Key Definitions explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Four words in section 2(1) of the Foreign Contribution (Regulation) Act, 2010 decide whether the Act reaches a receipt at all: "foreign contribution", "foreign source", "person" and "association". This post explains each as the Act now reads and shows how they work together; if a particular receipt is in doubt, a legal consultation before it is accepted is the safer course.
This article is as per the Foreign Contribution (Regulation) Act, 2010 read with the Amendment Act, 2020 (33 of 2020), which did not change section 2, and with the proviso to section 2(1)(j)(vi) inserted through the Finance Act, 2016 as amended by the Finance Act, 2018. Where the Act cites an older law it is quoted as printed; check the current law for the corresponding provision. Later amendments should be checked.
Foreign contribution is a donation, delivery or transfer, made by a foreign source, of an article, currency (Indian or foreign) or a security. A foreign source includes foreign Governments, foreign companies and corporations, companies more than half held by foreign holders, foreign trusts and societies, and any citizen of a foreign country. A person includes an individual, a Hindu undivided family and an association; an association is a group of individuals with an office in India.
Foreign contribution: section 2(1)(h)
The clause covers three things when a foreign source donates, delivers or transfers them:
- an article, other than an article given as a gift for personal use whose market value in India on the date of the gift is not more than the sum the Central Government specifies by rules;
- currency, whether Indian or foreign; or
- a security as defined in the Securities Contracts (Regulation) Act, 1956, including a foreign security as defined in the Foreign Exchange Management Act, 1999.
Rule 6A fixes the limit for a personal gift. As the consolidated copy of the Rules consulted prints it, an article gifted for personal use whose market value in India does not exceed one lakh rupees is not foreign contribution under sub-clause (i); confirm this against the official text. Rule 6 deals with gifts of money from relatives.
Three Explanations qualify the clause.
| Explanation | Effect |
|---|---|
| 1 | A donation, delivery or transfer by any person who received it from a foreign source, directly or through one or more persons, is also foreign contribution |
| 2 | Interest accrued on foreign contribution deposited in a bank referred to in section 17(1), and any other income derived from it or from that interest, is also foreign contribution |
| 3 | An amount received from a foreign source in India as a fee (including fees an educational institution in India charges a foreign student) or as the cost of goods or services rendered in the ordinary course of business, trade or commerce, is excluded |
Explanation 1 means a local intermediary does not wash the character of the money. Explanation 2 means that a fixed deposit made from foreign contribution, and the interest on it, remain foreign contribution. Explanation 3 turns on the receiver having rendered goods or services in the ordinary course of its own business; a gift to the same body from the same source is not a fee. The full treatment is in the article on foreign contribution and foreign hospitality.
Foreign source: section 2(1)(j)
The clause says a foreign source "includes" ten limbs, so the list is not stated to be closed.
| Limb | Foreign source |
|---|---|
| (i) | The Government of any foreign country or territory, and its agencies |
| (ii) | Any international agency, other than the United Nations or its specialised agencies, the World Bank, the International Monetary Fund or an agency the Central Government specifies by notification |
| (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 section 2(1)(g)(iv) |
| (vi) | A company in which more than one-half of the nominal value of share capital is held, singly or in the aggregate, by foreign Governments, foreign citizens, foreign corporations, foreign trusts, societies or associations, or a foreign company |
| (vii) | A trade union in a foreign country or territory, registered there or not |
| (viii) | A foreign trust or foundation, by whatever name called, or one mainly financed by a foreign country or territory |
| (ix) | A society, club or association of individuals formed or registered outside India |
| (x) | A citizen of a foreign country |
No notification under limb (ii) is in the texts consulted, and none is described here. "Foreign company" in section 2(1)(g) means any company, association or body of individuals incorporated outside India and includes a subsidiary of a foreign company, the registered office or principal place of business of such a company, and a multi-national corporation. The Explanation deems a foreign corporation to be multi-national if it has a subsidiary, branch or place of business in two or more countries or territories, or carries on business or otherwise operates in two or more. See the article on foreign source and foreign company.
The proviso to limb (vi)
A proviso says that where the nominal value of share capital is within the limits specified for foreign investment under the Foreign Exchange Management Act, 1999 or its rules or regulations, the company is not a foreign source, even if more than one-half is foreign-held. Section 220 of the Finance Act, 2018 replaced "the 26th September, 2010" with "the 5th August, 1976" in section 236 of the Finance Act, 2016, so the proviso is deemed inserted from that date. The wording of the proviso was read from the Finance Bill, 2016; confirm it against the enacted text. Because foreign-exchange questions arise at the same time, our FEMA advisory service can look at a donor's structure before money is accepted.
Person and association: section 2(1)(m) and (a)
"Person" includes an individual, a Hindu undivided family, an association and a company registered under section 25 of the Companies Act, 1956 (as the Act prints it). "Association" means an association of individuals, incorporated or not, having an office in India, and includes a society (registered or not) and any other organisation, by whatever name called. A trust, a society and a charitable company can all be a "person" through these limbs; the forms are compared in our guide to society, trust and section 8 company.
Other terms that matter for an NGO:
- Certificate (section 2(1)(e)) is the certificate of registration granted under section 12(3).
- Candidate for election and Legislature (section 2(1)(d) and (k)) reach municipalities and panchayats as well as Parliament and State assemblies; they feed into section 3.
- Section 2(2) borrows meanings from the Representation of the People Acts of 1950 and 1951 and the Foreign Exchange Management Act, 1999 for words the Act does not define.
The remaining clauses are set out in the article on person, association, political party and Legislature.
Why the definitions decide the outcome
Ask four questions of a receipt. Is the sender a foreign source, directly or through a chain of persons? Is it an article, currency or a security? Is it a fee or the cost of goods or services in the receiver's own ordinary business? Does the receiver have a definite cultural, economic, educational, religious or social programme, so that section 11 applies? If the first two answers are yes and the third is no, the Act's registration, account and utilisation regime follows.
Need help classifying a receipt?
Doubtful receipts often arise when a donor is a company, a fund or an overseas relative organisation. Our legal consultation team can trace the receipt through the definitions above and tell you which provision applies before you accept or record it.
Key takeaways
- Foreign contribution means a donation, delivery or transfer by a foreign source of an article, currency or security.
- Money passed through intermediaries, and interest and income earned on it, stays foreign contribution; fees and the cost of goods or services in the ordinary course of business are excluded.
- A foreign source includes foreign citizens, foreign companies and trusts, and companies more than half held by foreign holders, subject to the FEMA-limits proviso.
- A person includes an individual, a Hindu undivided family and an association; an association has an office in India.
Read next
- Section 1: short title, extent, application and commencement
- Section 11: registration or prior permission
- Rules 6 and 6A: relatives and personal gifts
- Rules 1 and 2: short title, commencement and definitions
Disclaimer: Based on the Foreign Contribution (Regulation) Act, 2010 as enacted, read with the Amendment Act, 2020 and the other amendments named in this article, and on the Foreign Contribution (Regulation) Rules, 2011 as amended by the notifications named (latest consulted: S.O. 3272(E) dated 22 June 2026), as consulted on 2 October 2026. No consolidated official text was available; some provisions rest on a third-party copy and are identified as such. Later amendments, notifications and Ministry of Home Affairs orders should be checked. This article is general information, not legal advice; check the official text before acting.