ₹10,00,000 is a transfer of foreign contribution to another person.
  4. Analysis: It makes no difference that the purpose is similar or that the society may itself be registered. The substituted section has no exception.
  5. Conclusion and advice: the transfer is barred. The Trust should use the funds itself for its approved programme. Gyan Sewa Society should apply for its own registration or prior permission if it wants foreign contribution.

Answer: The transfer of ₹10,00,000 to Gyan Sewa Society is prohibited by section 7. A registered person cannot transfer foreign contribution to any other person.

Example 2

Navjeevan Foundation has prior permission under the FCRA for one health project. It received foreign contribution in its FCRA Account at the specified State Bank of India branch, New Delhi. It moves ₹5,00,000 to a new FCRA Account in a scheduled bank in Pune, to pay for the project. Is this a breach of section 7?

Show the solution
  1. Provision: section 7 covers a person who has obtained prior permission and receives foreign contribution. It bars transfer to any other person.
  2. Facts: the Foundation holds prior permission, so section 7 applies to it.
  3. Analysis: the new account belongs to the Foundation itself. The payee is not another person.
  4. Analysis: section 17(1) lets the holder open another FCRA Account in a scheduled bank of its choice to keep or use the contribution received in the New Delhi account.
  5. Analysis: the proviso also says no funds other than foreign contribution may be deposited in these accounts.
  6. Conclusion: this is internal movement and not a transfer to another person, so section 7 is not breached, provided only foreign contribution is held in the accounts and it is used for the permitted project.

Answer: No breach. Moving the money between the Foundation's own FCRA Accounts is allowed under section 17. Section 7 bars transfer to another person.

Exam tips

  • Write the section 7 test in two limbs: status of the holder, then receipt of foreign contribution. Then apply it to the facts.
  • Use the current text. Say it was substituted by Act 33 of 2020 with effect from 29-9-2020, and mention the earlier position only if asked to contrast.
  • In case studies, always check who the payee is. Own account versus another person decides the answer.
  • Link section 7 to sections 11, 12 and 17 in your answer. It shows you understand registration, permission and the account rule.
  • End with a practical drafting or compliance point, such as advising direct utilisation and clean FCRA Account records.

Practice questions from Foreign Funding to Non-Corporate Entities

Prohibition on Transfer of Foreign Contribution in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Prohibition on Transfer of Foreign Contribution: frequently asked questions

Can an NGO sub-grant foreign contribution under the FCRA?

Not under the current section 7. A registered person or prior-permission holder who receives foreign contribution shall not transfer it to any other person. The substituted section has no exception.

Who does section 7 apply to?

It applies to a person who is registered and granted a certificate, or who has obtained prior permission, and who receives foreign contribution. Both registered and prior-permission holders are covered.

What is the difference between registration and prior permission?

Registration is a certificate under section 11(1), valid for five years under section 12(6). Prior permission is for a person not registered and is valid for the specific purpose and source, or a specific amount.

Is moving funds between the NGO's own FCRA Accounts a transfer under section 7?

No. Section 7 bars transfer to another person. Section 17 allows the holder to open further FCRA Accounts and accounts for utilisation in scheduled banks, if only foreign contribution is deposited in the FCRA Accounts.