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Introduction

The Foreign Contribution (Regulation) Act, 2010 (“FCRA/Act”), is an important piece of legislation that Parliament has enacted to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for activities detrimental to national interest.

In recent years, the Central Government has come up with major amendments to the framework regulating foreign contributions to make the procedure and consequences more stringent, leading to greater transparency and oversight. For instance, on April 07, 2025, the Ministry of Home Affairs (“MHA”) had issued a public notice under the FCRA, changing the validity and scope of prior permission sought for specific projects.[1] Furthermore, the Foreign Contribution (Regulation) Amendment Rules, 2024 (effective from January 1, 2025) (“2024 Amendment Rules”), amended the Foreign Contribution (Regulation) Rules, 2011, and mandated enhanced disclosures for chartered accountants (“CA”) to report non-compliance with FCRA provisions in their audits.[2] This development is particularly relevant given the increase in FCRA violation cases by non-government organisations and companies.

Foreign Contribution (Regulation) Amendment Rules, 2024

The 2024 Amendment Rules have introduced certain key changes in accounting and reporting, to increase transparency and accountability with respect to foreign contributions. Prior to the 2024 Amendment Rules, CAs were required to provide certification under Form FC-4 only for foreign contribution received by the organisation, interest accrued on it, maintenance of accounts of foreign contribution and related records, etc.

It is noteworthy that the 2024 Amendment Rules have introduced an additional obligation on CAs to certify that the concerned association/ person has/ has not violated any provisions of the FCRA, or any rules made thereunder, or notifications issued thereunder. This certificate forms a part of Form FC-4, to be submitted by organisations in accordance with Rule 17 of the Foreign Contribution (Regulation) Rules, 2011. These amendments also imply enhanced responsibility on CAs to have in-depth understanding of the FCRA framework and properly assess compliance with the new mandates.

While the 2024 Amendment Rules do not lay down any punishment or penalties on CAs for non-adherence to such guidelines, Section 35 of the FCRA seems to be broad enough to make CAs liable for ‘assisting’ any person, political party or organisation in accepting any foreign contribution in violation of the FCRA provisions or any rule or order made thereunder. Under Section 35 of the FCRA, a person may be punished with imprisonment for a term extending up to 5 (five) years, or with fine, or with both. Additionally, Section 37 of the FCRA also provides for imprisonment extending up to 1 (one) year, or with fine or both, for offences where no separate penalty has been provided under the Act.

While there is not much jurisprudence or cases wherein Section 35 of the FCRA has been invoked against CAs, however, in view of the changes, there is a strong possibility that we may see an increase in invocation of Section 35 of the FCRA. Off late, there has been a steep rise in cases of contraventions by auditors and Courts have come down heavily on auditors in such instances. Therefore, the enhanced responsibilities under the FCRA may necessitate greater vigil by the CAs before they sign off on a particular certification. This would also require better record keeping by the recipients of foreign contribution. An in-house inquiry against the CA for misconduct is also a possibility.

In view of the above, it is crucial that CAs, having been imposed with such an obligation under the 2024 Amendment Rules, make mandatory compliances, in the absence of which, the firms, as well as the CAs, may face regulatory scrutiny or punishments.

Inspection, Audit and Investigation

It is interesting to note that the procedure for inspection, audit and investigation under the FCRA is unique in many ways as the Central Government, under Section 23 of the FCRA, has the power to authorise any authority or organisation to inspect any account or record maintained by a political party, person, organisation or association. Such authorised organisation or authority has the right to enter in or upon any premises, for the purpose of inspecting the said account or record, including seizure of account or record. Similarly, the Central Government could authorise any organisation to audit any books of account kept or maintained by such person and such officer has the right to enter in or upon any premises, for the purpose of auditing the said books of account.[3]

Notably, there have been many investigations wherein independent accounting firms have also been vested with the powers by the MHA to conduct audit and inspection of accounts in terms of Sections 20 and 23 of the FCRA.

The abovementioned inspection and audit provisions, along with the enhanced obligations on CAs — as provided under the 2024 Amendment Rules to certify if there has been a violation of the FCRA — might put CAs under scrutiny of independent firms appointed by the Central Government under the FCRA. It could lead to the emergence of less-heard scenarios where an independent CA firm, authorised by the Central Government under Section 20 and 23 of the FCRA, could enter the premises, inspect and seize documents from the office of another CA firm, which allegedly has signed off on a certificate for a particular year under investigation.

Conclusion

The 2024 Amendment Rules significantly transform the regulatory landscape governing foreign contributions in India, imposing stringent compliance requirements while enhancing transparency. CAs now shoulder expanded responsibilities as compliance gatekeepers rather than mere auditors, requiring heightened professional diligence. Although, the FCRA lacks explicit penalties for CAs, provisions like Section 35 could hold them liable, leading to potential imprisonment and/ or financial penalties. It is evident that the government is pushing for greater compliance and efficiency in all quarters, and the FCRA, a significant legislation on foreign contribution, also reflects the same.


[1] Proposal regarding processing of prior permission application under FCRA, 2010, No.11/21022/36(0025)/2025/FCRA-II, Government of India (April 7, 2025), fc_notice_07042025.pdf.

[2] Foreign Contribution (Regulation) Amendment Rules, 2024.

[3] Section 20, Foreign Contribution (Regulation) Act, 2010.