By — Ananya Rana

Abstract

In Indian public life, foreign funding occupies an awkward place. It can finance hospitals, schools’ disaster reliefs and community welfare but raises legitimate concerns regarding political influence, religious preachings, financial misuse and national security. The Foreign contribution (Regulation) Act 2010 (FCRA) attempts to manage this tension by placing foreign funded organisations under extensive regulatory supervision. Yet as the regulatory framework becomes increasingly detailed, a difficult question emerges: When does regulating foreign money become regulating the organisation that receives it? This article examines the tension between legitimate foreign philanthropy and foreign influence especially in the context of NGO’s and religious organisations. It further argues that foreign funding should neither be treated as something which is inherently generous nor suspicious. Instead, the regulation should be grounded in demonstrable risk, financial transparency and evidence of unlawful conduct, while preserving legitimate space for civil society and religious activity.

Introduction

A foreign donation can buy a hospital bed, rebuild a village after a flood or fund a school. In theory, it can also buy access, influence or something even more sinister. The money doesn’t arrive with a label saying, ‘good deed’ or ‘threat to national security’. It simply lands in a bank account. So how is State supposed to tell the difference? That is the uncomfortable underneath India’s foreign funding regime. The Foreign contribution (Regulation) Act 2010 (FCRA) does not prohibit foreign philanthropy. Instead, it permits it subject to restriction, registration requirements, reporting obligations and governmental oversight. Its overall objective is to regulate the acceptance and utilisation of foreign contribution and prevent its use for activities detrimental to the national interest.

This article examines where that line should be drawn for NGOs and religious organisations. It argues that funding should be regulated based on risk, transparency and unlawful conduct, rather than treated as inherently suspicious because it comes from abroad.

Foreign money is not just money

The government’s concern is not unreasonable. Foreign funding supports healthcare, education, poverty alleviation, disaster relief and community development, but money can also carry relationships with it. A foreign donor may have political or ideological interests, while funds can be diverted from their stated purpose. The difficulty lies in distinguishing a foreign donor funding a rural health programme from a foreign entity funding political mobilisation, or foreign funding from actual foreign control. The distinctions sound obvious, but law exists largely because obvious distinctions stop being obvious once governments, regulators and lawyers get involved. 

The FCRA bargain 

If an organisation wants access to foreign contribution, it accepts a significant degree of regulatory supervision. Section 3of the act excludes various categories of persons and organisations from receiving foreign contributions. These include political parties. Similarly, Section 5 allows the government to determine whether an organisation falls in the latter category.

The reason is easy to grasp foreign funds should not provide a roundabout way of financing political activity in India. The fact is that civil society doesn’t split up as clearly as the law would have it. Groups concerned with environmental protection, labour rights, displacement or human rights may have to deal with political issues. They can lobby, carry out campaigns, publish criticism or oppose government policy without thereby becoming political parties. 

This was significant in the case of Indian Social Action Forum v Union of India (INSAF). The Supreme Court agreed that the State had the power to stop foreign funding entering into political activity but drew a distinction between active or party politics and ordinary social and economic welfare work. It therefore interpreted the relevant provisions more narrowly so that organisations would not be regarded as political just because they dealt with public issues. 

Foreign funding is a privilege, but that is not the end of the story.

While INSAF may be an example of one side of the conversation regarding constitutional rights, Noel Harper v Union of India is an example of the other side. In 2022, the Supreme Court upheld several aspects of the Foreign Contribution (Regulation) Amendment Act 2020, including the restriction on transferring foreign contributions to third parties and the reduction of the ceiling of permissible administrative expenditure from 50 percent to 20 percent. As the Supreme Court made clear in Noel Harper v Union of India, there is no fundamental right to receive foreign contribution, and Parliament may impose conditions on its receipt and use.

This removes one of the arguments that FCRA critics use: there is no constitutional right to receive foreign funds. However, this does not end the debate; it merely changes the question. An organisation that relies heavily on funding to run a school, hospital, shelter or research programme may find its ability to function deeply altered if that funding is taken away. The harder question is how far that power should extend once regulating money starts to decide whether an organisation can keep operating.

When charity becomes suspicious

The Missionaries of Charity illustrates why these matters. In December 2021, its FCRA registration was not renewed, citing adverse inputs and failure to meet eligibility conditions; it was renewed the following month. The episode raised a larger question: when a religious organisation also provides humanitarian services, should its religious identity automatically make its foreign funding suspicious? If the concern is misuse, examine the money; if it is political financing, regulate that; if it is terrorism financing, investigate the relevant links. But if the concern is simply that an organisation is religious, foreign-funded and capable of influencing people, the category becomes dangerously loose.

Influence is not the same as illegality

Foreign funding does not automatically mean foreign influence, foreign control or unlawful interference. The State has an interest in stopping that unlawful interference but foreign funding alone does not prove unlawful interference. 

This is where a risk‑based approach matters. The Financial Action Task Force has said that the regulation of non‑profits should be focused and proportionate to the risks that are identified rather than assuming that the whole sector is suspect. Treating low- and high-risk organisations alike is not necessarily stronger regulation; it is regulation without regard to risk. 

From regulating money to regulating institutions

For a law which is supposed to be concerned with regulating money, this raises an awkward question: How much of an organisation’s activity should the government get to regulate merely because some of its money comes from abroad? This becomes even more difficult when the organisation is religious, politically outspoken or involved in work that sits somewhere between charity and advocacy. 

The 2026 Rules make this tension clearer. The framework has become more detailed. The Foreign Contribution (Regulation) Amendment Rules 2026 needs the  organisations to identify the purposes for which they seek foreign contribution and the state or union territories in which they propose to operate. They also prescribe specific permissible purposes across religious, cultural, economic, educational and social categories and introduce additional disclosure requirements. But the more specific the rules become, the more the State shifts from simply asking where money went to deciding what an organisation is allowed to do. There is a difference between asking an organisation to explain its money and setting its limits ahead of time. The first is about oversight. The second starts to feel like regulation of the organisation itself.

The proposed Foreign Contribution (Regulation) Amendment Bill 2026 pushes the issue further. The bill was introduced in the Lok Sabha in March 2026. It suggests a system for handling contributions and assets when an organisation loses its FCRA registration with a Designated Authority and ways to move assets to temporary or permanent control. The bill is still not law. It has been sent to a Joint Parliamentary Committee. It also shows that the FCRA debate has gone past bank accounts. If foreign money has helped build a school, hospital or community centre what happens to that place when the organisation loses its registration?

So, where should the line be drawn?

It’s not fair to treat every foreign-funded group as a hidden threat just because of where the money comes from. The right way to handle this is to focus on risk not on the origin of the funding. We should look at who gave the money, who runs the organisation, where the money goes and if there’s proof of wrongdoing. If real risks exist the government should step in. If there’s no clear danger, the mere fact that the money is foreign shouldn’t be enough to shut things down. Foreign donations don’t need to be left unchecked, and neither should national security be used as a blanket excuse to stop honest civil society groups from working. The line must be drawn where evidence of risk starts not just where foreign money begins.

About the Author

Ananya Rana is a fourth-year B.B.A. LL.B. (Hons.) student at Jindal Global Law School. She specialises in the Public Policy cluster. Her research interests include public policy, constitutional law, human rights, and law and society.

Source: India Today