Corporate philanthropy faces a higher compliance burden

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The Centre's tighter foreign-contribution regulations will require corporate foundations to conduct deeper due diligence on their non-profit partners, strengthen compliance oversight and prepare for higher costs, legal risks and potential project delays, according to lawyers and corporate social responsibility (CSR) advisory firms.

The ministry of home affairs notified the Foreign Contribution (Regulation) Amendment Rules, 2026, on 22 June, introducing purpose- and geography-specific registrations, enhanced disclosure requirements and a stricter penalty framework for non-profits receiving foreign contributions.

“For purely domestic CSR grants, the impact should be limited. However, for foreign-source or FCRA-linked grants, compliance costs and timelines are likely to increase because companies will need more granular checks on purpose, geography, registration status and utilization,” said Iqbal Khan, senior partner at Cyril Amarchand Mangaldas.

The biggest change, according to lawyers, is that a non-governmental organization's (NGO) FCRA registration alone will no longer be sufficient. Companies must now verify whether an NGO is authorized to undertake a specific project in a particular state and for an approved purpose, turning compliance into a long-drawn process.

The changes raise legal, reputational and audit risks for multinational companies, likely making them more cautious when funding philanthropic projects in the country. “Partnerships with NGOs may become more selective, with stronger grant agreements, termination rights, compliance warranties, reporting covenants and utilization controls,” said Soumya Singh, co-founding partner at Thistle & Law.

Education, healthcare, skilling, rural development, social welfare, climate initiatives, faith-based charities and rights-based development programmes, where foreign funding plays a critical role in on-ground implementation, are expected to be hit the hardest.

The heaviest compliance burden is expected to fall on Section 8 (the Companies Act, 2013) companies, charitable trusts, societies, corporate foundations and FCRA-registered implementing agencies operating in these sectors.

Mint's query emailed to the home ministry remained unanswered.

CSR advisory firms also believe the amendments will reshape corporate philanthropy by making it more structured, institutionalized and compliance-driven.

“For corporate foundations and multinational philanthropies, the amendments make regulatory preparedness an even more important factor while selecting implementation partners. We may see more structured pre-grant assessments, periodic compliance audits and greater emphasis on governance practices throughout the project lifecycle,” said Bhomik Shah, founder and chief executive of CSRBOX Group.

Ashutosh K. Srivastava, partner at SKV Law Offices, said that businesses now must verify an NGO's approved purpose, geographical scope, governance structure and compliance history. Companies should also assess whether an NGO meets the new ₹10 lakh foreign contribution utilization threshold, strengthen grant agreements with robust compliance, reporting and audit clauses, and continuously monitor implementing partners' FCRA status.

In a separate 22 June notification, the Centre also tightened the penalty framework for FCRA violations. Organisations exceeding the 20% cap on administrative expenses will face a penalty of ₹1 lakh or 5% of the excess expenditure, whichever is higher, while speculative investment of foreign contributions will attract a penalty of ₹1 lakh or 30% of the amount invested, whichever is higher, along with recovery of gains.

Higher penalties have also been prescribed for diversion, misuse and unauthorized utilization of foreign contributions.

Indian companies spent ₹1.44 trillion on CSR activities between FY20 and FY24, the ministry of corporate affairs informed the Rajya Sabha o...