Sub granting under FCRA

Sub granting as per ammended provisions is prohibited but is there anyway in which an FCRA registered entity can donate funds out of FC receipts to another local entity (eg SHG, TRUST ,ETC) which would count as a qualifying distribution?
Replies (1)

Under the current Foreign Contribution (Regulation) Act (FCRA) framework in India, the answer is no.

The Foreign Contribution (Regulation) Amendment Act, 2020, introduced a strict prohibition on the transfer or sub-granting of foreign funds to any other person or organization, regardless of whether the receiving entity is registered under the FCRA or has prior permission.

Key Points:

  • Complete Ban: The law explicitly prohibits the transfer of foreign contributions to any other person or organization. This means an FCRA-registered entity cannot "pass on" or sub-grant funds received from foreign sources to other local entities, such as Self-Help Groups (SHGs), local trusts, or other NGOs.

  • Scope: This restriction applies to all "foreign contribution" funds. Under the law, even if you receive funds in Indian Rupees (INR) from a foreign source, those funds are classified as foreign contributions and are subject to these stringent regulations.

  • Legal Standing: The 2020 Amendment effectively ended the practice where larger intermediary NGOs would receive a large grant and then distribute it to smaller, grassroots organizations. This has been consistently upheld and further reinforced by subsequent rules and judicial interpretations.

  • Consequences of Violation: Non-compliance, including the unauthorized transfer of funds, can lead to the suspension or cancellation of an organization's FCRA registration, the freezing of bank accounts, and potential legal prosecution.

Summary: The law as it stands today does not provide a legal mechanism for an FCRA-registered entity to donate or transfer foreign contribution funds to another entity. Any such transfer would be a violation of the FCRA regulations. You are advised to consult with a legal professional specializing in FCRA compliance for specific guidance on how your organization might structure its operations within these legal boundaries.

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