FCRA 2026: Three regulatory changes reshaping foreign funding in India

The Foreign Contribution (Regulation) Act 2010 (FCRA) is a central feature of the regulatory framework governing India's non-profit sector. It regulates the acceptance and utilisation of money and goods received from foreign sources, and the terms and purposes on which they may be used. The framework is founded on a simple principle: an organisation may accept foreign contribution only if it holds FCRA registration or prior permission, and only if those contributions are applied to activities that the State does not regard as detrimental to national interest.

This framework is now being reshaped by two parallel developments. The Foreign Contribution (Regulation) Amendment Bill, 2026 was introduced in the Lok Sabha on 25 March 2026 and awaits Parliamentary approval. Separately, the revised Foreign Contribution (Regulation) Amendment Rules, 2026 were notified on 22 June 2026 and are already in force.

These reforms also come against the backdrop of intensified enforcement. According to data published on the Ministry of Home Affairs' public dashboard, approximately 20,000 FCRA registrations have either been cancelled or allowed to lapse over the past decade. Of the registrations on record, only 27.7 per cent remain active, while 29.2 per cent have expired and 43.1 per cent have been cancelled.

Key functionaries and foreign control

The Rules introduce a definition of "key functionary" for FCRA registered entities, covering directors, partners, trustees, the Karta of a Hindu undivided family and members of a governing body. The definition also includes a residual category, any other person, by whatever name called, who has control over or responsibility for the management or affairs of the entity. This extends the provision beyond formal titles to capture any person who directs or influences the organisation, whether through a contract, a funding arrangement or other means.

The importance of this definition becomes clear when read alongside another clarification introduced by the Rules: an association whose key functionaries include foreign nationals, other than persons of Indian origin, will ordinarily not be eligible for registration or prior permission under FCRA. Read together, these provisions mean that a foreign national who exercises control or direction over an Indian organisation may jeopardise its FCRA registration, regardless of how that control is exercised.

This is perhaps the clearest statutory articulation of the regulator's long-standing concern with foreign control. Although the FCRA has never defined the term, enforcement practice has consistently reflected a restrictive approach. In recent years, approvals for structures perceived as foreign-controlled or closely linked to foreign entities have become increasingly difficult to obtain and to maintain. The 2026 Rules now formalise this approach within the regulatory framework.

Disclosure of the ultimate donor

The second change alters the manner of disclosure in the annual return. Where an organisation previously reported only its immediate donor, Form FC-4 now requires the name, address and email of the ultimate donor behind funds received through donor advised funds and other intermediary remittance vehicles.

The approach resembles the look-through principles reflected in the significant beneficial owner regime under the Companies Act, 2013 and the ultimate ownership test under Press Note 2 in India’s foreign investment framework. It may, however, prove considerably harder to comply with in the FCRA context. A significant proportion of charitable funding reaches India through large humanitarian platforms and philanthropic vehicles that pool contributions from thousands of donors. Requiring an Indian recipient to identify the ultimate contributor behind a single remittance may be commercially impractical and, in many cases, beyond the recipient's ability to verify.

Chosen states, purposes and reasonable activity

The third change requires organisations to define their operational footprint. An entity must now specify the exact states and union territories in which it will operate and select its purposes from a prescribed schedule spanning religious, cultural, economic, educational and social activities. Existing registrants have been given a one-time opportunity to comply through Form FC-6F in a single filing. By 22 June 2027, an association must submit the form listing every state, union territory and purpose for which it wishes to retain registration.

While organisations operating nationwide may be able to map their geographic presence and fields of work with some effort, the accompanying "reasonable activity" requirement introduces a further layer of uncertainty. An association is regarded as having undertaken reasonable activity only if it has utilised at least Rs 1 million of foreign contribution during the previous two financial years in its chosen field. However, because the rule is drafted in the singular, it remains unclear whether this threshold applies separately to each declared purpose or collectively across all declared purposes. Until this is clarified, organisations that register across multiple purposes to preserve operational flexibility face uncertainty over whether they must demonstrate meaningful expenditure against each one.

Taken together, these changes reflect a clear tightening of the FCRA regime, even before the Amendment Bill is considered by Parliament. They strengthen the regulator's oversight of who controls foreign funded organisations, where their funding originates and how it is deployed. More broadly, the Rules signal a clear regulatory shift towards greater scrutiny of governance, funding transparency and demonstrable utilisation of foreign contributions. Organisations already registered under the FCRA should therefore review their governance structures, donor reporting processes and operational classifications, particularly as the Form FC-6F filing deadline of 22 June 2027 approaches.

(The article has been authored by Monika Srivastava and Sanchit Agarwal, Partners, and Romit Kohli, Senior Associate at Khaitan & Co. Views expressed are personal.)