Section 41 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.
Section 41 lets certain offences under the Act be settled by payment of a sum, before any prosecution is instituted, to an officer or authority the Central Government names by notification. It excludes offences punishable with imprisonment only and bars compounding of a similar offence within three years of an earlier one.
This article reads section 41 as per the Act as enacted, read with the Foreign Contribution (Regulation) Amendment Act, 2020 (33 of 2020); no paragraph of that Amendment Act changes section 41. The compounding table is set out from three notifications, the latest being S.O. 3287(E) dated 22 June 2026. Later amendments should be checked.
Any offence under the Act that is not punishable with imprisonment only may, before the institution of any prosecution, be compounded by the officers and for the sums that the Central Government specifies by notification. A similar offence within three years of an earlier compounding cannot be compounded. Once an offence is compounded, no prosecution can follow for it.
Section 41(1): what can be compounded, and when
The sub-section begins "Notwithstanding anything contained in the Code of Criminal Procedure, 1973". The Act still cites that Code, so check the current law for the corresponding provision. Three conditions appear in the text:
- Any offence punishable under this Act, whether committed by an individual or an association or any officer or employee of it.
- Not an offence punishable with imprisonment only. The penalties are in sections 33 and 34, sections 35 and 36 and sections 37 and 38; read the punishment printed in each.
- Before the institution of any prosecution. After a prosecution starts, section 41(1) is not available.
The officers and the sums are not in the section. They are "such officers or authorities and ... such sums as the Central Government may, by notification in the Official Gazette, specify". If a notice or a proposed prosecution is on your desk, our legal dispute resolution team can map the section against the facts.
Section 41(2) and the Explanation: the three-year bar
Sub-section (1) does not apply to an offence committed by an individual or association, or its officer or other employee, "within a period of three years from the date on which a similar offence committed by it or him was compounded". The Explanation adds that a second or later offence committed after the expiry of three years from the date of the earlier compounding "shall be deemed to be a first offence".
Section 41(3) to (6)
- (3) Every officer or authority exercises the power subject to the direction, control and supervision of the Central Government.
- (4) Every application is made to that officer or authority "in such form and manner along with such fee as may be prescribed". Rule 21, as substituted by G.S.R. 695(E) dated the 10th November, 2020, says the application is made to the Secretary, Ministry of Home Affairs, New Delhi in electronic form with a fee of rupees three thousand only; see rules 20 and 21.
- (5) Where an offence is compounded before any prosecution, no prosecution is instituted against that offender in relation to it.
- (6) For a default in obtaining permission, or in filing, registering, delivering or sending a return, account or other document to the Central Government or a prescribed authority, the officer "may, direct, by order, if he or it thinks fit" that it be filed within the time the order specifies. The direction is discretionary.
The compounding table
The notification under section 41(1) is S.O. 3025(E) dated the 1st July, 2022, which superseded S.O. 2291(E) dated the 5th June, 2018, except as to things done or omitted before. It was amended by S.O. 778(E) dated the 20th February, 2023 (serial numbers 4, 6 and 7) and S.O. 3287(E) dated the 22nd June, 2026 (serial numbers 3 and 4). The table is as those notifications show up to 22 June 2026. Column (4) names the same officer in every row: the Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act. "H" below means "whichever is higher".
| Sr. | Offence | Amount | Source |
|---|---|---|---|
| 1 | s.35, hospitality in contravention of s.6 | Ten thousand rupees | S.O. 3025(E) |
| 2 | s.37, transfer in contravention of s.7 or any rule (all instances compoundable only once) | One lakh rupees or ten per cent. of the transferred foreign contribution, H | S.O. 3025(E) |
| 3(a) | s.37, defraying beyond twenty per cent. for administrative expenses, s.8 | One lakh rupees or five per cent. of the amount defrayed beyond the limit, H | S.O. 3287(E) |
| 3(b) | s.37, speculative activities, s.8(1) with rule 4 | Thirty per cent. of the amount invested or rupees one lakh, H; and one hundred per cent. of the returns earned | S.O. 3287(E) |
| 3(c) | s.37, use for other purposes, s.8(1)(a) | Thirty per cent. of the amount so utilised or rupees one lakh, H | S.O. 3287(E) |
| 4(a) | s.35, accepting or utilising contrary to s.11 | One lakh rupees or thirty per cent. of the foreign contribution received or utilised, as the case may be, H | S.O. 3025(E); "or utilising" by S.O. 778(E); restated by S.O. 3287(E) |
| 4(b) | s.35, s.11 with rule 9(1B): use for a purpose or in a State or Union territory not registered | Thirty per cent. of the amount so utilised or rupees one lakh, H | S.O. 3287(E) |
| 5(a) | s.37 with s.17, receiving in an account other than the one specified in the application | One lakh rupees or five per cent. of the amount received in that account, H | S.O. 3025(E) |
| 5(b) | s.37 with s.17, banks and authorised persons not reporting the prescribed amount, source and manner | One lakh rupees or three per cent. of the amount received or deposited in that account, H | S.O. 3025(E) |
| 5(c) | s.37 with s.17, depositing funds other than foreign contribution in the foreign contribution account | One lakh rupees or two per cent. of the deposit, H | S.O. 3025(E) |
| 6 | s.37, no intimation under s.18 | One lakh rupees or five per cent. of the foreign contribution for which intimation is not furnished, H | S.O. 778(E) |
| 7 | s.37, accounts and records of each foreign contribution not kept, s.19 | One lakh rupees or five per cent. of the foreign contribution for which they are not maintained, H | S.O. 778(E) |
| 8 | ss.3, 11, 35 with rule 6, no intimation of receipt in time | Five per cent. of the foreign contribution received in a financial year | S.O. 3025(E) |
| 9 | ss.37, 17, 19 with rule 9(1)(e), no intimation of opening account(s) in time | Ten thousand rupees per utilisation account | S.O. 3025(E) |
| 10 | The same with rule 9(2)(e) | Ten thousand rupees per utilisation account | S.O. 3025(E) |
| 11 | ss.37, 11, 17 with rule 17A, no intimation of details in time | Ten thousand rupees for each violation | S.O. 3025(E) |
| 12 | ss.37, 19 with rule 13, not placing on the website as in rule 13(a) in time | Ten thousand rupees for each violation | S.O. 3025(E) |
Slip to note. S.O. 3287(E) prints "" and "" in square brackets in serial number 4(a), although S.O. 778(E) inserted those words without brackets. They are read here as inserted by S.O. 778(E).
Conditions for the whole table. Paragraph 2 of S.O. 3025(E): the amount computed under column (3) "shall not be more than the value of the foreign contribution received". Paragraph 3: the application may be processed in physical or electronic form as the Government specifies. S.O. 778(E) applies to pending and prospective cases only; S.O. 3287(E) does not apply to cases disposed of before its publication. Disposed cases are not reopened under either.
Example (invented). The Sarvodaya Seva Samiti received foreign contribution in an account other than the one named in its application; no prosecution has begun. Row 5(a) applies, subject to the cap. If a similar offence was compounded for the Samiti two years ago, section 41(2) bars compounding.
Need help with a compounding proposal?
If an offence has come to light and no prosecution has begun, the order of steps and the figures matter. Speak to our legal dispute resolution team with the notice, the account statements and the dates of any earlier compounding.
Key takeaways
- Offences not punishable with imprisonment only can be compounded before any prosecution is instituted (s.41(1)).
- A similar offence within three years of an earlier compounding cannot be compounded; after three years it is deemed a first offence.
- The application is under rule 21 with a fee of rupees three thousand only.
- The amount cannot exceed the value of the foreign contribution received (S.O. 3025(E), paragraph 2).
Read next
- Sections 35 and 36: punishment for contravention and additional fine
- Sections 37 and 38: residual penalty and bar after a second conviction
- Rules 20 and 21: revision application and compounding application
- Compounding vs adjudication of offences: key differences
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.