Guidelines Released for Foreign Funding in Section 8 Firms

In a move aimed at tightening oversight while facilitating legitimate international support for non-profit work, the Government of India has issued comprehensive guidelines for accepting foreign funding in Section 8 companies. These new rules, jointly framed by the Ministry of Corporate Affairs (MCA) and the Ministry of Home Affairs (MHA), are intended to ensure that charitable entities receiving overseas donations operate with transparency, accountability, and in full compliance with domestic laws.

The guidelines mandate that any Section 8 company intending to receive foreign contributions must be registered under the Foreign Contribution Regulation Act (FCRA) and maintain a separate bank account exclusively for such receipts. All foreign funds must be routed through a bank designated by the Reserve Bank of India for FCRA transactions. The entity must also provide detailed disclosures on the origin of funds, purpose of utilization, beneficiary details, and project outcomes in both their annual reports and filings with the MHA and MCA.

To ensure stricter monitoring, Section 8 firms receiving substantial foreign support will be subject to periodic audits and compliance reviews. The guidelines also require timely submission of annual FCRA returns and declarations of compliance under the Companies Act, including proper classification of foreign contributions in their financial statements. Non-compliance or misreporting may result in penalties, suspension of FCRA registration, or cancellation of the company’s Section 8 license.

Officials clarified that the aim is not to deter legitimate foreign aid but to safeguard the sector from misuse, financial malpractice, or political interference. By clearly defining operational boundaries and reporting standards, the government seeks to foster an ecosystem where Section 8 companies can confidently engage with international donors while upholding legal and ethical standards. The guidelines are seen as a balancing act between regulatory vigilance and enabling a vibrant, globally connected non-profit landscape in India.