Background On 19 June 2026, the National Commission for Women (NCW) issued an advisory to all States and Union Territories directing them to strengthen the implementation of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act). The advisory was addressed to the Chief Secretaries, Directors General of Police, District Magistrates, Senior Superintendents of Police, and Commissioners of Police to ensure consistent enforcement of the POSH Act across government, private, organised, and unorganised sectors. It seeks to move beyond mere statutory compliance by fostering safe, inclusive, and gender-sensitive workplaces through stronger monitoring, accountability, and awareness mechanisms. Key Highlights of the Advisory State-Level Monitoring: States and Union Territories have been advised to establish POSH Monitoring Cells or digital compliance dashboards and conduct periodic compliance reviews. Mandatory Annual POSH Audits: Annual POSH audits have been recommended for establishments employing 10 or more persons, covering legal compliance, Internal Committee functioning, awareness initiatives, confidentiality safeguards, and use of the SHe-Box platform. Failure to conduct audits is to be treated as non-compliance. District-Level Accountability: States have been directed to notify District Officers to oversee implementation, monitoring, awareness, and grievance redressal under the POSH Act. Universal Constitution of Internal Committees (ICs): Every establishment employing ten or more persons must constitute legally compliant Internal Committees in each office, branch, and unit. Strengthening Local Committees (LCs): Districts must ensure effective Local Committees for women working in establishments with fewer than ten employees, domestic workers, and the informal sector. Appointment of Nodal Officers: Nodal Officers are to be appointed at block, tehsil, taluka, ward, and municipality levels to facilitate complaint registration and referrals to Local Committees. Public Disclosure Requirements: Details of ICs, LCs, Nodal Officers, complaint procedures, and grievance mechanisms should be prominently displayed on websites and office premises. Employer Compliance: Employers have been reminded to ensure timely inquiries, maintain confidentiality, submit annual reports, conduct awareness programmes, and implement committee recommendations promptly. Capacity Building: Regular sensitisation programmes and specialised training for IC and LC members have been recommended to ensure legally compliant and sensitive inquiries. Promotion of SHe-Box: Organisations have been encouraged to promote the use of the Government's SHe-Box portal for filing and tracking complaints. Protection Against Retaliation: The advisory emphasises safeguards against victimisation, intimidation, discrimination, or retaliation against complainants, witnesses, and committee members. Focus on Educational and Healthcare Institutions: Schools, colleges, universities, hospitals, hostels, coaching centres, and medical institutions have been urged to strengthen POSH compliance considering the vulnerability of students, interns, trainees, researchers, and contractual personnel. Awareness in the Unorganised Sector: District administrations have been encouraged to conduct awareness campaigns in rural areas, industrial clusters, domestic work sectors, and other informal workplaces. Safer Workplaces: Organisations have been advised to adopt a zero-tolerance approach and improve workplace safety through adequate infrastructure, lighting, surveillance, safe access, and emergency support mechanisms. Overall Objective: The advisory aims to strengthen implementation of the POSH Act by promoting a culture of dignity, accountability, and workplace safety for women across India. The National Commission for Women (NCW) Releases POSH Inquiry Handbook To complement its recent advisory on strengthening POSH compliance, NCW has also released the Handbook on Inquiry Procedure for Internal Committees (ICs) and Local Committees (LCs) under the POSH Act. The handbook serves as a practical guide for conducting fair, impartial, and legally sustainable inquiries under the POSH Act. It provides step-by-step inquiry procedures, flowcharts, procedural checklists, and guidance on the principles of natural justice, confidentiality, evidence assessment, and report writing. It also distinguishes between inquiry procedures for ICs, LCs, and government departments, while incorporating key judicial precedents to promote consistency and procedural fairness in POSH inquiries. Next Steps for Non-Profit Organisations Review POSH Framework: Assess existing POSH policies, IC constitution, inquiry procedures, and reporting practices against the NCW Advisory and Inquiry Handbook. Strengthen Compliance Mechanisms: Ensure legally compliant ICs are constituted across all offices, conduct regular awareness and capacity-building programmes, and maintain robust confidentiality and record-keeping practices. Enhance Governance and Accountability: Consider periodic internal POSH compliance reviews, promote awareness of the SHe-Box platform, and strengthen measures to prevent retaliation while fostering a safe, inclusive, and respectful workplace for employees, volunteers, interns, consultants, and beneficiaries.

In this issue, we cover two important Corporate Social Responsibility (CSR) updates relevant to non-profit organisations. First, we examine whether research can qualify as a CSR activity under the Companies Act, 2013 and second, we highlight the new CSR priority themes identified for Central Public Sector Enterprises (CPSEs) under the Department of Public Enterprises (DPE) Office Memorandum dated 18 June 2026. Part 1: Can Research be Funded through CSR? Legal Position Research can qualify as CSR, provided it falls within the scope of Schedule VII and is not undertaken in the company's ordinary course of business. Direct Route – Schedule VII, Item (ix) CSR funding is expressly permitted for: ● STEM research projects funded through specified government bodies. ● Contributions to public-funded universities, IITs, national laboratories, and specified research institutions undertaking SDG-related research. Liberal Interpretation As clarified by MCA General Circular No. 21/2014, Schedule VII should be interpreted liberally. Accordingly, research that supports another eligible CSR activity may also qualify, such as: ● Baseline studies for education programmes ● Health research ● Livelihood assessments ● Monitoring and evaluation studies Key Limitation Research undertaken as part of the company's own commercial R&D or normal business activities cannot be treated as CSR expenditure. Key Takeaway Research may qualify as CSR where it: ● Falls within Schedule VII Item (ix); or ● Supports another Schedule VII activity; and ● Is not part of the company's ordinary business. Part 2: New CPSE CSR Priorities (DPE Office Memorandum dated 18 June 2026) The DPE has issued an Office Memorandum dated 18 June 2026 identifying the common CSR themes for all Central Public Sector Enterprises (CPSEs) for FY 2026–27 and FY 2027–28. Purpose of the Office Memorandum The Government has identified certain national development priorities and has requested all Central Public Sector (CPSEs) to align their CSR expenditure with these priorities. While CPSEs continue to comply with Section 135 of the Companies Act, 2013 and Schedule VII, they are encouraged to prioritise projects falling under these themes. Common CSR Themes Nutrition–Strengthening Anganwadi Infrastructure The Government aims to improve early childhood care and nutrition by upgrading Anganwadi Centres. Central Public Sector Enterprises are encouraged to support: ● Construction of new Anganwadi buildings ● Functional toilets ● Safe drinking water facilities ● Smart TVs for early childhood education ● Boundary walls for safety ● Child-friendly furniture Objective: Improve nutrition, health, and early childhood education outcomes. Development of Sporting Activities CPSEs are encouraged to promote sports by supporting: ● Development of sports infrastructure ● Provision of sports equipment ● Access to professional coaching ● Promotion of sports at various levels ● Identification and nurturing of talented sportspersons Objective: Strengthen India's sporting ecosystem and develop future athletes. Innovative Livelihood Enhancement The focus is on improving employability and livelihood opportunities through modern infrastructure and technology. CPSEs may support: ● Equipment for skill development ● Infrastructure for vocational education ● Digital learning tools ● Modern workshops and laboratories ● Smart classrooms and digital learning infrastructure Additionally, CPSEs are encouraged to: ● Adopt one or more of the 100 Prime Minister Dhan-Dhaanya Krishi Yojana (PMDDKY) districts, particularly those located within or near their operational areas. Objective: Enhance skills, employment, and rural economic development. Directions to Ministries The Office Memorandum requests all administrative ministries and departments to communicate these themes to the CPSEs under their administrative control for implementation and compliance. Legal Status This Office Memorandum does not amend the Companies Act, 2013 or the CSR Rules. Instead: ● It is an administrative direction applicable to Central Public Sector Enterprises ● It guides Central Public Sector Enterprises on the Government's preferred CSR priorities for the specified financial years. ● Central Public Sector Enterprises must still ensure that all CSR projects fall within the permissible activities under Schedule VII of the Companies Act, 2013. Actionables for Non-profit Organisations ● Review existing programmes to identify whether they align with the three priority CSR themes identified by the DPE. ● Tailor CSR proposals and concept notes for Central Public Sector Enterprises by highlighting how the proposed project contributes to the Government's identified priorities. ● Develop projects focused on Anganwadi infrastructure, sports development, vocational training, digital education, or livelihood enhancement where feasible. ● Map projects to PMDDKY districts or to locations where Central Public Sector Enterprises have operations, as these may be preferred for CSR implementation. ● Engage proactively with Central Public Sector Enterprises that have CSR budgets and whose operations align geographically or thematically with the organisation's work. ● Continue to comply with CSR eligibility requirements, including registration under Form CSR-1 (where applicable), as the Office Memorandum does not alter the legal requirements for receiving CSR funding. ● Update fundraising strategies and CSR outreach materials to reflect alignment with these government-identified priorities for FY 2026–27 and FY 2027–28.

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

A briefer for donors, International NPOS (INPOs), and Indian NPOs Overview On 22 June 2026, the Ministry of Home Affairs published the Foreign Contribution (Regulation) Amendment Rules, 2026 (S.O. 3272(E)), and the notification took effect immediately on publication. The Rules amend the parent Foreign Contribution (Regulation) Rules, 2011. The amendments operate across four broad registers: tightening the definition of who governs a registered association; introducing purpose- and geography-specific registration; imposing a measurable activity threshold for renewal and continuation; and restructuring compliance reporting. Each of these changes carries distinct obligations and strategic implications for the foreign donors disbursing funds, and for the Indian associations receiving them. The Key Changes at a Glance A Definition of 'Key Functionary' and Foreign Nationals as Key Functionaries — Restricted The rules insert a new defined term — 'key functionary' — covering directors of companies, partners of firms, trustees, Kartas of Hindu undivided families, office-bearers or members of governing or managing bodies of societies, trusts, and trade unions, and any other person exercising control over the management or affairs of an association. References throughout the rules to 'office bearers', 'executive committee members', and 'governing council members' are replaced uniformly with this term. The definition, verbatim in substance “Key functionary”, in relation to a person other than an individual, includes — (i) the Director of a company; (ii) a partner in a firm; (iii) a trustee of a trust; (iv) the Karta of a Hindu undivided family; (v) an office bearer, member of the governing body, managing committee or other controlling authority of a society, trust, trade union or association of individuals; and (vi) any other officer or person, by whatever name called, who has control over, or responsibility for, the management or affairs of such person. A new Explanation under Rule 9 codifies the position that associations having foreign nationals (other than persons of Indian origin) as key functionaries shall ordinarily not be considered eligible for registration or prior permission. The Central Government may by order specify exceptions and conditions. Purpose- and Geography-Specific Registration Associations must now specify, at the point of registration, both the purpose(s) for which they seek foreign contribution and the States/Union Territories in which they will operate. Purposes must be selected from a new statutory Schedule listing activities across the following broad categories: Religious, Cultural, Economic, Educational, and Social. Each of these categories have sub-categories. A base registration fee covers one purpose and one State or Union Territory; each additional purpose or State/UT attracts a fee of Rs.300. Associations already registered before the commencement of these rules have one year from June 22, 2026 (i.e., up till June 21, 2027) to file Form FC-6F specifying the purposes and States/UTs for which they wish to retain their registration. Changes to scope thereafter require a fresh application in Form FC-6F, accompanied by a governing body resolution and the prescribed fee. Quantified Activity Threshold for Renewal and Cancellation A new Rule 14A provides that, for the purposes of cancellation under Section 14 and renewal under Section 16 of the FCRA, an association is deemed to have undertaken 'reasonable activity' if it has utilised at least Rs.10 lakh of foreign contribution over the last two financial years for the stated purpose. Only activities funded out of foreign contribution count toward this threshold. The phrase “reasonable activity” has long appeared in Section 14(1)(e) of the FCRA, 2010, which empowers the Central Government to cancel a registration where the holder “has not been engaged in any reasonable activity in its chosen field for the benefit of the society for two consecutive years or has become defunct.” The Act never said what “reasonable activity” meant, leaving it to administrative judgement. This clarity is welcome since the FCRA wing has, in recent years, issued show-cause notices to organisations filing nil returns or showing little to no foreign-contribution activity. The introduction of the definition of ‘reasonable activity’ brings more specificity. Instalment Disbursement — Tighter Conditions (Rule 9A) Prior permission grantees seeking the second or any subsequent instalment of foreign contribution must now apply in the new Form FC-3BB. Release of any subsequent instalment is conditional on utilisation of at least 75% of the previous instalment and a field inquiry by the Ministry. A CA-certified utilisation certificate is required along with bank statements and a photographic activity report. 5. Enhanced Reporting: FC-4, Activity Reports, and Publications The amendments make five distinct changes in FC 4 disclosures: Digital footprint disclosure. Associations must now disclose their official website and social media accounts in FC-4 (mirrored in registration Forms FC-3A and FC-3C). Digital presence becomes part of the compliance record. Look-through on Donor Advised Funds. The donor table’s “Institutional / Individual” column is widened to “Institutional / Individual / Donor Advised Funds / Other intermediary remittance vehicles”, and a new sub-clause (aa) requires associations to name the ultimate donor behind any DAF or intermediary with the ultimate donor’s name, address, email, and amount. This would require intermediary platforms like Benevity to disclose who the ultimate donor is to the grantee. Activity-to-expenditure mapping. Serial 3 now states that a detailed activity report shall be attached and adds a table mapping each project / activity and location to amounts utilised, split across project / activity spend, fresh assets, and administrative expenditure. Publications disclosure. A new Serial 8A requires disclosure of any publications brought out by the association or its key functionaries during the year (date, nature, title, where published, brief description), with an express note that under Section 3(1)(g) the association shall not engage in production or broadcast of news or current-affairs content. UDIN on audit certificates. Auditor certification must now carry a UDIN (Unique Document Identification Number), and a new clause requires the UDIN of the separate audited financial statements maintained for foreign contribution. Implications: The Donor Perspective Foreign donors, whether institutional foundations, bilateral programmes, Donor Advised Funds, or individual contributors will encounter these changes at multiple points in their grant-making cycle. Due Diligence & Eligibility Scope-match now a compliance requirement. Donors must verify that a proposed grantee's FCRA registration covers the specific purpose and geographies of the proposed grant. A grantee registered for 'Educational' purposes in Karnataka cannot receive foreign funds to run a public health programme in Telangana without amending its registration scope. Grant agreements should carry a representation and warranty to this effect. Foreign national trustee/director risk. If a grantee's board includes foreign nationals who are not of Indian origin, its eligibility for registration or prior permission is now expressly restricted. Donors should incorporate a key functionary nationality check into pre-award due diligence, particularly for INPOs with mixed-nationality boards. DAF and intermediary transparency. Grants channelled through Donor Advised Funds or other intermediary remittance vehicles now trigger a mandatory disclosure of the ultimate donor's identity in the grantee's FC-4 return. Donors using DAFs should inform their grantees and ensure documentation of the donor chain is in order. Reporting & Audit Grantee reporting obligations are heavier. Grantees must now file detailed activity reports alongside FC-4, and renewal applications require three years of year-wise reports. Donors should consider whether their standard grant reporting requirements produce documentation that maps onto these statutory formats, and whether templates need to be updated. UDIN requirements on auditor certificates. Auditor certificates in FC-4 must now carry UDIN (Unique Document Identification Number). Donors requiring audited utilisation statements as a grant condition should ensure their reporting requirements align with the updated statutory form. Implications: The Grantee Perspective Indian associations registered under FCRA face an array of immediate compliance actions and longer-term operational adjustments. Immediate Compliance Actions FC-6F filing within one year. Every association with a current FCRA registration must file Form FC-6F within one year of 22 June 2026, specifying the purpose(s) and States/UTs for which it wishes to retain registration. This is non-negotiable failure to file within the window is likely to result in lapse or restriction of registration. Organisations should convene their governing bodies promptly to pass the necessary resolution. Board composition audit. Governing bodies should immediately audit the nationality status of all key functionaries. Any foreign national who is not of Indian origin serving as a director, trustee, partner, or governing body member puts the association's eligibility for registration at risk. Scope rationalisation. Organisations currently operating across multiple States or purposes should assess whether their current activities align with what they intend to declare in their FC-6F. Financial Management Rs.10 lakh annual utilisation floor. Organisations receiving foreign contribution must now demonstrate utilisation of at least Rs.10 lakh over any two consecutive financial years to be considered for renewal. Organisations that have historically under-utilised their FCRA accounts perhaps due to cautious draw-down or capacity constraints should revise their expenditure planning and communication with donors accordingly. 75% utilisation before next instalment. Prior permission grantees receiving money in tranches must reach 75% utilisation of each instalment and pass a field inquiry before the next tranche is released. This requires robust internal monitoring and the ability to produce CA-certified utilisation statements, bank records, and photographic evidence at relatively short notice. Activity-expenditure mapping. FC-4 now requires organisations to map each expenditure to a specific project or activity at a named location, distinguishing between programme spend, asset creation, and administrative expenditure. Finance teams should ensure their accounting systems produce data in this format as a matter of routine, not just at year-end. Governance & Reporting Detailed activity reports become statutory. The requirement for detailed activity reports in both FC-4 (annual) and renewal applications (three years, year-wise) elevates programme documentation from a donor-relations function to a statutory compliance obligation. Programme and M&E teams should ensure their documentation standards are capable of serving a dual purpose. Social media and publications disclosure. Organisations must now disclose their social media accounts in registration forms and annual returns, and detail any publications books, articles, media content produced by the association or its key functionaries during the year. The statutory note flags Section 3(1)(g)'s prohibition on news and current affairs programming. Organisations engaged in media or advocacy work should assess their activities carefully against this boundary. Key functionary definition — governance implications. The breadth of the 'key functionary' definition including anyone with 'control over, or responsibility for, the management or affairs' of an association means the compliance perimeter extends beyond formal office-bearers. Organisations with programme heads, CEOs, or committee chairs who exercise de facto control should factor these individuals into FCRA compliance processes even if they do not hold a formal title. Organisations which are FCRA licensed and wholly owned subsidiaries of foreign institutions The New Schedule: Permitted Purposes The statutory Schedule inserted by the rules lists specific permitted activities across five categories (numbered VI–X in the gazette). The categories are: • Religious: 16 specified activities, covering places of worship, scripture preservation, religious education, and interfaith dialogue (proselytisation expressly excluded). • Cultural: 18 activities, covering archaeological conservation, classical and folk arts, regional languages, tribal heritage, and knowledge systems. • Economic: 19 activities, covering agricultural development, SHG formation, microfinance, skilling, rural livelihoods, and green economy initiatives. • Educational: 22 activities, from early childhood education and scholarships to STEM programmes, sports academies, and civic awareness (strictly non-political). • Social: 30 activities, encompassing healthcare, nutrition, sanitation, disability care, disaster relief, rehabilitation, and animal welfare. Organisations must select their purposes from this Schedule. Activities that fall outside the listed items even if broadly 'charitable' will not constitute valid FCRA purposes unless they can be mapped to a listed entry. Organisations engaged in advocacy, policy research, or media work should examine whether their activities can be legitimately characterised within the Schedule, or whether they require separate legal advice on eligibility. Summary Table Particulars Description Relevant Provision Definition of ‘Key Functionary’ Replaces scattered references to office bearers and committee members. Rule 2(1)(ca) inserted by Amendment Rule 2; consequential substitutions in Rules 5(i), 5(iii), 9(1)(a), 12(2), 17A(iv) Eligibility: Foreign Nationals as Key Functionaries Foreign Nationals (other than Indian Origin) make the organisation ordinarily ineligible for registration as key functionaries. Explanation 1 inserted after Rule 9(5) by Amendment Rule 4(e) Restriction on Use of Foreign Funds Outside India Foreign contributions must be used only within India for declared purposes. Explanation 2 inserted after Rule 9(5) by Amendment Rule 4(e) Purpose- and State-Specific Registration The registration certificate must specify the exact purposes (from the Schedule) and States/UTs of operation. Rule 9(1B)(a) and (b) inserted by Amendment Rule 4(b) Compliance Deadline for Existing NPOs (Form FC-6F) Existing registrations must file Form FC-6F declaring purposes and States/UTs by 21 June 2027. Rule 9(1B)(c) inserted by Amendment Rule 4(b); Form FC-6F inserted by Amendment Rule 18 Revised Fee Structure for Registration Base fee covers one State and one purpose; Rs.300 extra per additional State/UT or purpose. Proviso inserted in Rule 9(4)(b) by Amendment Rule 4(d) Change of Operational Scope (New Rule 17B) Associations may add/delete purposes or States/UTs via Form FC-6F with governing body resolution. Rule 17B inserted by Amendment Rule 10; Form FC-6F inserted by Amendment Rule 18 Minimum Spend Requirement (‘Reasonable Activity’) Must utilise at least Rs.10 lakh in foreign funds over last two financial years to be ‘active’. Rule 14A inserted by Amendment Rule 7 Instalment Release Conditions (Form FC-3BB) Next instalment of released only after 75% utilisation of prior instalment and mandatory field inquiry. Proviso to Rule 9A substituted by Amendment Rule 5; Form FC-3BB inserted by Amendment Rule 15 Contents of Form FC-3BB Requires CA certificate, bank statements, activity photographs, and declaration of violations/changes. Form FC-3BB inserted after Form FC-3B by Amendment Rule 15 [See Rule 9A] Expanded Annual Return (Form FC-4) Now requires website, social media, detailed activity report, and project-wise expenditure table. Form FC-4 amended by Amendment Rule 17(a), (b), (c) Publication Disclosures in Annual Return All publications by association/key functionaries must be disclosed with title, date, and description. Serial No. 8A inserted in Form FC-4 by Amendment Rule 17(d) UDIN Requirement for CA Certificates CA certificates must now include UDIN; a separate UDIN is required for audited FCRA financial statements. Form FC-4, Serial No. 9(v) amended and clause 9(va) inserted by Amendment Rule 17(e) Ultimate Donor Disclosure Ultimate donors behind donor-advised funds or intermediary vehicles must be disclosed in the annual return. Sub-clause (aa) inserted in Form FC-4, Serial No. 2(ii) by Amendment Rule 17(b)(ii) Politically Exposed Person Disclosure in Form FC-2 Office/service details of persons associated with foreign donors must be disclosed in Form FC-2. Serial No. 8A inserted in Form FC-2 by Amendment Rule 12 Resources from Pacta 1. FCRA Amendment Bill, 2026: How This May Affect Non-profits , Pusle by Pacta, March 27, 2026 2. FCRA Amendment Bill, 2026: How does it affect nonprofits?, IDR, April 17, 2026 3. FCRA Amendment Rules:Impact on NPO Publications, Pulse by Pacta, June 2, 2025

Case Title: Milacron India Private Limited vs. Deputy Commissioner of Income Tax Court: Income Tax Appellate Tribunal (ITAT), Ahmedabad Citation: I.T.A. No. 1696/Ahd/2024 Date of Judgement: 27.05.2026 Bench: Dr. B.R.R. Kumar,Vice-President and T.R. Senthil Kumar, Judicial Member The Ahmedabad ITAT has delivered an important decision that impacts non-profit organisations and charitable institutions receiving donations from large companies. The Tribunal ruled that companies cannot be automatically denied tax deductions for charitable donations simply because those donations were made as part of their mandatory Corporate Social Responsibility (CSR) activities. This judgement may reshape how companies approach funding charities and non-profit organisations. Background Under the Companies Act, 2013, CSR obligations apply to large companies that meet specified financial thresholds. A company is required to comply with CSR provisions if it has a net worth of Rs. 500 crore or more, a turnover of Rs. 1,000 crore or more, or a net profit of Rs. 5 crore or more in any financial year. Such companies must spend 2% of their average net profits from the previous three years on social welfare activities listed in Schedule VII of the Companies Act. These include education, poverty reduction, healthcare, environmental protection, animal welfare, and other social causes. CSR was introduced to ensure that large and profitable companies contribute to social development. It is not a voluntary contribution, but a legal obligation. Companies that fail to comply with CSR requirements may be subject to consequences under the Companies Act, 2013. On the other hand, Section 80G of the Income Tax Act, 1961 allows individuals and companies to reduce their taxable income when they donate to approved charitable institutions. The purpose of Section 80G is to encourage charitable giving by providing a tax benefit to donors. Eligible institutions include those registered and approved by the tax department for charitable work, including approved universities, hospitals, disaster relief funds, institutions supporting persons with disabilities, and trusts working in sectors such as education and healthcare. The issue arises from the treatment of CSR expenditure under the Income Tax Act, 1961. When the government introduced CSR rules in 2014, it also clarified that CSR spending cannot be deducted as a business expense under Section 37 of the Income Tax Act, 1961. Section 37 covers regular business expenses. The government’s reasoning was clear: if companies could deduct CSR spending as a business expense, the government would effectively be subsidising CSR costs through tax savings. Since CSR is a statutory obligation, companies were expected to bear the full cost without claiming this benefit. In effect, the government closed the Section 37 route for CSR-related tax deductions. However, Section 80G operates differently. It is not concerned with business expenses, but with deductions for charitable donations. The question, therefore, is whether the government’s intention to bar CSR expenditure from business expense deductions also extends to charitable donation deductions under Section 80G. What Happened in This Case Milacron India Private Limited is a company that manufactures plastic processing machinery, including injection moulding equipment, extrusion machines, and temperature controllers. The company filed its income tax return on 15 February 2021 for the financial year ending 31 March 2020. The company declared total income of approximately Rs.130 crore. The income tax authorities selected this return for detailed examination. During the assessment process, the Assessing Officer noticed that the company had claimed a deduction of Rs. 83.20 lakh under Section 80G. The company had spent this money on donations as part of its CSR obligations. The Assessing Officer rejected this claim entirely. The reasoning was straightforward. The company made these donations only because the law required it to do so under the CSR rules. The donations were not voluntary. The law mandates that large companies spend on CSR. The officer argued that Section 80G is meant for voluntary donations only. Since this spending was mandatory, not voluntary, it could not qualify for Section 80G deduction. The company disagreed and submitted objections to the Dispute Resolution Panel, which is an internal review authority that examines assessment decisions. The Panel also sided with the Assessing Officer. The Panel upheld the rejection, saying CSR expenditure is a statutory obligation and not a voluntary contribution, so it does not qualify as a donation under Section 80G. Aggrieved by this decision, the company appealed to the Ahmedabad ITAT. Key Findings of the Ahmedabad ITAT 1. CSR Donations Are Not Automatically Barred from Section 80G Deductions The Tribunal held that companies cannot be rejected from Section 80G deductions merely because their payment involves CSR obligations. What this means is that the tax authorities must look at the specific facts of each donation, not just reject it outright because it relates to CSR spending. The question is not whether the payment was made to fulfil CSR obligations. The question is whether the institution that received the donation is approved under Section 80G and whether all other conditions are satisfied. If those conditions are met, the deduction must be allowed. 2. Parliament's Limited Exclusion Indicates CSR Donations Can Qualify The Tribunal made an important observation about how Section 80G is written. The section lists two specific funds where CSR-related donations are excluded from deduction benefits. These are the Swachh Bharat Kosh, a government fund for sanitation and cleanliness projects, and the Clean Ganga Fund, a government fund for cleaning the Ganga River. If Parliament intended to exclude all CSR-related donations from Section 80G benefits, it could have said so plainly in the law. Instead, it named only two specific funds. This tells courts that Parliament left the door open for other CSR donations to potentially qualify. When a law specifically lists exceptions, it suggests that things not on that list are not automatically excluded. 3. Tax Authorities Improperly Rejected Claims Without Examining Basic Facts The Tribunal found that the Assessing Officer rejected the claim without doing basic verification work. The officer did not check whether the organisations that received the donations were approved under Section 80G. The officer did not verify whether the donations met other legal requirements for Section 80G eligibility, such as whether the recipient institution was established for charitable purposes and whether donations to it were not used for benefit of particular individuals. Instead, the officer simply said no because it involved CSR, without examining anything specific about each donation. The Tribunal said this approach was wrong. Rejecting a claim requires checking whether the conditions for that claim are satisfied. 4. Earlier Tribunal Decisions Support This Approach The Tribunal found support from several coordinate bench decisions, including Goldman Sachs Services Pvt. Ltd. vs. JCIT, FNF India Pvt. Ltd. vs. ACIT, JMS Mining Pvt. Ltd. vs. PCIT, Sling Media Pvt. Ltd. vs. DCIT, and Infinera India Pvt. Ltd. vs. JCIT, all of which consistently held that CSR-related donations are not automatically disqualified from claiming deduction under Section 80G. These decisions emphasised that while CSR expenditure is specifically disallowed as a business expenditure under Section 37(1), such restriction does not extend to Section 80G, which operates as an independent deduction provision. The Tribunals further observed that Parliament's decision to expressly exclude only certain CSR contributions, such as those made to the Swachh Bharat Kosh and Clean Ganga Fund, indicates that other CSR donations are not per se barred from deduction under Section 80G. Accordingly, the determining factor is not whether the contribution forms part of CSR expenditure, but whether the recipient institution satisfies the statutory requirements and possesses valid approval under Section 80G. 5. The Matter Is Remanded for Proper Examination Rather than allow or reject the claim directly, the Tribunal sent the matter back to the Assessing Officer with clear instructions. The Assessing Officer must now examine whether the institutions that received Milacron's donations are registered and approved under Section 80G. The officer must verify that the donations comply with all other legal conditions required under Section 80G. These conditions include verifying that the institution is established in India for charitable purposes, that donations are not used for benefit of any particular individuals, and that the institution maintains proper accounts. If these facts check out, the deduction must be allowed. If they do not, the deduction can be rejected based on those specific factual grounds, not merely because the donation involved CSR.

On 27th May 2026, the Ministry of Corporate Affairs notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026 (“the 2026 Amendment”). This edition of Pulse by Pacta explains what changed, why it matters, and what it means for non-profits considering the Social Stock Exchange route. The Social Stock Exchange: Where Things Stand India’s Social Stock Exchange (“SSE”), established under SEBI’s regulatory framework as a segment of both BSE and NSE was designed to connect donors and impact investors with non-profit organisations (NPOs) through a capital markets architecture. As of May 2026, 92 NPOs are registered on BSE SSE and 84 NPOs on NSE SSE. Of these, only 11 NPOs have actually listed instruments (Zero Coupon Zero Principal instruments, or “ZCZPs”) and raised funds through the SSE. The Companies (Corporate Social Responsibility Policy) Rules, 2014 The Companies (Corporate Social Responsibility Policy) Rules, 2014 (“the 2014 Rules”) govern how companies implement their CSR obligations under Section 135 of the Companies Act, 2013. They cover CSR expenditure thresholds, eligible activities (listed in Schedule VII of the Act), permissible implementing entities, and reporting requirements. The SSE and ZCZP Instruments The SSE operates as a segment of BSE and NSE, enabling NPOs to raise funds through the capital markets. Within this framework, SEBI introduced the Zero Coupon Zero Principal instrument (“ZCZP”): a security issued by NPOs that carries no interest (“zero coupon”) and returns no principal (“zero principal”). The contributor’s return is a social one of impact, not income. ZCZP instruments must be issued for a specific project, listed on the SSE in dematerialised form, with a minimum issue size of Rs. 50 lakh, minimum application size of Rs.10,000, and a minimum subscription threshold of 75% before funds are released to the NPO. What the 2026 Amendment Does The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026 makes two categories of changes: 1. New Definitions: NPO and ZCZP NPO is now defined by cross-reference to Regulation 292A(e) of the SEBI (ICDR) Regulations, 2018. Under that definition, an NPO is a Social Enterprise that takes the form of a charitable trust, charitable society, Section 8 company, or any other entity specified by SEBI, provided it primarily pursues social objectives and serves disadvantaged populations. ZCZP is now formally defined in CSR law as a security recognised under the Securities Contracts (Regulation) Act, 1956, issued by an NPO registered on the SSE segment of a recognised stock exchange, and governed by SEBI regulations. 2. CSR Can Now Be Fulfilled Through ZCZP 2.1 For Companies Subscribing to ZCZP The 10% cap. A company’s subscription to ZCZP instruments cannot exceed 10% of its total CSR expenditure for that financial year. To illustrate: if XYZ Limited has a CSR obligation of Rs. 5 crore, its maximum ZCZP subscription is Rs. 50 lakh. The remaining Rs. 4.5 crore must be deployed through other permissible CSR activities. This cap prevents ZCZP from becoming a dominant CSR channel while still opening it as a meaningful option. Impact assessment exemption. Currently, companies with CSR budgets above Rs.10 crore or projects above Rs.1 crore must commission independent impact assessments. Companies that subscribe to ZCZP instruments using CSR funds are exempt from conducting an independent impact assessment for those projects. The rationale is that the SSE’s own disclosure and impact reporting architecture, including the Annual Impact Report assessed by a Social Impact Assessor substitute for the company’s obligation. This removes a layer of compliance cost and is likely to make ZCZP a more attractive CSR deployment route for companies. However, the burden for Impact Assessment remains on the NPO. 2.2 For NPOs Issuing ZCZP Instruments Three-year project limit. Any project funded through a ZCZP instrument must be completed within three succeeding financial years from the date of issue. If an NPO issues a ZCZP in FY 2026–27, the project must be delivered by the end of FY 2029–30. This is intended to prevent funds from remaining idle and to create a predictable timeline for social impact delivery. Unspent funds must be returned. When a ZCZP instrument’s listing terminates either because the project is complete or its tenure has expired, any unspent funds must be transferred to a fund specified in Schedule VII of the Companies Act, 2013 (such as those relating to social welfare, education, or environment). The NPO must then submit a compliance report to SEBI confirming the transfer. This forecloses any possibility of diverting unutilised charitable funds. Rule 4 of the 2014 Rules applies (with limited exceptions). When CSR is implemented through ZCZP subscription, the general implementation standards under Rule 4 of the 2014 Rules apply except sub-rules (5) and (6). Sub-rule (5) disqualifies activities that benefit only employees and their families; sub-rule (6) limits administrative and capacity-building expenditure. Their exclusion is sensible given that a company subscribing to a ZCZP is a passive contributor, not a project implementer. Pacta Resources on the Social Stock Exchange These amendments reflect a broader policy effort to integrate India’s CSR and social capital markets frameworks. Whether they translate into meaningful uptake will depend on how actively corporate CSR teams engage with the SSE — and how well-prepared NPOs are to issue instruments that meet the new conditions. Pacta will continue to track these developments. Primer: Social Stock Exchange: A Primer for Non-profits Pulse by Pacta: Recent Amendments to the Social Stock Exchange Framework: Reporting and Eligibility Updates (Nov 2025) Pulse by Pacta: Social Audit Under the Social Stock Exchange Pulse by Pacta: Amendments to Social Stock Exchange Framework: A Summary of Recent Developments (Update 2)

Case Title: The Chamber of Tax Consultants vs. The Commissioner of Income Tax Court: Bombay High Court Citation: 2026: BHC-OS:6814-DB Date of Judgement: 09.03.2026 Bench: B. P. Colabawalla The Bombay High Court has delivered a severe reprimand to the Commissioner of Income Tax, in the case of The Chamber of Tax Consultants vs. The Commissioner of Income Tax on 9th March, 2026, regarding arbitrary dismissal of renewal applications for registration of charitable trust. The Court decisively ruled that a public charitable trust is deemed irrevocable by operation of law unless the trust instrument expressly provides a power of revocation, fundamentally holding that silence in the deed implies irrevocability, not revocability. Background The dispute arose after the introduction of the new registration regime under Section 12AB of the Income Tax Act, 1961. The petitioners, including The Chamber of Tax Consultants, the Bombay Chartered Accountants’ Society and other charitable trusts, challenged the rejection of renewal applications under Section 12AB on the ground that the trust deeds did not contain an express irrevocability clause and a provision regarding dissolution. The petition also challenged the online Form 10AB utility, which effectively compelled applicants to answer “Yes” to Row 6 regarding irrevocability in order to upload the application. Later, however, such answers were treated as “false or incorrect information” amounting to a “specified violation” under clause (g) of the Explanation below Section 12AB(4). The Petitioners argued that neither Section 12AA nor Section 12AB makes an express irrevocability clause a condition for registration and that, under Sections 22(3A), 22(3B), and 55 of the Maharashtra Public Trusts Act, 1950, public charitable trusts are inherently irrevocable since trust assets cannot revert to the settlor. The Respondents contended that Sections 60 to 63 read with Section 11 deny exemption to revocable trusts, and therefore irrevocability must be determined at the stage of registration itself. The core issue before the Court was whether a trust could be treated as revocable merely because the trust deed did not expressly state that it was irrevocable. Key Findings of the Bombay High Court Interpretation of Section 12AB of the Income-tax Act, 1961: The Court was of opinion that Section 12AB of the Income-tax Act, 1961, mandates an objective satisfaction by the Commissioner regarding the objects of the trust, the genuineness of its activities, and compliance with other material laws. The Court iterated that Section 12AB contains no requirement for an explicit irrevocability clause as a condition for registration. By insisting on such a clause, the respondent was found to be impermissibly attempting to read a condition into the statute which does not exist. Irrevocability under Sections 61 and 63 of the Income-tax Act, 1961: Section 61 of the Act deals with the taxability of income from a revocable transfer of assets. From the mere reading of the provisions, the court clarified that for a transfer to be revocable under Section 63(a), the instrument must contain a positive provision for re-transfer or a right for the transferor to re-assume power. The Court clarified that silence in the deed implies irrevocability, not revocability and stated that the mere absence of an irrevocability clause cannot be construed as giving a settlor an indirect right to re-assume power, rather, the statute requires a specific provision to that effect. This opinion was directed by the judgement of Bombay High Court in the case of Controller of Estate Duty, Vidarbha vs. Smt. Mangala [(1983) 143 ITR 491 (Bom)], wherein it was held that once a dedication to a public charity is complete, the settlor is divested of the property and has no power of revocation left; even an express reservation of such power would be invalid . This was reiterated in the case of Smt. Virbala K. Kewalram & Ors. vs. Shri. Ramchand Lalchand & Ors. [1996(4) ALL MR 490], holding that a trust is irrevocable unless it is expressly desired (and stated) otherwise by the settlor. Inherent Irrevocability in the Maharashtra Public Trusts Act, 1950 (MPT Act): The Court held that public trusts in Maharashtra are inherently irrevocable because the MPT Act creates statutory safeguards preventing trust property from reverting to the settlor under sections 22(3A) and 22(3B). The Court observed that a trust can be revoked only where the trust deed expressly provides a power of revocation. Even upon revocation, the assets cannot return to the settlor and must instead be transferred to the Public Trusts Administration Fund. Cy-pres Doctrine : Within the provisions of MPT Act,1950, under Section 55, if the original objects of a trust fail or become impossible to carry out, the Charity Commissioner must redirect the trust assets towards similar charitable purposes, ensuring continued public use of the property. This was supported by CIT vs. Tara Educational & Charitable Trust where the High Court previously held that the absence of a dissolution clause is not a ground for rejection because Section 55 already handles such contingencies. View of Ministry of Finance :The Court highlighted that the Ministry of Finance, in communications with the Public Accounts Committee and CAG, had admitted that in states like Maharashtra and Gujarat, an explicit dissolution clause is neither necessary nor legal because state laws bar the reversion of assets. The Court ruled that the respondent cannot take a stand contrary to its own Ministry. Existing Safeguards under the Act: The Court pointed out that Section 13(1)(c) denies exemption if income is applied for the benefit of interested persons like the settlor and Section 115TD imposes an exit tax on the accreted income upon dissolution. Thus, the Court held that the Act already contains sufficient safeguards to prevent misuse or diversion of trust property, making an additional mandatory irrevocability clause unnecessary. Arbitrary Procedural Requirement under Form 10AB: The Court delivered a sharp critique of the Form 10AB online utility, which forced applicants to answer "Yes" in Row 6 to bypass a system error, only for the respondent to later penalise them for furnishing false or incorrect information which is a "specified violation" under Section 12AB(4) Explanation (g). The Court termed this a "high-handed and arbitrary approach," ruling that a procedural form cannot be used to coerce applicants into declarations used to their disadvantage. Implications and Key Takeaways for Non-Profit and Charitable Organisations Irrevocability by Default: For the purposes of registration and renewal under Section 12AB, there is no requirement for a charitable trust or non-profit organisation to include an explicit irrevocability clause in its trust deed. The Court established that a public charitable trust is deemed irrevocable by operation of law unless a power of revocation is expressly reserved by the settlor. Statutory Safeguards Against Asset Reversion: The legal framework ensures that assets dedicated to a charitable trust remain as public property. Under specific state laws, such as the Maharashtra Public Trusts Act 1950, even if a trust is revoked, the properties never revert to the settlor. Consequence of Revocation Clarified: The judgment clarifies that ‘revocability’ and ‘dissolution’ are distinct legal concepts with different implications for a charitable trust. While revocability can be partial and pertains to the settlor's power over specific assets or income, dissolution implies the complete loss of identity for the non-profit organisation. Protection of Trustees from Systemic Arbitrariness: Trustees of non-profit organisations are protected from being penalised for technical errors within the Department’s digital infrastructure. The Court found it manifestly arbitrary to treat an error in the form to be classified later to be a specified violation or false information when the system itself forced such a response to allow the application to be uploaded.

In this issue, we cover three new developments from upcoming and enforced Companies Act Amendments every Section 8 company leader should know about. Update 1: Action Required Now Live · Deadline 15 July, 2026 MCA General Circular No. 01/2026 · 24 Feb 2026 The government is giving non-profits a second chance on late ROC filings. You have until 15 July. If your Section 8 company has missed annual ROC filings — even for multiple years — the Ministry of Corporate Affairs has opened a limited window to catch up at a fraction of the usual cost. This is the biggest compliance amnesty for non-profits in recent years. LATE FEE WAIVER 90% WINDOW CLOSES 15 Jul 2026 TYPE OF SCHEME One-time only What is CCFS-2026? Under the Companies Act, every Section 8 company must file its annual return (Form MGT-7/7A) and financial statements (Form AOC-4) with the Registrar of Companies each year. Miss the deadline and you face a penalty of ₹100 per day — with no upper cap. For organisations that have missed multiple years, this can run into lakhs. The Companies Compliance Facilitation Scheme 2026 (CCFS-2026) lets you clear all pending filings by paying just 10% of those accumulated late fees, plus the normal filing fee. It also offers discounted routes to go dormant or formally close down. ⚠️ One-time only. After 15 July 2026, the Registrar of Companies will initiate enforcement against all organisations still in default. Penalties resume in full — there is no indication of another amnesty. Does this Apply to your Organisation? ✔ Eligible Section 8 companies with pending AOC-4 or MGT-7 filings — even going back several years or to the old Companies Act, 1956 era. Also, organisations with accumulated late fees that make catching up financially unrealistic under normal rules. ✘ Not eligible Companies that have already received a final strike-off notice under Section 248, or have applied for closure or dormancy. Trusts and societies are also not covered — this scheme applies only to companies registered under the Companies Act. Three Paths Under this Scheme Path 1 — Clear your backlog and continue (Most relevant for NGOs) File all pending forms (AOC-4, MGT-7/7A). Pay the normal fee plus only 10% of the accumulated late penalty. Prosecution immunity is granted if filed before a penalty notice is issued by an adjudicating officer. Path 2 — Go dormant (inactive but stay registered) If your organisation is temporarily inactive, apply for dormant status via Form MSC-1 at 50% of the normal filing fee. You stay registered with minimal compliance obligations going forward. Path 3 — Formally close down If your Section 8 company has ceased operations permanently, apply for strike-off via Form STK-2 at just 25% of the normal filing fee. A clean, cost-effective exit. Update 2: On the Radar— Draft Rules Open for Comment Draft· Comment by 9 May, 2026 MCA Public Notice · 8 Apr 2026 Section 8 companies limited by guarantee may soon be allowed to convert to a share-based structure On 8 April 2026, the MCA issued draft Companies (Incorporation) Amendment Rules, 2026. A proposal within this draft matters specifically to Section 8 companies: for the first time, a company limited by guarantee would be permitted to convert into a Section 8 company limited by shares. Currently, this conversion is not allowed. What is the Difference, And Why does it Matter? Limited by guarantee Members commit to contributing a fixed (usually nominal) amount if the company winds up. No shares are issued. Most older NGOs and membership bodies are structured this way. Seen as more “purely non-profit” in character. Limited by shares Members hold shares. Even in a Section 8 company, no dividend can be paid — shares don’t create ownership in the usual commercial sense. Seen as more structured and often preferable for CSR-funded entities. ℹ️ Note that the reverse —conversion of Sec 8 company limited by shares to Sec 8 company limited by guarantee — has been possible in practice by alteration of MOA & AOA and explicitly obtain the approval of Ministry of Corporate Affairs / Regional Director (though with some regulatory ambiguity). What else is in the Draft Incorporation Amendment Rules? Simplified documentation for Section 8 licences The draft removes requirements such as attaching the memorandum and articles of association and providing income-expenditure estimates when applying for a Section 8 licence. Less paperwork at the incorporation stage. Forms simplified: E-CHNG and E-CON Multiple existing forms (including INC-4, INC-22, INC-23, INC-24 for name and office changes, and INC-6, INC-12, INC-18 for conversions) are proposed to be merged into two simplified forms, reducing the filing burden for structural changes. What Should You do Right Now? These are draft rules, not yet law. The MCA has invited public comments until 9 May, 2026 through its e-consultation portal at mca.gov.in. If your organisation has views on the guarantee-to-shares conversion proposal — or on the documentation simplification — this is your window to submit them. Watch this space for when the final rules are notified. Update 3: On the Horizon — Referred to Joint Parliamentary Committee Bill in JPC · Not Yet Law Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026) · Introduced 23 Mar 2026 A sweeping corporate law reform is making its way through Parliament — here’s what non-profit leaders need to track On 23 March 2026, Finance Minister Nirmala Sitharaman introduced the Corporate Laws (Amendment) Bill, 2026 in the Lok Sabha. It proposes 107 amendments to the Companies Act, 2013. The Lok Sabha immediately referred it to a Joint Parliamentary Committee (JPC) for detailed scrutiny. It is not yet law — but once passed, it will significantly change how Section 8 companies operate. ⚠️ Nothing in this story requires action today. Do not change your compliance practices until the Bill is enacted and notified. We are flagging this now so your board can plan ahead. What is in the Bill that Matters for Section 8 Organisations? 1. CSR thresholds are changing — potentially affecting your funding pipeline Currently, companies with a net profit of ₹5 crore or more must spend 2% of average net profits on CSR. The Bill proposes to double this threshold to ₹10 crore. This means companies with profits between ₹5–10 crore would no longer be required to do CSR. For NGOs that receive CSR funding from smaller corporate donors, this could reduce the pool of mandatory CSR spenders — and the funding available to you. On the positive side, the Bill extends the deadline to transfer unspent CSR funds for ongoing projects from 30 days to 90 days — giving NGOs implementing CSR projects more breathing room on timelines. 2. Decriminalisation of procedural defaults — less fear, more fines The Bill converts over 20 procedural offences from criminal liability (jail + fine) to civil monetary penalties (monetary only, adjudicated by an officer, not a court). For directors of Section 8 companies, this is mostly good news — honest mistakes on filings will no longer carry the threat of prosecution. However, the Bill also introduces a Recovery Officer mechanism: if civil penalties go unpaid, the government can attach bank accounts and property. 3. Virtual and hybrid meetings are being formally recognised AGMs and EGMs will be permitted via video conferencing or hybrid mode. Companies must hold at least one physical AGM every three years. Notice periods for fully virtual EGMs are also proposed to be reduced from 21 days to just 7 days. This formalises what most Section 8 companies have been doing since COVID-19 and gives greater governance flexibility. 4. Director disqualification rules are being tightened The period of non-filing that triggers director disqualification is being reduced from three financial years to two. Directors of Section 8 companies that fall behind on filings will face disqualification sooner. New grounds are also being added — auditors, valuers, and insolvency professionals will be barred from simultaneously serving as directors. 5. Annual disclosure of director interest is being eased Currently, directors must disclose their interests in other entities every year. The Bill proposes that disclosure is required only when interests change — not as a routine annual exercise. This reduces repetitive paperwork at board meetings. 6. Mandatory website and email for certain classes of companies The Bill introduces a new Section 12A requiring prescribed classes of companies to maintain a website and email address, and to register these with the Registrar. It is not yet clear whether Section 8 companies will fall in the prescribed class, but organisations should be prepared. Summary at a Glance CSR net profit threshold ₹5 crore → ₹10 crore (proposed) Unspent CSR transfer window 30 days → 90 days (proposed) Director disqualification trigger 3 years → 2 years of non-filing AGM mode Physical / virtual / hybrid (1 physical per 3 years) EGM notice (fully virtual) 21 days → 7 days Director interest disclosure Annual → only on change Procedural offences Criminal → civil monetary penalty Current status Referred to JPC; not yet law Disclaimer: This advisory is prepared for general informational purposes only and does not constitute legal advice. Please consult a qualified Company Secretary or legal professional for guidance specific to your organisation.

The Foreign Contribution (Regulation) Amendment Bill, 2026 (“2026 Bill”) introduces an important shift in how India regulates foreign funding. At a high level, the message is simple: If your organisation loses (voluntarily or otherwise) Foreign Contributions Regulation Act, 2010 (“FCRA”) registration, the government now has a clear process to take over assets created from foreign funds. This idea is not entirely new but the way it is being implemented is. Indian law has long taken the view that: • Charitable assets don’t belong to founders • They are meant for public purposes Under the Income Tax Act,1961 , if an NGO shuts down, its assets must go to another non-profit or be used for public benefit. Similarly, earlier FCRA (2020 amendment) already said that: assets created from foreign funding could go to the government if registartion is cancelled. Existing Law on Asset Takeover:  Section 15 of the FCRA allowed for a designated authority to manage the assets created out of the foreign contribution by an organisation whose FCRA certificate has been cancelled under Section 14 or surrendered under section 14A. The designated authority had the power to utilise the foreign contribution or dispose of the assets created out of it in case adequate funds are not available for running the organisation's activity. This law only applied if your FCRA registration was cancelled or surrendered, not if you allowed to let it lapse upon the certificate's expiry. The idea was for the designated authority to apply foreign assets towards public good and only dispose them if necessary. What has changed now:   The law now clearly lays out how this takeover of foreign contribution and assets acquired under FCRA will happen. The Bill introduces a system where if your FCRA registartion is: a) cancelled b) surrendered c) or even expires without renewal your foreign funds and related assets can be taken over by a government-appointed authority. If your registration is not restored in time: This takeover becomes permanent Assets can even be: - transferred to government bodies - or sold with proceeds going to the Consolidated Fund of India A Big Practical Concern: Mixed Funding Assets  Many non-profits build assets with a mix of domestic and foreign funding. The 2026 Bill says: Assets created wholly or even partly using foreign funds shall be fully taken over. You can apply to recover the non-foreign portion but only if it is clearly seperable. In real life, funding is often mixed and ascertaining asset value based on source of funding is not straightforward. This creates uncertainty for organisations that have invested in infrastructure using foreign funds, even if partly. A common example is Land bought with domestic funds with buildings and infrastructure constructed using foreign funds. It is unclear how the designated authority will take over such assets. Another Tightening: Time Limits on Spending under Prior Permission route  The Bill also allows the government to set: Deadlines for using foreign funds received under prior approval route. This means: Funds must be used not just for the right purpose But also, within a fixed time Together with asset rules, the signals: Foreign funding is being pushed down short-term, programmatic use , rather than long-term investments. Missed Opportunities While the Bill is very clear on how the government can take over assets, some everyday issues remain unclear. Why speaking orders are on FCRA applications (especially rejections) are not the default? Is a foreign share holder of a Section 8 company limited by share capital an FC transaction What is the appeal process for administrative rejections? Pacta's Take: This amendment reflects a consistent idea in Indian law: Assets created for public good is not private property. What's changed is the level of control. The government is now setting up a clear system to step in and manage those assets. For non-profits, this means: Pay close attention to FCRA renewals and compliance Be cautious about using foreign funds for infrastructure Think carefully about how assets are structured

Notes from a first-hand experience For many non-profits organisations (NPOs), applying for permanent registrations under sections 12AB and 80G of the Income Tax Act, 1961 comes with some fear and anxiety.  Many leave it up to their finance teams to upload the forms and attach documents and hope it’s the same as obtaining a provisional registration. In practice, the process is far more conversational, and at times, searching. This note is drawn from a first-hand experience of appearing before the Income Tax Department (IT Department) in connection with applications for permanent 12AB registration and approval under section 80G(5). It is not a critique of the system, but an attempt to demystify what applicants should expect once the application is submitted and enters the scrutiny phase. First Notice Once the applicant NPO forms and documents are filed online, acknowledgements are generated almost instantly. However, applicant NPOs may not be informed about when they can expect to hear back.  This is normal, the income tax department officers will have 6 months from the end of the quarter of the filing to respond to the applicant under Income Tax Act, 2025.  So, if the application is filed in April/May, responses can take as long as December 31 (June 30 + 6 months). Generally, the time between submission and the first substantive communication happens between 6-10 weeks. Applicant NPOs can expect to receive a notice asking for responses to queries and questions that the IT Department has. Questions will generally revolve around activities of the applicant in the previous year, financial entries that seem irregular, governing charter of the applicant and specific concerns. Applicant NPOs should respond to such a notice in detail.  They should be ready to provide the necessary paperwork and justify payments/activities where necessary.  The easiest way to ensure applicants have answers for the IT Department is to ensure that records are maintained through the year, rather than only at the time of submission.  This enables an applicant to record in real time the activities being carried out, beneficiaries impact, monies received and spent rather than attempts to match receipts in the future.  As important as responding in detail with sufficient records to the IT Department is responding in time.  Many applicants miss deadlines or show cause notices themselves leading to rejection of their Income Tax registrations without a proper hearing.  This could be because the registered email was inactive or went to an old CA firm.  Applicant NPOs should ensure that they are actively monitoring the email provided to the IT Department so as to not miss any important emails. Responses to the first notice may result in the request for further documentation or a hearing being fixed.  At this point, the process moves quickly and applicants may be given only a few days or a week to respond to additional requests.  Applicant NPOs should attempt to respond to their best ability to such requests.   The hearing: less about paperwork, more about substance Under section 12AB, the Commissioner is required to satisfy himself about (i) the genuineness of activities of the applicant and (ii) compliance with such requirements of law as are material for achieving its objects. Approval under section 80G(5) similarly requires satisfaction that the institution is established in India for charitable purposes  and that its income would not be used for private benefit. Contrary to popular perception, the hearing is not a line-by-line verification of your balance sheet. The focus was on understanding the applicant as an entity in the social space.  It focused on who runs it, how decisions are taken, where money flows, and who ultimately benefits. The questions broadly clustered into five themes. 1. The NPO and its Board The first set of questions sought to understand the relationship between the applicant NPO and its governing board. a) Who are the trustees/directors? Are they related to each other? b) How were they appointed? What are there qualifications? c) Do they draw any personal benefit from the NPO? These questions are not accusatory, but they are probing. The underlying concern was clear: whether the NPO is genuinely independent and charitable, or whether it functions as an extension of its board’s personal or family interests. Charter documents, profiles of trustees/directors, and clarity on governance structures was the most important to clarify. 2. Salaries and remuneration Remuneration emerged as a focal point. a) Which directors/trustees or key persons draw salaries? b) How are these salaries determined? c) Are they commensurate with roles and responsibilities? d) Are any trustees/directors simultaneously employees? The department questions thoroughly on whether the remuneration paid to key managerial personnel is reasonable, justified, and transparently approved. Where trustees were also salaried executives, the expectation was that this dual role be clearly documented and defensible on commercial and functional grounds .  This becomes harder to justify for research and policy-based organisations where most of the expenses are salaries of staff.  Ensure that there is clear documentation with relevant researchers and consultants that showcase their value to the NPO and invoices that are raised for work done.  Here, linkage with activities conducted and beneficiaries impacted becomes relevant.  For example – if you are running a think tank, demonstrate how NPO staff actively engage in work that pushes public policy. 3. Actual and ultimate beneficiaries A recurring theme was: who really benefits ? a) Who are the beneficiaries of the NPO’s activities? b) Are they identifiable groups or the general public? c) How does the NPO ensure benefits are not restricted to a closed circle? This is where activity reports, photographs, program descriptions, and beneficiary narratives proved useful. Abstract charitable objects are insufficient on their own. The hearing tests whether those objects translated into real-world outcomes for identifiable beneficiaries.  Again, this becomes harder to justify for NPOs working in capacity building roles where their direct beneficiary may be another organisation or personnel and links to the ultimate beneficiaries may seem faint.  The NPO must show how they advanced public utility by using data/reports to show how the ultimate beneficiary benefitted from the Applicant NPO’s intervention. Clarity of institutional purpose, supported by documentary evidence, significantly strengthens the applicant’s case.  4. Activities conducted The department sought alignment between objects, activities, and expenditure. a) What activities have been conducted so far? b) Do they match the stated objects? c) How are these activities funded? d) Are there any activities that resemble commercial services? All NPOs are expected to demonstrate some level of activity and documentation of this activity.  Newspaper clippings, media reports, public narrative building documentation helps prove that the applicant NPO is engaged in the work and there is external validation of the same. Images and documents that show public mobilisation will always help build trust in the NPOs work.  If there are any large expenses that stand out in the NPO’s balance sheet – they will be questioned.  NPOs should be prepared to explain such expenses with proper utilisation documentation.  5. Donations received and their character The department seeks to learn about how money was received by the NPO.  a) Who has donated to the NPO so far? b) Are donations domestic or foreign? c) Are there corpus donations? d) Are any donations conditional or routed through related parties? The emphasis was on understanding whether donations were genuine voluntary contributions, free from quid pro quo, and consistent with the NPO’s charitable character. Transparency mattered most – especially when donors were related to the governing board of the NPO.  The motives of the donors were questioned too.  Be prepared to validate the motives of larger donors through a quick background.  For example – if your work is in disability and you have non-institutional HNI donors; feel free to anonymise but use their stories for why they carry out philanthropy in the sector.  It helps create context for the NPO and really put into perspective why the work the NPO does is relevant and needed. Where the NPO falls under the limb of “advancement of any other object of general public utility”, the Department may examine whether any activity resembles trade or business within the meaning of the proviso to section 2(15). App licants should be prepared to explain the nature of consultancy fees, training charges, or event revenues, and demonstrate that such receipts are incidental and within statutory thresholds.  If such receipt of revenue exceeds the 20% limit, NPO must demonstrate that it was solely for remuneration of expenses.  The tone of the process What stood out most was that the hearing was not adversarial. It was investigative, sometimes sceptical, but fundamentally grounded in understanding intent and structure rather than catching errors. That said, gaps in documentation or unclear explanations were quickly exposed. The process rewards preparation not just of documents, but of narrative and intention. Applicant NPOs who can clearly explain why the NPO exists, how it operates, and who it serves are far better placed than those who rely solely on formal compliance. What applicants should take away A 12AB or 80G hearing is not a mere formality. It is, in effect, a legitimacy check. Applicants should expect scrutiny on governance, remuneration, beneficiaries, activities, and funding. They should be prepared to explain relationships, justify payments, and demonstrate that charitable intent is matched by charitable action. Most importantly, they should view the process not as an obstacle, but as an opportunity to put their institutional story on record.  Passionate founders explaining their story, NPO purpose and mission will go a long way towards helping the department understand your NPO’s legitimacy.  Also, NPOs should plan for the time effort.  Permanent registrations need to be applied for within 6 months of receiving your provisional registration. There is document preparation required which will involve time consuming work.  If your grants hinge on obtaining permanent 12A/80G approval, put your best foot forward and carry out meaningful compliance and documentation. What the Income Tax Act, 2025 Means for Charitable Registrations The proposed Income Tax Act, 2025, expected to take effect from 1 April 2026, reorganises and renumbers provisions of the existing Income-tax Act, 1961. For charitable institutions, however, the underlying principles remain substantially intact. Registrations currently granted under sections 12A, 12AA, or 12AB, and approvals under section 80G, continue to operate within the same conceptual framework. The conditions governing: a) application of income, b) accumulation limits, c) prohibition on private benefit, d) restrictions on commercial activity under section 2(15), e) and audit and filing requirements, remain materially unchanged. The reform is primarily structural and numerical rather than doctrinal. Case law developed under the 1961 Act on “charitable purpose”, “genuineness of activities”, and “application of income” will continue to guide interpretation unless expressly altered. For NPOs who already have tax exemption, nothing needs to be changed or re-done.  Only NPOs who are applying for registrations post April 1, 2026 – the correct respective forms should be used.  However, there is no benefit in delaying your application till the new financial year - compliance discipline, documentation standards, and scrutiny at the stage of registration are unlikely to soften or intensify merely because of the new statute.