The Foreign Contribution (Regulation) Act (FCRA) is a law that controls how foreign funding is received and used by individuals and non-profits in India. It is enforced by the Ministry of Home Affairs and applies mainly to donations from foreign sources to Indian nonprofits, not payments for business transactions.
The law has been tightened over time, particularly with amendments in 2020, which significantly affected how nonprofits operate.
In March 2026, the government introduced the FCRA Amendment Bill, 2026. It proposes stricter rules, including allowing the government to take over assets if an organisation loses its FCRA registration, and setting time limits on how foreign funds can be used.
The bill has led to protests, with the Opposition in Parliament and voices from the nonprofit sector arguing that it could increase government control over civil society and disrupt nonprofit work. For now, it was not passed during the budget session of Parliament and has been put on hold.
The key shift
The amendments introduced in the bill mark an important shift in how India regulates foreign funding. Simply put, if an organisation loses its registration, voluntarily or otherwise, under the Foreign Contribution (Regulation) Act, 2010 (FCRA), the government now has a clear process and legal pathway to take over assets created from foreign funds.
What are the existing laws?
Indian law has long held that charitable assets do not belong to founders, and that they are meant for public purposes.
Under the Income Tax Act, 1961, if a nonprofit organisation shuts down, its assets must be transferred to another nonprofit organisation or used for public benefit. Similarly, earlier FCRA provisions (including the 2020 amendment) allowed for assets created from foreign funding to be taken over by the government if registration was cancelled.
Section 15 of the FCRA allowed a designated authority to manage assets created out of foreign contributions where an organisation’s registration was cancelled (under section 14) or voluntarily surrendered (under section 14A).
The authority could utilise the foreign contribution or dispose off assets if funds were insufficient to continue activities.
However, this framework applied only to cancellation or surrender, not where registration simply lapsed. The intent was to ensure that such assets continued to be used for the public good, with disposal being the last resort.
As per the amendments in the 2026 bill, this framework now applies to organisations whose FCRA licences expire without renewal.
What has changed now?
Section 16A in the amendment proposed in the 2026 bill clearly lays out that if an organisation’s registration is cancelled, surrendered, or expires without renewal, its foreign funds and related assets may be taken over by a government-appointed authority.
The transfer of assets can be reversed if the FCRA license is restored.
However, if the registration is not restored in time, the takeover becomes permanent. Assets may be transferred to government bodies or sold, with proceeds going to any ministry, department, authority or agency (of the central government, state government, or any local authority), or to the Consolidated Fund of India, which is the government’s main account into which all its revenues, such as taxes, loans, and other receipts, are deposited, and from which most public expenditure is made. Money can be withdrawn from this fund only with the approval of Parliament.
What happens to assets created by mixed funding?
Many non-profits create assets using a mix of domestic and foreign funding. The 2026 bill states that assets created wholly or partly using foreign funds may be fully taken over.
Organisations can apply to recover the non-foreign portion, but only if it is clearly separable.
In practice, this is difficult because funding is often pooled from multiple sources and tracing value to specific sources is not straightforward. For instance, land may be purchased using domestic funds while buildings are constructed using foreign funds. It remains unclear how such assets will be valued, divided, or taken over, creating significant uncertainty, particularly for organisations that have invested in infrastructure.
Infrastructure funding may become harder
Foreign aid has historically supported schools, hospitals, and training centres, but the combined effect of asset takeover risk and uncertainty around mixed funding may make both donors and organisations more cautious about investing in long-term infrastructure.
Foreign funding is likely to shift toward programme delivery, human resources, and technology-enabled interventions.
Foreign donors are likely to distinguish more clearly between appreciating assets, such as land, buildings, and corpus funds, and programmatic assets like laptops, tablets, and routine equipment. The former are capitalised, retain or increase in value over time, and carry a higher risk of loss of control, making donors more hesitant to fund them. On the other hand, programmatic assets have shorter lifecycles, depreciate quickly, and are incidental to service delivery, which may make donors more comfortable continuing to support them.
As a result, foreign funding is likely to shift toward programme delivery, human resources, and technology-enabled interventions rather than long-term infrastructure.
What if organisations use FCRA funds only for programmes?
When FCRA funds are used for activities, organisations often purchase items like laptops, equipment, or vehicles. These are legally treated as assets created from foreign contributions, even if they are incidental to programme delivery.
So while the risk is lower for such assets due to depreciation and limited value, they still fall within the scope of the law.
Time limits for prior-permission licenses
The proposed amendment of section 12 in the bill allows the government to set deadlines for the utilisation of funds received under the prior permission route. This means that funds must be used not only for the intended purpose but also within a fixed timeframe. Alongside the rules for asset takeover, this amendment signals a clear direction: Foreign funding is being steered toward short-term, programmatic use rather than long-term investment.
What remains unclear
While the bill clearly explains how asset takeover will work, some day-to-day procedural issues are still unclear.
- Why are reasoned orders on FCRA applications (especially rejections), passed after allowing the organisation a hearing not standard?
- Is foreign shareholding in section 8 companies treated as foreign contribution?
- What is the appeal process for administrative rejections?
What this means for nonprofits functioning within this framework
This amendment reinforces a long-standing principle in Indian law that assets created for the public good are not private property. What has changed is the degree of control and the clarity with which this principle will now be enforced.
For non-profits, this means paying close attention to FCRA renewals and compliance timelines. It also requires caution in using foreign funds for infrastructure and other long-term assets, along with careful structuring of assets, mainly where funding is mixed.
Overall, these amendments suggest that foreign funding is meant to support short-term work and programmes rather than long-term assets like land or infrastructure.
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Know more
- Read this article to explore how Indian philanthropy and domestic funders can support civil society.
- Read this guide to understand the key amendments in the FCRA Amendment Act 2020 passed by Parliament in 2021
- Read this blog to decode the impact of the Finance Bill, 2026, on nonprofit organisations.
