Recently, the Ministry of Home Affairs (MHA) announced a major change regarding the validity of foreign funds received through the prior permission route.
- The update was communicated via a notice to all banks.
Key Change Introduced
- New Validity Period: Foreign funds received through prior permission will now be valid only for four years for utilization.
- Earlier, there was no fixed time limit, funds could be used until fully exhausted.
- Legal Implications: Failure to utilize the funds within the four-year window will be treated as a violation of the Foreign Contribution (Regulation) Act (FCRA), 2010.
- Non-compliance could invite punitive action under the Act.
- Receiving Foreign Contribution: NGOs/individuals will have three years from the approval date to receive the foreign contribution.
- Utilizing Foreign Contribution: The entire amount must be used within four years from the approval date.
- Provision for Ongoing Approvals: For prior permissions already granted (where project duration exceeds three years),
- The four-year utilization period will be counted from April 7, 2025, the date of this new order.
- Scope for Extension: The MHA mentioned it may consider extending the validity period on a case-to-case basis, depending on the merits of each request.
About Foreign Contribution under FCRA
- Under the Foreign Contribution (Regulation) Act (FCRA), 2010 of India, “foreign contribution” broadly refers to any donation, delivery, or transfer made by a foreign source of:
- Articles (except personal gifts under a certain value),
- Currency (Indian or foreign),
- Securities (like shares, bonds, debentures, etc.).
- Examples:
- If an NGO in India receives a donation from a UK-based trust, that will be considered a foreign contribution.
- If a foreign citizen gifts a large sum of money to an Indian journalist, that’s also foreign contribution
Specifically, “foreign contribution” includes
- Donation, delivery or transfer made by any foreign source of:
- Any article (unless it’s a personal gift below ₹25,000 in market value),
- Any currency (Indian or foreign),
- Any foreign security.
- Indirect transfer: Even if the contribution is first received by an Indian citizen/organization and then transferred to another person or entity, it is considered foreign contribution if the original source is foreign.
- Coverage: Contributions received by individuals, associations, companies, NGOs, political parties (with strict limitations), and even some journalists and editors.
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About FCRA Prior Permission
- FCRA Prior Permission is an initial approval granted by the Ministry of Home Affairs (MHA) for organizations wishing to receive foreign contributions without permanent FCRA registration.
- In 2024, 58 applications for prior permission were processed and in 2025 , 20 NGOs received foreign donations via prior permission.
- It allows receipt of a specific amount from a specific donor for designated activities or projects.
- Prior permission is ideal for newly registered organizations seeking to accept foreign contributions for the first time.
- Approval is granted for specific projects, activities, and specified donor contributions.
Eligibility for Prior Permission
- The organization must be registered under:
- Societies Registration Act, 1860
- Indian Trusts Act, 1882
- Section 25 of Companies Act, 1956 (now Section 8 of Companies Act, 2013)
- A commitment letter from the donor must specify the amount of contribution and purpose of donation.
- Additional conditions apply if the donor and recipient have common members, ensuring no conflict of interest.
Differences Between Registration and Prior Permission
| Aspect |
FCRA Registration |
Prior Permission |
| Purpose |
For regular and long-term receipt of foreign contributions. |
For receiving foreign funds for a specific project. |
| Eligibility |
3 years of existence with ₹10 lakh spent on core activities. |
New or existing organizations with a specific project. |
| Application Basis |
Organization-based (overall activities). |
Project-specific with donor commitment. |
| Documents Required |
Audited statements, activity reports (last 3 years), certificates. |
Project proposal, donor commitment letter, registration certificates. |
| Validity |
5 years (renewable). |
For the specific project/donor, limited duration. |
| Fundraising Scope |
Multiple projects and donors. |
Limited to the approved project and donor. |
| Processing Time |
Longer due to detailed scrutiny. |
Comparatively faster. |
| Credibility |
Higher credibility for fundraising and partnerships. |
Project-based credibility. |
| Compliance |
Annual returns, dedicated FCRA bank account, audits. |
Same compliance for the approved project. |
Additional Reading: FCRA
8 Apr 2025
