Section 8 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 8 tells a registered organisation how it may use the foreign contribution it receives. It must use the money for the purpose for which it was received, must not use it for speculative business, and may spend only a limited share of it on administrative expenses. The Amendment Act, 2020 lowered that share from fifty to twenty per cent.
This article reads section 8 as per the Act as enacted, read with the Foreign Contribution (Regulation) Amendment Act, 2020 (33 of 2020), paragraph 4. Later amendments should be checked.
A person who is registered, or has prior permission, and receives foreign contribution must utilise it for the purposes for which it was received, may not use the contribution or any income from it for speculative business, and may not defray more than twenty per cent. of the contribution received in a financial year on administrative expenses, unless the Central Government gives prior approval. The Rules say what is speculative and what counts as administrative expenses.
Who section 8 binds
Section 8(1) applies to "every person, who is registered and granted a certificate or given prior permission under this Act and receives any foreign contribution". It is a rule for the conduct of those who have already come within the registration and prior permission scheme explained in the article on section 11. Organisations that want their ledgers checked against section 8 can use our books of accounts and compliance service.
Section 8(1)(a): purpose and no speculation
Clause (a) says such a person "shall utilise such contribution for the purposes for which the contribution has been received". This is the rule that ties the spending to the application. If you applied for a certificate or prior permission for a health programme, the foreign contribution is for the health programme. Section 12(6) adds that prior permission is valid for the specific purpose or specific amount of foreign contribution proposed to be received.
Two provisos follow.
- First proviso: any foreign contribution or any income arising out of it "shall not be used for speculative business". The words "income arising out of it" mean that interest and returns on foreign contribution carry the same restriction; this matches Explanation 2 to section 2(1)(h), under which such income is itself deemed foreign contribution.
- Second proviso: the Central Government shall, by rules, specify the activities or business to be construed as speculative business. The rule that does so is explained in the article on rule 4 on speculative activities; this article does not state its content.
Section 8(1)(b): the administrative expense limit
Clause (b) says such a person "shall not defray as far as possible such sum, not exceeding twenty per cent. of such contribution, received in a financial year, to meet administrative expenses". Its proviso says that administrative expenses exceeding twenty per cent. of such contribution "may be defrayed with prior approval of the Central Government".
The clause is drafted in a compressed way, and read alone its first sentence is not easy to follow. The proviso makes the working rule clear: the permitted share is twenty per cent. of the contribution received in a financial year, and anything above it needs prior approval of the Central Government.
What the 2020 Amendment Act changed
| As enacted | After the 2020 Amendment Act |
|---|---|
| "not exceeding fifty per cent." in clause (b) | "not exceeding twenty per cent." |
| Proviso: "administrative expenses exceeding fifty per cent. of such contribution may be defrayed with prior approval" | Proviso: "administrative expenses exceeding twenty per cent. of such contribution may be defrayed with prior approval" |
Paragraph 4 of the Amendment Act says that in section 8(1), for the words "fifty per cent.", at both the places where they occur, the words "twenty per cent." shall be substituted. The rest of section 8 stands as enacted. The change took effect with the Amendment Act, which came into force on the 29th September 2020 by S.O. 3395(E).
Example (invented). Greenfield Education Society receives foreign contribution during a financial year. Under the section as amended, it may defray administrative expenses up to twenty per cent. of the contribution received in that year. If its administrative spending would go beyond twenty per cent., the part above the limit needs the prior approval of the Central Government before it is defrayed. Before the 2020 change the same example would have been measured at fifty per cent.
The text speaks of contribution "received in a financial year". It does not say that unspent room can be carried to the next year; that point is not covered by the section.
Section 8(2): elements and manner of calculation
Section 8(2) says the Central Government "may prescribe the elements which shall be included in the administrative expenses and the manner in which the administrative expenses referred to in sub-section (1) shall be calculated". The rule that does this is explained in the article on rule 5 on what counts as administrative expenses. Read it together with this article: the percentage comes from the Act, and the heads of expense that count towards it come from the Rules.
Keeping the evidence
The limit is only as useful as the books behind it. Section 19 requires a registered person to maintain, in the form and manner prescribed, an account of foreign contribution received and a record of how it has been utilised; see the article on sections 18 to 20. Section 18 requires an intimation to the Central Government of the amount of each foreign contribution received, its source, the manner of receipt and the purposes and manner of utilisation. A trust or society that keeps the foreign contribution ledger apart from its general ledger, with each head of expense mapped to the purposes in its application, will find the twenty per cent. calculation straightforward. A breach of the Act's provisions can lead to suspension or cancellation of a certificate under sections 13 and 14, where the grounds in section 14(1) are met; see the article on section 14. Section 14(1)(b) lists violation of the terms and conditions of the certificate, and 14(1)(d) lists violation of any provision of the Act or rules or orders made under it.
Need help with FCRA books and expense allocation?
Allocating salaries, rent and overheads between programme and administration is where many organisations find problems. Our books of accounts and compliance team can set up a ledger structure that makes the section 8 calculation visible.
Key takeaways
- Foreign contribution must be utilised for the purposes for which it was received.
- Neither the contribution nor income arising from it may be used for speculative business; the Rules say what is speculative.
- Since the 2020 Amendment Act, administrative expenses above twenty per cent. of the contribution received in a financial year need the Central Government's prior approval.
- The elements of administrative expenses and the manner of calculation are for the Rules under section 8(2).
- Keep separate records; sections 18 and 19 require intimation and accounts.
Read next
- Section 7: foreign contribution not to be transferred
- Section 11: registration or prior permission
- Section 14: cancellation of certificate
- Rule 5: what counts as administrative expenses
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.