FCRA 2026 Sub-Granting Ban: What NGOs With Implementing Partners Must Do
The June 2026 amendment to the FCRA Rules, 2011 removes the 20% transfer permission entirely, banning all transfer of foreign contribution to implementing partners — even FCRA-registered ones. Here is what NGOs running multi-partner structures must do now.
CA Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Legal basis: Foreign Contribution (Regulation) Rules, 2011 (amended), read with Foreign Contribution (Regulation) Act, 2010, Sections 11, 11(2), 12(4) — Effective: June 22, 2026. Source: MHA notification amending FCRA Rules 2011 (as applicable). Last reviewed by CA Harun Raaj: September 2026.
The Ministry of Home Affairs amended the Foreign Contribution (Regulation) Rules, 2011 on June 22, 2026. The most operationally disruptive change: a blanket prohibition on transfer of foreign contribution to any other entity — even one holding a valid FCRA registration. If your organisation channels foreign funds through implementing partners, sub-grantees, or sister organisations, that arrangement is now non-compliant.
What the Transfer Ban Means
Before June 22, 2026, FCRA-registered organisations could transfer up to 20% of foreign contribution to another FCRA-registered entity — a ceiling already reduced from 50% by the FCRA Amendment Act, 2020. The June 2026 amendment removes this permission entirely. The new position: a primary FCRA-registered organisation may not transfer foreign contribution to any person or entity, regardless of whether the recipient holds its own FCRA registration.
This change operates at the Rules level and took effect June 22, 2026 without Parliamentary enactment. Existing sub-granting arrangements entered into before this date are also caught — the date of the original agreement provides no safe harbour.
Key point: As of June 22, 2026, no FCRA-registered organisation may transfer foreign contribution to any other entity, including another FCRA-registered entity, under the amended FCRA Rules, 2011.
Who Is Affected
This ban applies to every organisation registered under the Foreign Contribution (Regulation) Act, 2010 (Act 42 of 2010) — charitable trusts, Section 8 companies, registered societies, and institutions holding FCRA registration under Section 11 or prior permission under Section 11(2). Common affected scenarios:
- A lead NGO receiving foreign funds and passing a portion to field-level implementing partners, common in rural development, livelihood, and health programmes.
- Two related trusts where one holds FCRA registration and routes funds to the operational entity.
- A Section 8 company receiving CSR funds from a foreign-headquartered company as foreign contribution, then sub-granting to local implementing NGOs.
- The Indian chapter of a global federation routing foreign contribution from the international body to state-level affiliates.
Illustrative example: An FCRA-registered Section 8 company in Pune receives ₹1.2 crore annually from a UK-based charity for education programmes in Marathwada, and had been channelling ₹40 lakh to a field partner, also FCRA-registered, for last-mile delivery. As of June 22, 2026, this arrangement is non-compliant. The primary entity must either implement directly or restructure the relationship.
Restructuring Options
Immediate Compliance Steps
- Map every current sub-grant agreement and identify which ones involve foreign contribution.
- Assess whether the sub-grantee can activate an independent, direct donor relationship.
- Take advice from a Chartered Accountant with FCRA expertise before deciding to continue, terminate, or restructure any arrangement.
- File Form FC-6F on the FCRA 2.0 portal by June 21, 2027 to register your activity purposes and geographic areas — also now mandatory under the June 2026 Rules.
FCRA Amendment Bill 2026 — What Is Still Coming
Separately from the Rules amendment, the Government introduced the Foreign Contribution (Regulation) Amendment Bill, 2026 in Lok Sabha on March 25, 2026. On August 12, 2026, Lok Sabha passed a motion referring the Bill to a 31-member Joint Parliamentary Committee, required to report by the Winter Session of Parliament 2026 (November–December 2026). The Bill is not yet law.
Its key focus is a framework for supervision, management, and disposal of foreign contribution and assets of an organisation that loses its FCRA certificate — addressing the current gap where a cancelled registration leaves no clear mechanism forcing return or redirection of residual foreign funds. Refer to the official Bill text and JPC report once released for the exact provisions; do not rely on this summary for the final drafting.
Do not let your FCRA registration lapse or accumulate unspent foreign funds. The regulatory and legal exposure around residual foreign contribution is increasing, not decreasing.
This article is for general information only and does not constitute legal advice. FCRA compliance involves fact-specific analysis, and a Chartered Accountant or FCRA compliance specialist should review your organisation's specific funding structure before any restructuring decision is made.
I'm CA Harun Raaj, Visakhapatnam. If your NGO runs foreign-funded implementing-partner arrangements, reach out before your next disbursement — restructuring now avoids compounding penalties later.
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See Also
Frequently Asked Questions
If our sub-grantee has its own FCRA registration, are we still prohibited from transferring funds?
Yes. The June 2026 amendment to the FCRA Rules, 2011 prohibits transfer of foreign contribution to any entity, including one that itself holds FCRA registration. The sub-grantee's own FCRA status does not create an exemption.
We signed a sub-grant agreement in 2024 before the Rules changed. Are we protected by the earlier law?
No. The Rules amendment applies from its effective date of June 22, 2026 irrespective of pre-existing agreements. A sub-grant agreement is a private contract between parties and cannot override a statutory compliance requirement under the FCRA Rules, 2011.
Can we transfer foreign contribution to an Indian government body under the amended Rules?
The amended FCRA Rules, 2011 do not carve out an explicit exemption for government bodies in the source material. Verify the current position with FCRA counsel before making any such transfer.
What penalty applies if we continue sub-granting after June 22, 2026?
Under FCRA 2010 Sections 11(4) and 12(4), the FCRA registration is liable to suspension or cancellation. The FCRA (Compounding of Offences) Rules, as updated in 2026, also allow a penalty of up to five times the amount improperly transferred.
Does the transfer ban also affect purely domestic contributions between our organisations?
No. FCRA regulates "foreign contribution" as defined in Section 2(1)(h) of the FCRA, 2010. Funds sourced entirely from Indian donors, government grants, or domestic CSR and transferred between organisations are not regulated by FCRA.
What is Form FC-6F and when must we file it?
Form FC-6F is filed on the FCRA 2.0 portal to register your organisation's activity purposes and geographic areas of operation. Under the June 2026 Rules, filing is mandatory by June 21, 2027.
Can our implementing partner get its own FCRA registration to keep receiving funds from the same foreign donor?
Yes, this is one restructuring route. The field partner obtains independent FCRA registration and builds a direct relationship with the foreign donor, who must then fund each implementation entity directly rather than routing through the primary grantee as a pass-through.
Is the FCRA Amendment Bill, 2026 already in force?
No. Lok Sabha passed a motion on August 12, 2026 referring the Bill to a Joint Parliamentary Committee, which must report by the Winter Session of Parliament 2026. The Bill, which addresses supervision of foreign contribution assets after certificate cancellation, is not yet law.
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