JSA Prism | Corporate | July 2026

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Ministry of Home Affairs notifies amendments to the foreign contribution regulatory framework

The Ministry of Home Affairs (“MHA”) has recently overhauled the compliance framework under the Foreign Contribution (Regulation) Act, 2010 (“FCRA”) through 2 (two) simultaneous notifications, requiring FCRA-registered entities to reassess their governance, operational footprint, and disclosure practices within stringent timelines. On June 22, 2026, the MHA notified the: (a) Foreign Contribution (Regulation) Amendment Rules, 2026 (“FCRR 2026”); and (b) amended the compounding notification dated July 1, 2022 (“Compounding Notification”). These amendments aim to strengthen regulatory oversight and transparency with enhanced accountability of FCRA registered entities.

Amendment to the Compounding Notification

The amendment materially broadens the compounding regime by including new  utilisation-based contraventions under Serial Nos. 3 and 4 of the Compounding Notification, i.e.: (a) dealing with the use of foreign contribution in speculative activities; (b) diversion of foreign contribution to purposes other than those for which it was received; and (c) use of foreign contribution for a purpose or in a State/Union territory not covered by the registration. The prescribed compounding amount for these new utilisation-linked contraventions is generally 30% of the relevant amount or INR 1,00,000 (Indian Rupees one lakh), whichever is higher, with an additional disgorgement of 100% of returns in the case of speculative activities.

The amendments apply prospectively and expressly state that cases already disposed of prior to the amendments will not be reopened.

Key Highlights of FCRR 2026

• Introduction of the term ‘key functionary’: The FCRR 2026 introduce a new defined term ‘key functionary’ covering directors of companies, partners of firms, trustees, kartas of Hindu Undivided Families, office-bearers or members of governing or managing bodies of societies, trusts, and trade unions, and any other person who has control over, or responsibility for, the management or affairs of the entity. The amendment seeks to clearly identify/ascertain responsibility and eliminate nomenclature-related inconsistencies under the FCRA (which previously used varying expressions such as ‘officer bearer’, ‘governing council’, ‘member’).
• Restraint on foreign nationals as ‘key functionary’: The FCRR 2026 clarify that organisations having foreign nationals (other than persons of Indian origin) as ‘key functionary’ will ‘ordinarily not be considered’ eligible for FCRA registration or prior permission (to receive foreign contribution) unless specifically permitted by the Central Government under prescribed circumstances.
• Purpose and territory-specific registration: Applications must specify the purpose (religious, cultural, economic, education, or social from the list of permitted activities) and the States or Union Territories of operation. A base fee of INR 10,000 (Indian Rupees ten thousand) applies, with INR 300 (Indian Rupees three hundred) for each additional purpose or territory. Existing registrants must file Form FC-6F within 1 (one) year specifying the purpose(s) and States or Union territories for which they seek to retain their registration.
• Clarification on purpose of utilisation of foreign contribution: The FCRR 2026 clarifies that the foreign contribution received will be utilised only for activities carried out in India, in accordance with the entity’s stated objectives and for the purposes for which it has been received.
• Reasonable activity threshold: For the purpose of renewal or cancellation of registration, FCRR 2026 has introduced the concept of ‘reasonable activity’. Accordingly, an association is deemed to have undertaken reasonable activity in its chosen field if it has utilised foreign contribution of not less than INR 10,00,000 (Indian Rupees ten lakh) in the last 2 (two) financial years for such purpose.
• Release of instalments: Prior permission grantees seeking the second or any subsequent instalment of foreign contribution are required to:
  • make an application in a new Form FC-3BB for such second or any subsequent instalment;
  • demonstrate utilisation of 75% of the foreign contribution received in the previous instalment; and
  • undergo a field inquiry of such utilisation.
• Change of scope of registration: An association intending to change its area of operation by including or deleting any purpose, State, or Union Territory must apply in Form FC-6F, accompanied by a governing body resolution and the prescribed fee. The Central Government may approve or reject the application after conducting such inquiry as it deems fit.
• Form amendments and enhanced disclosure: The MHA has revised reporting and application forms to require, among other things, disclosure of official websites and social media accounts, details of ultimate donors in the case of Donor Advised Funds or other intermediary remittance vehicles, a detailed activity report, the UDIN (Unique Document Identification Number) of certificates and of separate audited financial statements maintained for foreign contribution, and information on whether the entity is constituted under a Central or State Act, is wholly government-owned, or is subject to compulsory audit.

Conclusion

Taken together, these notifications tighten both the compliance and enforcement framework under the FCRA. From a strategic standpoint, the introduction of purpose and territory-specific registration represents a fundamental shift from a general-purpose licence to a granular, activity-by-activity framework. Associations that currently operate across multiple States or pursue overlapping objectives will need to rationalise their registration portfolios and weigh the incremental fee burden per additional purpose or territory against the operational flexibility each registration confers. Further, FCRA-registered entities will now need to align their activities and registrations with the prescribed categories and purposes under the FCRR 2026.

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