Foreign Contribution to Political Parties and NGO’s in India

Shivam Anand, Honors Law Student, D.S. National Law University, Vishakhapatnam, India


Credit: Public domain.

What is foreign contribution?

It refers to any donation, delivery or transfer made by any foreign source of any article, not being an article which has been given to a person as a gift for his personnel use whose market value on the date of such gift does not exceed Rs. 25000 (specified vide the Foreign Contribution (Regulation) Amendment Rules, 2012 [G.S.R. 292 (E) dated 12th April, 2012]. Therefore if a person has been given an article for his personnel use and the market value of it does not exceed Rs. 25000 then it won’t amount to foreign contribution. Foreign contribution also includes any any donation, delivery or transfer made by any foreign source of any currency ,whether Indian or foreign and security as defined under Section 2(h) of the Securities Contracts (Regulation) Act inclusive of foreign security defined under Foreign Exchange Management Act, 1999.

One of the most important aspect to be taken into consideration is the definition of “foreign sources” because the latest amendment in the Finance Bill,2016 with respect to Foreign Contribution Regulation Act (FCRA), 2010 deals with the definition of foreign source. Under FCRA foreign source refers to

(i)             the Government of any foreign country or territory and any agency of such Government;

(ii)             any international agency, not being the United Nations or any of its specialized agencies, the World Bank, International Monetary Fund or such other agency as the Central Government may, by notification, specify in this behalf

(iii)          A foreign company;

(iv)          A corporation, not being a foreign company, incorporated in a foreign country or territory;

(v)           A multi-national corporation referred to in sub-clause (iv) of clause (g);

(vi)           A company within the meaning of the Companies Act,1956 (now 2013) , and more than one-half of the nominal value of its share capital is held, either singly or in the aggregate, by one or more of the following, namely:- (A) the Government of a foreign country or territory; (B) the citizens of a foreign country or territory; (C) corporations incorporated in a foreign country or territory; (D) trusts, societies or other associations of individuals (whether incorporated or not), formed or registered in a foreign country or territory; (E) Foreign company;

(vii)         A trade union in any foreign country or territory, whether or not registered in such foreign country or territory;

(viii)       A foreign trust or a foreign foundation, by whatever name called, or such trust or foundation mainly financed by a foreign country or territory; (ix) a society, club or other association or individuals formed or registered outside India; (x) a citizen of a foreign country;”

Under FCRA 2010, a ‘person’, as defined in Section 2(1)(m) with the exclusion of those mentioned in Section 3 of FCRA, 2010, having a definite cultural, economic, educational, religious or social programme can receive foreign contribution after it obtains the prior permission of the Central Government, or gets itself registered with the Central Government. So with respect to Section 3 of FCRA following are excluded from receiving a foreign contribution:

(a) a candidate for election;

(b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;

(c) Judge, government servant or employee of any Corporation or any other body controlled on owned by the Government;

(d) member of any legislature;

(e) political party or office bearer thereof;

(f) organization of a political nature as may be specified under sub- section (1) of Section 5 by the Central Government.

(g) association or company engaged in the production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode, or any other electronic form as defined in clause (r) of sub-section (i) of Section 2 of the Information Technology Act, 2000 or any other mode of mass communication; (h) correspondent or columnist, cartoonist, editor, owner of the association or company referred to in clause (g).

On scrutinizing the above section 3, we see that political parties are excluded from the “person” allowed to receive foreign contribution.

Under Chapter III of the FCRA, 2010 with respect to Section 11 no person having a definite cultural, economic, educational, religious or social programme shall accept foreign contribution unless such person obtains a certificate of registration from the Central Government. Section 12 provides for procedures to be followed for filing of application for permission of receiving the foreign contribution. The application should be disposed within 90 days and in case the application is rejected then reason should be stated for the same. Under Section 12 several guidelines are provided under the license for receiving the foreign contribution can be revoked. In the recent Greenpeace foundation case, where the accounts of the NGO was frozen by the Ministry of Home Affairs on the ground that it violated Section 12 (4) (f) (ii) and also on the basis of discrepancies with respect to annual return filed by Greenpeace which violated several clauses of FCRA,2010.[1] The activities of Greenpeace, was found to be detrimental to the economic interest of India though Delhi High Court ruled in the favour of Greenpeace.


Filing of annual return of receipt and utilisation of foreign contribution in FORM FC-4 as provided under Foreign Contribution (Regulations) Rules, 2011 is mandatory  along with scanned copies of income and expenditure statement, receipt and payment account and balance sheet. The process of filing of annual return can be done online


Mr. Arun Jaitley, the Hon’ble Finance Minister inserted a new clause in the Finance Bill, 2016 as part of Union Budget amending section 2 of the FCRA, 2010 with retrospective effect.

Under the new amendment “In the Foreign Contribution(Regulation) Act 2010, in section 2, in sub section(1), in clause (j), in sub-clause(vi), the following proviso shall be inserted with effect from 26 September, 2010, namely:–

Provided that where the nominal value of share capital is within the limits specified for foreign investments under the Foreign Exchange Management Act, 1999, or the rules and regulations made there under, then, notwithstanding the nominal value of the share capital of a company being more than one half of such value at the time of making the contribution, such company shall not be deemed a foreign source’.”[2]

Under FCRA, as we have seen that political parties are barred from receiving funds from any foreign source. Now with respect to new amendment there is no change with respect to the status of the political party to receive the foreign contribution and they are still barred but the amendment provides that in case the foreign company’s ownership of an Indian company is within the foreign investment limits as provided by the government for a particular sector then the company will be treated as “Indian” for the purpose of the Foreign Contribution Regulation Act ,2010. The new provision has been given a retrospective effect and is effective from 2010.


Well in 2014 Delhi High court found BJP and Congress guilty of receiving donation from UK based multinational companies Vedanta through their wholly owned Indian subsidiaries Sterlite and Sesa. As under the definition of the foreign source any donation received by companies who have one half of the nominal value of the share held by any foreign entities therefore any donation from these two companies comes within the ambit of foreign source and since political parties are barred from receiving foreign contribution therefore BJP and Congress was found to in violation of this law. Therefore giving a retrospective effect to the new inserted clause, BJP has cleverly tried to escape the liabilities. The matter is pending in Supreme Court and only time will tell the real time scenario of the impact of this clause.

[1] last accessed on  26th May 2016

[2] last accessed on 26th May 2016


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