FCRA Compounding Provisions Updated in 2026: MHA Revises Penalties for Certain Offences

The Ministry of Home Affairs (MHA) has notified amendments to the compounding framework under the Foreign Contribution (Regulation) Act (FCRA), 2010 through Notification S.O. 3287(E) dated 22 June 2026. The notification revises the quantum of penalties for certain offences and adds the option to compound for . The current consolidated position on compounding specified offences under FCRA is detailed below:

Consolidated Compounding Framework under the FCRA

Violation	Relevant Provision	Penalty
Accepting prohibited hospitality in contravention of Section 6	S. 35	₹10,000
Sub-granting FC to another person in violation of Section 7—compoundable only once, ever	S. 37	₹1 lakh or 10% of FC transferred, whichever is higher
Administrative expenditure exceeding 20% of FC received	S. 37	₹1 lakh or 5% of FC defrayed beyond the limit, whichever is higher
[New, 2026] Using FC for speculative activities in violation of Section 8(1) read with Rule 4	S. 37	₹1 lakh or 30% of amount invested in speculative activity, whichever is higher; plus 100% recovery of all returns earned
[New, 2026] Using FC for purposes other than those for which it was received	S. 37	₹1 lakh or 30% of amount so misused, whichever is higher
Accepting or utilising FC without registration or prior permission — Section 11 violation (scope expanded in 2026)	S. 35	₹1 lakh or 30% of FC received or utilised, whichever is higher
[New, 2026] Using FC in a State or UT for which registration has not been granted — the geography violation under Rule 9(1B)	S. 35 r/w Rule 9(1B)	₹1 lakh or 30% of FC used in that State/UT, whichever is higher
Receiving FC in an account other than the specified FCRA account	S. 37	₹1 lakh or 5% of FC received in such account, whichever is higher
Non-reporting of remittance amount, source, or manner by banks	S. 37	₹1 lakh or 3% of FC received or deposited, whichever is higher
Depositing non-FC funds in the FCRA account	S. 37 r/w S. 17	₹1 lakh or 2% of such deposit, whichever is higher
Non-furnishing of intimation of FC received under Section 18	S. 37	₹1 lakh or 5% of FC received during the period of non-submission, whichever is higher
Non-maintenance of accounts and records under Section 19	S. 37	₹1 lakh or 5% of FC during the relevant period, whichever is higher
Failure to intimate receipt of FC within prescribed time (Rule 6)	S. 3, 11, 35 r/w Rule 6	5% of FC received in that financial year
Failure to intimate opening of a utilisation account within prescribed time	S. 37, 17, 19 r/w Rule 9	₹10,000 per utilisation account
Failure to intimate details within prescribed time under Rule 17A	S. 37, 11, 17 r/w Rule 17A	₹10,000 per violation
Failure to upload documents on website within prescribed time (Rule 13)	S. 37, 19 r/w Rule 13	₹10,000 per violation

The competent authority for compounding is the Director or Deputy Secretary in charge of FCRA administration in the Ministry of Home Affairs for all notified offences. Applications for compounding under Section 41 are filed electronically at fcraonline.nic.in with a filing fee of ₹3,000. No physical copies are required.

The concept of Compounding

Section 41(5) of the FCRA explicitly states that where an offence is compounded before prosecution is instituted, no prosecution can subsequently be initiated for that offence. However, the MHA is entirely free to take administrative action on the same set of facts. The MHA retains the power to suspend or cancel FC registration even after compounding. Compounding only bars prosecution from occurring, it does not immunise the registration.

The Three-Year Rule

Section 41(2) imposes a cooling-off period: if the same offence is committed within three years of a previous compounding, it cannot be compounded again. It goes directly to prosecution. If the same offence recurs more than three years after a prior compounding, it is treated as a fresh first offence and can be compounded again.

The sub-granting offence under Section 7 is a harder restriction: it is compoundable only once, ever, regardless of when a second violation occurs.

Read more on the amendment to the Rules here: https://www.pacta.in/post/fcra-2026-amendments-what-changed-and-what-it-means