In a landmark ruling, the Supreme Court of India in Sukdeb Saha vs. State of Andhra Pradesh  (25 July 2025) declared student mental health an integral component of the fundamental right to life under Article 21 of the constitution. The court’s decision was prompted by the tragic case of a 17-year-old NEET aspirant, whose death was initially classified as a suicide despite significant inconsistencies in the investigation. This ruling establishes a new precedent, making it mandatory for all educational institutions across India, including public and private schools, colleges, universities, training centres, coaching institutes, residential academies, and hostels, irrespective of their affiliation to implement comprehensive mental health safeguards. Key Takeaways from the Ruling The Supreme Court, exercising its powers under Article 32, has issued 15 binding directives that apply to all public and private schools, colleges, universities, training centers, and hostels. The guidelines aim to create a framework for preventing student suicides, providing for early detection of distress, and establishing robust support systems. Here are some of the key mandates from the court's judgement: Adoption of a uniform Mental Health Policy : Institutions must adopt and implement a mental health policy aligned with UMMEED Draft Guidelines , MANODARPAN initiative , and the National Suicide Prevention Strategy . The policy must be reviewed annually and published on websites and notice boards. Appointment of Mental Health Professionals : Institutions with 100+ students must appoint at least one qualified counsellor, psychologist, or social worker with expertise in child/adolescent mental health. Smaller institutions must establish referral linkages with external professionals. Student-to-Counsellor Ratio : Institutions must ensure optimal counsellor availability. Dedicated mentors/counsellors should be assigned to small student groups, especially during exams and academic transitions, to provide consistent and confidential support. No Batch Segregation or Public Shaming : Institutions, especially coaching centres, must avoid dividing students based on academic performance, imposing unrealistic academic targets, or publicly shaming students. Protocols for Mental Health Emergencies : Institutions must establish written referral protocols for hospitals, mental health services, and suicide helplines. Suicide helpline numbers (e.g., Tele-MANAS) must be prominently displayed across campuses and online platforms. Mandatory Staff Training : Teaching and non-teaching staff must undergo training at least twice a year by certified mental health professionals. Training must cover psychological first-aid, identifying warning signs, responding to self-harm, and referral mechanisms. Sensitivity towards Marginalised Students : All staff must be trained to sensitively engage with vulnerable and marginalised groups (SC/ST/OBC, EWS, LGBTQ+, students with disabilities, those affected by trauma or bereavement) in a non-discriminatory manner. Reporting & Redressal Mechanism : Institutions must create confidential and accessible systems to report sexual assault, harassment, ragging, and bullying. They must set up empowered internal committees, ensure timely action, provide psycho-social support, and protect whistle-blowers. Failure to act can result in institutional liability. Parent & Guardian Sensitisation : Institutions must organise sensitisation sessions for parents/guardians on student mental health. They should be educated to avoid undue academic pressure, recognise psychological distress, and support students empathetically. Mental health literacy should be integrated into student orientation. Annual Mental Health Report : Institutions must maintain anonymised records of wellness interventions, referrals, training, and related activities. An annual report must be submitted to the relevant regulatory body (UGC, AICTE, CBSE, State Education Dept.). Extracurricular & Examination Reforms : Institutions must prioritise extracurricular activities (sports, arts, personality development) and periodically review exam patterns to reduce academic stress and promote holistic student identity beyond ranks/scores. Career Counselling Services : Institutions must provide structured career counselling for students and parents through qualified counsellors. These sessions must reduce unrealistic pressure, highlight diverse career paths, and ensure inclusivity. Safe Residential Campuses : Hostel owners, wardens, and caretakers must keep campuses free from harassment, bullying, drugs, and harmful substances to ensure a safe living-learning environment. Suicide Prevention Infrastructure : Residential institutions must install tamper-proof ceiling fans, restrict access to rooftops/balconies/high-risk areas to deter impulsive acts of self-harm. Special Protection in Coaching Hubs :Cities like Kota, Jaipur, Hyderabad, Delhi, etc., must implement heightened mental health measures due to high student suicide rates. This includes career counselling, structured academic planning, continuous psychological support, and accountability mechanism. What a Mental Health Policy Should Look Like To operationalise the Court’s directives, institutions must translate them into robust internal policies. A mental health policy serves as the backbone for implementation, ensuring that safeguards are not just on paper but actively practiced. Introduction and Scope: A strong policy begins with a clear scope, defining whom it applies to and affirming its inclusivity. It should explicitly recognise the needs of LGBTQIA+ students, persons with disabilities, and those from diverse socio-economic and cultural backgrounds. Support Systems: The policy must outline the counselling and wellbeing resources available. This includes on-campus services with clear contact details (e.g., counselling centre email and phone number), referral pathways to external professionals, and guidance on emergency hospital contacts. Academic Accommodations Flexibility in academic requirements is essential: Students with mental health challenges should be able to request accommodations through a defined channel, such as contacting the Programme Coordinator or Disability and Inclusion Office, whose email IDs and office numbers must be listed in the policy. Confidentiality and Privacy: Confidentiality should be guaranteed, with counsellor contact details clearly mentioned so students know where to reach out safely. Exceptions should be specified only in cases of self-harm, suicidality, or threats to others, in which case the emergency contact person identified in the student’s records may be reached. Risk and Safety Measures : Institutions should provide for independent evaluations and crisis intervention. The policy should clearly display 24x7 emergency helpline numbers, hospital contacts, and the university’s designated emergency officer for immediate response. Anti-Discrimination and Inclusion: The policy should ensure equal access to mental health services for all, regardless of identity or background. A dedicated grievance redressal contact (email ID and phone number) must be included so that students can report discrimination or bias in accessing services. Implementation and Governance: Clear governance roles should be set out, along with direct contact details of responsible offices such as the counselling centre head, programme directors, or the student wellbeing office. This ensures accountability and accessibility. Awareness and Sensitisation: Workshops, peer-support sessions, and awareness drives must be planned and advertised. Contact points (such as student mentors, peer-support groups, or mental health ambassadors) should be listed so students know whom to approach for participation. Accessibility of Services: Services must be physically and digitally accessible. Policies should include online counselling links, appointment booking portals, and contact details for remote access, ensuring inclusivity for students who cannot attend in person. Continuous Review and Feedback: Policies should be reviewed regularly, and feedback mechanisms should be transparent. A dedicated feedback email ID or online form link must be provided so students can confidentially suggest improvements to the mental health support system.

For non-profit organisations (NPOs) in India, it is crucial to be transparent and share information clearly with the public. This helps build trust and credibility especially with their donors and collaborative partners. The legal rules regarding the name boards and websites differ based on how the NPOs is officially registered–as a Section 8 Company, a Trust, or a Society. However, there are certain mandatory rules and good practices that all NPOs should follow.  Name Board Requirements: A Matter of Identification The primary purpose of a name board is to clearly identify the organisation and its registered location. While a single comprehensive law does not dictate exact specifications nationwide, the following table summarises the key requirements:   *  Language display requirements may vary by State. Refer to your State’s Shops and Commercial Establishments Rules. Website Requirements: Building Transparency Online A website is a vital tool for enhancing transparency and outreach. While specific legal mandates for website content are less defined than for companies, certain principles and best practices are crucial for all NPOs: Display of Identity and Contact:  The registered name, address, and contact information should be prominently displayed Organisational Information:  Clearly state the NPO's objectives, mission, and registration details. For Section 8 companies, the website should also have the Corporate Identification Number (CIN). Governance:  Information about the governing body (Board of Directors/Trustees/Committee members) fosters accountability Financial Transparency:  Consider publishing annual reports and audited financial statements to build trust Activities and Impact:  Detail the work being done and its impact to inform stakeholders Data Privacy:  If collecting personal data, a clear and compliant privacy policy is essential Secure Transactions:  For online donations, ensure secure payment gateways Website Address Disclosure (Section 8):   Section 134(3)(d)  of the Companies Act, 2013, requires the website address to be included in the Board's Report FCRA (Foreign Contribution Regulation Act) regulations: The Ministry of Home Affairs (MHA), which administers FCRA, has clear guidelines for public disclosure, much of which is expected to be accessible via the organisation's website. All FCRA-registered organisations are mandated to place their audited annual accounts (including Income & Expenditure Statement, Receipt & Payment Account, and Balance Sheet) on their official website for every financial year. Conclusion: While the Companies Act, 2013, offers more specific guidelines for Section 8 companies, the governing laws for Trusts and Societies are generally less prescriptive regarding website content nationwide. Regardless of the registration type or location, maintaining a clearly visible name board and a comprehensive, informative website are crucial for regulatory compliance, building credibility, and effectively pursuing the NPO's mission.

The Madras High Court recently ruled in the case of M/s. Sharma Centre for Heritage Education vs. The Director, FRCA Wing, Ministry of Home Affair , that every NGO receiving foreign funding should not be viewed with suspicion. Background of the Case The case involved the renewal of Foreign Contribution (Regulation) Act, 2010 (FCRA) registration for two Chennai-based NGOs: Ellen Sharma Memorial Trust and Sharma Centre for Heritage Education. The Ellen Sharma Memorial Trust, a public charitable trust established in 1982, focuses on promoting education and child welfare. It runs institutions like the Ellen Sharma Primary School and the Ellen Sharma Memorial Matriculation School, which cater to orphaned and Tibetan refugee children, and also operates health clinics. The trust is heavily reliant on foreign contributions, which constitute approximately 70–75% of its operational funding. It has been duly registered under the FCRA, with its last renewal granted on April 23, 2016, effective from November 1, 2016, for five years. Ahead of the expiry of the registration, the trust applied for renewal under Section 16 of the FCRA on 15.02.2021. During the processing of the application, the Ministry of Home Affairs (MHA) raised a series of queries, particularly concerning the trust's association with two sister organisations: Children’s Garden School Society  and Sharma Centre for Heritage Education  (the latter being the appellant in the associated Civil Miscellaneous Appeal). All three organisations operated from the same premises to reduce administrative costs, had some overlapping office bearers, and received contributions from a common foreign donor family. The trust clarified these matters and submitted supporting documents including certified bank statements and annual returns. Despite these clarifications, the MHA issued a communication on 09.12.2021 rejecting the renewal application, citing Section 16(1) read with Section 12(4)(a)(vii) of the FCRA. A similar rejection was issued to the Sharma Centre for Heritage Education  on 29.12.2021, triggering the present appeal. The basis of this rejection, was an alleged violation of Section 7 of the FCRA , which pertains to the prohibition on the transfer of foreign contributions. It is crucial to understand the context of Section 7 of FCRA . The FCRA, was originally enacted to regulate foreign donations in India, later replaced by the FCRA 2010 to enhance transparency and prevent misuse of foreign grants. In 2020, significant amendments were introduced through the Foreign Contribution (Regulation) Amendment Act, 2020. Prior to these amendments, registered organizations were permitted to transfer foreign contributions to other registered organizations without prior government approval. However, the 2020 amendment introduced a complete prohibition on such transfers, even between FCRA-registered entities, unless explicit prior approval was obtained from the Central Government. The authorities alleged that the petitioner trust and its sister NGOs continued to transfer foreign funds among themselves without prior approval during the "post-amendment period of October 2020 to February 2021". Key findings of the Madras High Court The Madras High Court ruled in favour of the petitioner, allowing the NPO’s FCRA registration and reinforcing that the government must follow proper legal procedures when scrutinizing foreign contributions. Lack of Reasoned Rejection: The Court held that the impugned rejection communications issued by the MHA did not provide any reasons other than a bare reference to Section 16(1) read with Section 12(4)(a)(vii) of the FCRA. It noted that neither the writ petitioner nor the appellant was informed of the specific violation alleged against them. The absence of reasoning, especially in matters affecting rights and continuity of longstanding institutions, was found to be contrary to principles of natural justice.   Alleged Violation of Section 7 – Limited and Procedural: The only substantive allegation — that foreign contributions were transferred among sister NGOs without prior approval — arose from the amended Section 7 of the FCRA, which came into effect on 29.09.2020. The Court observed that before this amendment, such transfers between FCRA-registered entities were lawful. The alleged violation, therefore, could have occurred, if at all, only between October 2020 and February 2021. The Court emphasized that this was a short period immediately following a legal change, and any non-compliance appeared procedural rather than intentional.   No Misuse or Diversion of Funds: Upon reviewing the sealed Intelligence Bureau report and government records, the Court categorically found no evidence of misuse, diversion of foreign funds, or personal gain. The foreign contributions were used for their intended charitable purposes, including the running of schools and welfare programs. The Court also noted that the institutions had never previously come under adverse notice and had responded promptly and transparently to all government queries.   Bona Fide Conduct and Longstanding Compliance: The Court highlighted the petitioner trust’s longstanding history of lawful operation since 1983 and its consistent compliance with FCRA requirements until the denial of renewal. The trust’s response to queries, submission of clarifications and documentation, and their continued charitable work indicated bona fide conduct. The Court held that such organisations, especially those supported by individuals of Indian origin living abroad and engaged in welfare efforts, should not be denied renewal on hyper-technical grounds.   Disproportionate Response by the Authorities: The Court applied the principle of proportionality and held that denying renewal based solely on a procedural lapse in a newly amended provision was excessive. It stressed that in the absence of any mala fide intent or misuse of funds, the authorities should have issued a notice and sought explanation before resorting to rejection. Consequently, the Court set aside the impugned communications and directed the authorities to process the renewal applications within four weeks.   Layperson’s Difficulty in Keeping Up with Technical Amendments: The Court acknowledged that amendments to procedural laws — such as the sudden prohibition on inter-NGO fund transfers introduced in late 2020 — can be difficult for laypersons or non-legal entities to immediately absorb and act upon. It emphasized that charitable organisations, particularly those with a clean record, cannot be expected to instantly comprehend and implement technical legislative changes without clear communication or guidance from authorities. The Court held that procedural lapses under such circumstances should not be treated as wilful violations. Conclusion The judgement is a significant step in safeguarding the autonomy ensuring that NPOs can function without undue interference, as long as they comply with norms. It also emphasizes that without evidence, there should be no reason to deny NPOs the ability to work and receive foreign funds. The Court gave weight to the petitioner’s long-standing clean record since 1983, suggesting that consistent compliance and transparent conduct can strengthen an NPO’s case even when procedural mistakes occur.

On January 20, 2025, the Securities and Exchange Board of India (SEBI) released a Consultation Paper  proposing a comprehensive review of the framework for the Social Stock Exchange (SSE). This initiative, driven by recommendations from the Social Stock Exchange Advisory Committee (SSEAC), aims to refine elements of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) to simplify the process for social enterprises to access capital and enhance transparency. The consultation paper put forth important reforms aimed at broadening the SSE's scope, including: Expanded Eligible Activities:  The list of activities qualifying as eligible for social enterprises is proposed to be significantly expanded. This now includes organisations focusing on promoting and educating about art, culture, and heritage, as well as those assisting disadvantaged children, women, the elderly, and individuals with disabilities. It also covers vocational skills training, sustaining and stewarding natural ecosystems and the environment, pollution control, addressing climate change, conserving forest and wildlife, and animal welfare. New Eligible Structures for Not-for-Profit Organisations (NPOs):  The framework proposes recognising a wider range of legal structures as NPOs. This includes trusts registered under the Indian Registration Act, 1908 (especially in States without a Conditioned Legislation), charitable societies registered under relevant State laws, and companies registered under Section 25 of the Companies Act, 1956 (equivalent to Section 8 of the Companies Act, 2013). Extended Registration Tenure for NPOs:  Recognising practical challenges, SEBI has proposed allowing NPOs to remain registered on the SSE for a maximum of two years without necessarily raising funds through the platform. Enhanced Reporting and Accountability:  The paper suggests various measures for improved reporting, including: Separating reporting for listed and unlisted significant projects. Reworking annual disclosure schedules and splitting annual disclosures into financial and non-financial components. Introducing Mid-Term and End-Term Reports for listed projects of three years or more, alongside annual reports, to measure long-term impact. Integrating baseline measurement for listed projects with the Solution Implementation Plan. Business income for For-Profit or Not-for-Profit social enterprises must constitute greater than 20% of revenues in the most recent annual year to meet the 67% eligible activities criterion, reinforcing the primacy of social intent. Refinement of ZCZP Instrument Provisions:  The paper also discusses modifications to certain provisions of the ICDR Regulations regarding the procedure for public issue of Zero Coupon Zero Principal Instruments (ZCZP), including the wording of the fund-raising document, and other conditions relating to their issuance. This includes a proposal to include "Project/Programme Proposal" along with minimum initial disclosures for ZCZP instruments. (Note: A subsequent SEBI Circular on March 19, 2025 , after the consultation paper, formally reduced the minimum application size for ZCZP instruments from Rs. 10,000 to Rs. 1,000, aligning with the objective of engaging retail investors and making them more accessible).    The evolution of the SSE, from its conceptualisation to its active implementation and continuous refinement, underscores India's progressive approach to social finance. We will continue to track these developments and provide further insights in our upcoming editions.

What is the latest FCRA Amendment? The Ministry of Home Affairs ("MHA") on May 26, 2025 notified the  Foreign Contribution (Regulation) Amendment Rules, 2025 (“Amendment”) , amending Forms FC-3A (registration), FC-3B (prior permission), and FC-3C (renewal), among others. The Amendment requires applicants engaged in publication-related activities or if publication activities are among their aims and objectives in their governing documents, to submit an undertaking from the Chief Functionary stating that they are compliant with section 3(1)(g) of the Foreign Contribution (Regulation) Act, 2010 (“FCRA”) .  Furthermore, if the publication of the association is registered with the Registrar of Newspaper for India, a “Not a Newspaper” certificate from the Registrar of the Newspaper for India needs to be submitted. Furthermore, the Amendment requires an applicant seeking prior permission under FCRA to furnish the following documents: “(a) commitment letter from the donor, with the amount committed in the letter matching the donation amount mentioned in this Form; (b) project report including a detailed breakup of proposed expenses to be incurred from the foreign contribution to be received, along with a declaration that administrative expenses shall not exceed 20% of the foreign contribution; (c) letter from Chief Functionary, in the format available on the website of Ministry of Home Affairs, providing point wise details in respect of each item of guidelines for prior permission issued by the Ministry of Home Affairs. (d) undertaking to adhere to the Good Practice Guidelines of the Financial Action Task Force (FATF), in the format available on the website of Ministry of Home Affairs ” While the amended forms have been uploaded ( linked here ), the supporting undertaking and letter formats are yet to be made available on the FCRA website, as on date of this note. These amendments are consistent with the government’s broader objective of limiting foreign influence over domestic public discourse and reinforcing financial transparency within civil society operations. In addition to the above, there are other reporting updates in the Amendment that we will examine in another issue. What are the key takeaways and what should existing FCRA registration holders be mindful of? This Amendment signals enhanced regulatory sensitivity to foreign-influenced publications, especially where such content may influence public opinion or policy discourse.  While research or policy publishing entities may not view themselves as media outlets, the inclusion of such objectives or activities in governing documents could trigger heightened scrutiny or procedural delays under the revised framework. For entities who already have FCRA registration and will need renewal, it is recommended that you are mindful of these renewed obligations, especially regarding the undertaking from the Chief Functionary.  While the Amendment need not affect your current operations as they are, renewal may be slightly more complicated if you are engaged in publishing activities.  Non-profit organisations involved in knowledge dissemination, research, advocacy, and educational publication must adopt a proactive compliance posture, integrating legal review of their objectives, disclosures, and publication strategies into their FCRA risk management processes. Non-profit organisations should also review their Memorandum of Association or Trust Deed to assess how publication-related objectives are articulated. Language that closely resembles carrying our publication or news dissemination may warrant modification. Who is affected by it? The Amendment does not directly affect entities who already have FCRA approvals in place and are not seeking renewal.    The new compliance requirements with are applicable to: 1) All new applicants for FCRA registration filing through Form FC-3A have to file an undertaking from the Chief Functionary stating that they are compliant with section 3(1)(g);2) Applicants seeking prior permission through Form FC-3B are required to furnish all the documents listed below:a) commitment letter from the donor;  b) a project report with detailed break-up of proposed expenses;  c) a letter from the chief functionary; and  d) undertaking to adhere to the Good Practice Guidelines of the FATF.3) Entities applying for renewal of FCRA registration through Form FC-3C after the effective date need to file an affidavit regarding receipt and utilisation of foreign contribution after expiry of FCRA registration. What is section 3(1)(g) of the FCRA? Were there existing publishing restrictions in FCRA? Section 3 of the FCRA prohibited certain foreign contribution to be accepted by: “3.(1) … (b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper; … (g) association or company engaged in the production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode, or any other electronic form as defined in clause (r) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000) or any other mode of mass communication; (h) correspondent or columnist, cartoonist, editor, owner of the association or company referred to in clause (g).” The restrictions with respect to publishing are limited to a registered newspaper or audio/visual broadcasting of news.  There are no broad restrictions on publishing in general outside of these restricted activities.    How is publication defined? FCRA or the Amendment does not define “publication” and has not provided any content based guidelines.   The Press and Registration of Periodicals Act, 2023 defines publication as:  “publication means newspapers, magazines, journals or newsletters printed periodically and published in India, and shall include its reproduction in electronic form or any syndication, facsimile edition, for public distribution or access” What is the effective date? The Amendment comes into force from May 26, 2025.  Applicants filing for FCRA registration, prior permission or renewal of their expired/cancelled FCRA registration after May 26, 2025 must conform to the amended compliance requirements.  My organisation carries out policy work including publishing white papers, think pieces, reports and other publications.  How does this Amendment affect me? Yes, the Amendment broadly refers to “publication-related activities”, which unless otherwise specified by MHA later, would include publications such as white papers, think pieces, reports and other publications.  Our literal interpretation of the Amendment would require that entities engaging in these publications have to furnish an undertaking from the Chief Functionary as part of their FCRA application.  An organisation working in policy may be benefitted by showing how the foreign funding does not affect the neutrality of their research advocacy. As of the date of this briefing, no further clarifications or FAQs have been issued by the MHA. Future guidance may further delineate the scope of these provisions. We will update this note with developments, if any.  Given the absence of an FCRA specific definition for publication, entities are advised to adopt a politically sensitive approach of 'publication-related activities,' especially where publications are public-facing and may contain commentary on public policy or current affairs. My organisation regularly publishes newsletters to inform donors/public about my activities. How does this affect me? The Amendment refers only to entities engaged in “publication-related activities” or if publication activities are among the entities’ aims and objectives.  While it is not clear whether newsletters would be covered under this framing of the Amendment,  a literal interpretation would restrict publishing of newsletters only if that were one of the main activities of the entity.  Our understanding is that publishing newsletters that only report periodic activities of the organisation and not predominantly involved in shaping policy narrative and discourse would not constitute “publication-related activities”.  I am a non-profit organisation mostly carrying out implementation work using FCRA funding.  After completing my projects, I generally submit a report to the foreign funder about objectives completed.  Post approval, I have been publishing these reports to benefit others working in the same sector, can I continue doing that? It remains unclear whether occasional publishing triggers the requirement, since it would not even fall under the definition of publication as defined under the Press and Registration of Periodicals Act, 2023. Our understanding is that publishing a report that only records activities of the organisation and does not influence policy discourse should not face difficulties. Until clarified by FAQs or advisory notes, the prudent approach is to interpret the rule literally and comply if publishing is regular or institutionalised part of your affairs.If you are an FCRA applicant and publishing is only incidental to your work, then we recommend pausing publications till there is further clarity from the MHA.  If you already have an FCRA registration and have carried out publications already – please seek an undertaking from the Chief Functionary when applying for a renewal.  How are universities impacted by this Amendment? Most universities carry out research and have the publication of their studies as part of their aims and objects.  Universities will definitely be required to submit an undertaking when applying for their FCRA registrations or renewal with respect to their publications. Given that universities frequently partner with international donors and publish collaborative research, institutions should consider developing internal protocols for disclosure and neutrality review.  Universities may benefit if they can show how foreign funding is disbursed in a manner where their research and studies remain neutral and impartial. I am an NGO who was about to apply for FCRA prior permission.  How does this Amendment affect my application and potential funder? The Amendment has made the process for obtaining prior permission more extensive.  The authorities now additionally require a) commitment letter from the donor; b) a project report with detailed break-up of proposed expenses; c) a letter from the chief functionary; and d) undertaking to adhere to the Good Practice Guidelines of the FATF.While these documentary requirements are more comprehensive, there is no substantive crackdown on obtaining prior permissions.  The documentary requirements may, in fact, raise more comfort with the funders as well.  Please inform your potential funder about the requirement of the commitment letter where the funds and objectives stated match the actual disbursement and project report.  Please also be mindful of the publication related advisory above when applying for prior permission with FCRA.      Disclaimer:   This note is intended for informational purposes only and is based on our interpretation of the Foreign Contribution (Regulation) Amendment Rules, 2025, along with our experience advising non-profit organisations. This note does not constitute a legal opinion or legal advice. Applicability of the Amendment may vary depending on the specific facts, nature of activities, and objectives of each organisation. We recommend seeking tailored legal guidance prior to acting on any information contained herein. If you have questions or require further clarification, please feel free to reach out to our team at [ hello@pacta.in ] .

The Delhi High Court in a judgment delivered on April 24, 2025, has clarified that a charitable trust’s entitlement to tax exemptions under Sections 11 and 12 of the Income Tax Act, 1961, is not jeopardized merely because it makes reasonable payments to related parties for services rendered. The judgment rendered by court in Commissioner of Income Tax Exemption, Delhi v. IILM Foundation (ITA 179/2023) provides important guidance on the interpretation of Section 13 of the Act, which governs the conditions under which exemptions can be denied to charitable institutions.    Background of the Case  The dispute arose between IILM Foundation, a registered charitable trust engaged in educational activities, and the concerned Revenue authorities. The Director of Income Tax (Exemptions) had cancelled the trust’s registration under Sections 11 and 12 of the Income Tax Act, citing payments made to Malvika Rai, the Chairperson of the aforementioned trust.  The Department argued that these payments constituted a violation of Section 13(1)(c) read with Section 13(3 of the Income Tax Act, which prohibits trusts from allowing income or property to be used for the benefit of specified related parties. Although the Income Tax Appellate Tribunal (ITAT) ruled in favor of the trust, the Revenue Department then challenged this decision before the DHC.    Legal Issues  The central issue before the Court was whether reasonable payments made by a charitable trust to a person falling within the ambit of Section 13(3) — a ‘prohibited person’ — for bona fide services could nonetheless lead to forfeiture of tax exemptions under Sections 11 and 12. Section 13(2)(c) of the Income Tax Act provides that payments to related parties are not automatically treated as benefits unless they are made ‘in excess of what may be reasonably paid for such services.’ Thus, the dispute hinged on whether the payments made were reasonable and justified.  Key Findings of the Court  1. Interpretation of Section 13(2)(c):  The Court held that Section 13(2)(c) permits charitable trusts to compensate related parties for services rendered, provided that the payments are reasonable. Only payments that are excessive in relation to the value of services would attract the prohibitions under Section 13(1)(c).  2. Reasonableness of Payments:  The Court examined the evidence presented by the IILM Foundation and found that the payments made to Malvika Rai were commensurate with the services she had provided. It was not a case of siphoning trust funds for personal enrichment, but of bona fide compensation for actual work performed.  3. Mere Existence of Related Party Transactions Not Sufficient:  The Court emphasized that the mere fact that a related party has been paid does not automatically lead to denial of exemptions. The critical test is whether the payment is excessive. In this case, the Court found no evidence of unreasonableness or improper benefit.  4. Validation of ITAT’s Findings:  The Court upheld the ITAT’s conclusion that the cancellation of the trust’s registration was unwarranted. It noted that the Income Tax Department had failed to establish that the payments were excessive or unjustified.  Implications for Non-Profit Organizations  This judgment has significant implications for charitable trusts and non-profit organizations operating under the regulatory framework of the Income Tax Act:  1. Related Party Transactions Permitted Within Limits:  Charitable trusts can engage individuals or entities related to the trust for professional services without fear of losing tax exemptions, provided that payments are reasonable, properly documented, and reflective of the value of services rendered.​ 2. Need for Documentation and Transparency:  Non-profits must maintain detailed records substantiating the nature of services, the necessity of engaging related parties, and the basis for determining remuneration. Transparency is key to defending such transactions if scrutinized by tax authorities.  3. Clarification relating to Section 13:  The ruling affirms that the involvement of a ‘prohibited person’ under Section 13(3) is not per se a ground for denial of exemptions. Only transactions resulting in excessive payments or unjustified benefits will attract disqualification.  Conclusion  This decision highlights the balanced approach to regulating non-profits. It protects the integrity of charitable purposes by guarding against misuse of trust income while also recognizing the practical necessity of engaging capable individuals, even if they are related parties. However, charitable organizations must exercise due diligence in structuring such engagements, ensuring that compensation is fair, reasonable, and properly documented. This ruling reaffirms that compliance with tax exemption conditions hinges on avoiding related party transactions and maintaining reasonableness, transparency, and fidelity to charitable objectives.​

The Supreme Court of India, in a judgment delivered on April 2, 2025, has affirmed the entitlement of employees to receive bonus payments under the Payment of Bonus Act, 1965 (the “ Bonus Act ”), even when employed by charitable trusts involved in commercial manufacturing activities. The Court's decision in Worth Trust v. Govt. of Tamil Nadu & Ors. (2025)  clarifies that the charitable nature of an organization does not exempt it from compliance with labor welfare legislation when its operations fall within the purview of commercial manufacturing.   Background of the Case Worth Trust, a charitable organization based in Vellore, Tamil Nadu, was established to provide vocational training and employment to individuals cured of leprosy and persons with disabilities. Over time, the Trust expanded its activities to include the operation of production units manufacturing industrial goods, generating surplus income. The Trust maintained that this income was reinvested into its charitable endeavors.   In 1987, employees of the Trust filed a complaint seeking statutory bonus payments under the Bonus Act for the years 1984 to 1987. The Trust argued that it was exempt from such payments under Section 32(v)(a) of the Act, as it was a non-profit charitable institution originally established with the Swedish Red Cross. The Trust also cited its practice of making voluntary ex-gratia payments to its employees.   The Assistant Commissioner of Labour ruled in favor of the employees, determining that the Trust's industrial operations constituted systematic commercial activity, thereby attracting the provisions of the Bonus Act. This decision was upheld by the Madras High Court and subsequently by the Supreme Court in 2009. The Supreme Court, in its earlier ruling, affirmed that the Trust was not entitled to exemption under the Act and was obligated to pay statutory bonuses, emphasizing that charitable status does not override labor law obligations when an organization engages in commercial production.   Key Findings of the Supreme Court (2025) In its recent judgment, the Supreme Court reiterated and elaborated upon these principles, providing further clarity for non-profit organizations:   Applicability of the Bonus Act to Charitable Trusts : The Supreme Court unequivocally affirmed that the Payment of Bonus Act, 1965, applies to all factories, as defined under Section 1(3)(a) of the Act, regardless of whether they are operated by charitable or non-profit trusts. The Court emphasized that the categorization of an establishment as a “factory” under the Factories Act, coupled with its engagement in manufacturing activities, necessitates compliance with the Bonus Act. The nature of ownership, whether charitable or otherwise, is immaterial to this determination.   Nature of Activities and Commercial Character of the Trust : While acknowledging Worth Trust's initial establishment as a charitable organization focused on rehabilitation, the Court observed that the Trust had, since 1985, engaged in commercial manufacturing activities, including the production of automobile and industrial machine parts. These activities generated a surplus, establishing the Trust as a commercially operational factory subject to the provisions of the Bonus Act. The Court also noted the Trust's severance of ties with the Swedish Red Cross Society in 1989.   Entitlement of Workmen to Statutory Bonus : The Court held that the individuals employed by the Trust fall within the definitions of “employee” and “workman” under the Factories Act and the Bonus Act. Consequently, they are entitled to receive statutory bonus payments, as mandated by Sections 10 and 11 of the Bonus Act, which prescribe minimum and maximum bonus thresholds. This entitlement exists irrespective of the Trust's charitable origins, as the employees function within a regular employer-employee relationship in an industrial context.   Rejection of Exemption Under Section 32(v)(a) : The Court rejected the Trust’s contention that it was exempt under Section 32(v)(a) of the Bonus Act, which excludes institutions such as the Indian Red Cross Society. The Court found that the Trust lacked the requisite legal or institutional connection to the Indian Red Cross Society and could not be classified as an institution of a similar nature. The Court emphasized the statutory establishment and distinct public character of the Indian Red Cross Society.   Rejection of Exemption Under Section 32(v)(c) : The Court also denied the Trust’s claim for exemption under Section 32(v)(c) of the Act, which applies to institutions “not established for purposes of profit.” The Court determined that the Trust, by virtue of its sustained engagement in commercial manufacturing and profit-generating activities since 1985, did not meet the criteria for such an exemption. The Court affirmed that the Trust's continued charitable work does not negate its identity as an industrial and profit-generating entity.   Ex-Gratia Payments are Not a Substitute for Statutory Bonus:  The Trust argued that its voluntary ex-gratia payments to employees should be considered as a basis for avoiding bonus payments. The Court categorically rejected this argument, asserting that bonus is a statutory right, distinct from voluntary or charitable payments. While ex-gratia payments may be adjusted against statutory bonus obligations, they cannot substitute for or be used to evade these legal obligations.   Final Directions and Dismissal of Appeal:  The Supreme Court upheld the Tribunal’s award of a minimum 8.33% bonus, along with the High Court’s modification permitting the adjustment of previously paid ex-gratia amounts. The Court dismissed the Trust’s appeal and directed it to pay the bonus from the year 1996–97 onwards, ensuring compliance with the Bonus Act within one month of the judgment.     Implications for Non-Profit Organizations This judgment has significant implications for charitable trusts and non-profit organizations that engage in commercial activities. Section 11(4A) of the Income Tax Act, 1961, permits charitable trusts to conduct businesses, provided that the business is incidental to the trust’s objectives and separate books of account are maintained. While profit-making is permissible, profit motive is not, and all income must be applied exclusively towards the trust’s charitable purposes.   The Supreme Court’s ruling reinforces the following principles for such organizations:   Non-Profit Status ≠ Exemption from Labor Laws:  The Court has clarified that the status of a charitable trust or non-profit organization does not automatically exempt it from compliance with the Bonus Act. If such an organization operates factories or commercial ventures, it is subject to the same labor law obligations as any other industrial establishment, particularly when profits or surplus are generated, even if these are utilized for charitable purposes.   Commercial Activities Impose Statutory Obligations:  When a non-profit organization engages in manufacturing, trading, or any profit-generating activity, even if incidental to its charitable work, it is required to comply with all applicable statutes, including the Factories Act, the Employees Provident Fund Act, the Employees' State Insurance Act, and the Bonus Act. The Court's decision to apply the Bonus Act was primarily based on the nature of the work (factory-based production) and the generation of surplus income from such activities.   Restrictive Interpretation of Section 32(v)(a):  The exemption provided under Section 32(v)(a) of the Bonus Act, which applies to the Indian Red Cross Society and similar institutions, has been interpreted narrowly. The Court held that Worth Trust could not claim exemption under this provision merely due to its historical association with the Swedish Red Cross or its engagement in welfare activities. To qualify for exemption under this clause, an institution must be statutorily established and centrally governed, akin to the Indian Red Cross Society.   Rejection of Exemption Under Section 32(v)(c):  The Court also rejected claims for exemption under Section 32(v)(c), which pertains to institutions “not established for the purpose of profit.” The Court stated that once a non-profit organization undertakes sustained commercial operations through factories that generate income, it cannot invoke this clause to avoid its statutory obligations to employees. Charitable intent alone is insufficient if the operational execution involves commercial activities. Recognition of Workers’ Rights in Hybrid Structures : The judgment reaffirms that the statutory rights of workers, such as the right to a minimum bonus, cannot be denied solely because they are employed by a charitable trust. The Court emphasized that even employees who are rehabilitated individuals or persons with disabilities, when employed by a welfare-oriented organization, are considered workers under the law and are entitled to the same benefits as any other employee in a factory setting.   Impact on Similar Institutions Engaged in Vocational Rehabilitation:  Organizations involved in rehabilitation and skill training through production units or commercial activities, such as those working with disabled persons, individuals cured of leprosy, or marginalized communities, must now re-examine their compliance frameworks. If these activities are factory-based or profit-generating, the organization is obligated to compute and disburse bonuses in accordance with the Act, and cannot rely solely on discretionary ex-gratia payments.   Conclusion This judgment serves as a crucial reminder to the non-profit sector, particularly those organizations with income-generating verticals. Non-governmental organizations that operate production units, workshops, or service delivery businesses under their charitable umbrella must ensure that they comply with all applicable labor regulations. Reliance solely on charitable objectives or the reinvestment of surplus into social programs will not suffice as a defense in cases involving commercial-scale operations. This ruling underscore the principle that charitable organizations cannot evade statutory liabilities once they engage in commercial enterprise.

The    Centre    has    warned    non-profit    organizations    against    receiving    foreign  funds    due    to various    raids    and    closedowns.   In March 2025 there were news-reports of raids on non-profit organizations for non-compliances under the FEMA including foundations linked  to  George Soros and 12  offices linked to  Social Democratic  Party of India. This edition provides an overview of the Foreign Exchange Management Act, 1999 (FEMA) - compliances and safeguards under the FEMA for Indian non-profit institutions.    Scope of FEMA Law  The Foreign Exchange Management Act (FEMA) regulates foreign exchange transactions in India, covering trade, investments, remittances, and currency conversions. It aims to facilitate external trade, promote orderly foreign exchange markets, and ensure smooth capital flows. FEMA provides a framework for foreign investments and financial transactions while preventing unauthorized dealings. It allows automatic and government approval routes for foreign direct investment (FDI) and enforces compliance through penalties for violations. The Reserve Bank of India (RBI) oversees its implementation, ensuring stability in India’s foreign exchange market.   How is FEMA different from Foreign Contribution (Regulation) Act (FCRA)?  FCRA falls under the purview of the Ministry of Home Affairs (MHA) and governs the acceptance and utilization of foreign contributions and hospitality by individuals, associations, and non-profit organizations in India. The main objective of FCRA is to ensure that foreign contributions and hospitality received by entities or individuals are utilized for legitimate and authorized purposes.  The law defines foreign contribution as any donation, transfer, or income received from foreign sources, excluding payments for goods or services which is an amount over INR 25,000.  A non-profit entity would require an FCRA registration to be eligible to receive foreign contributions. To obtain and maintain registration under the FCRA, non-profit organizations must meet strict criteria, including, annual reporting, and a minimum of three years of active charitable activities.    Non-profit Compliances on Receiving Funds from a Foreign Source under a Service Agreement   FEMA regulates the acceptance and utilization of foreign remittances to non-profits including by way of service agreements. A non-profit can receive service fees from, subject to compliance with FEMA. As per FEMA mandate, a non-profit receiving foreign funds under service agreements should:  open a current account for the foreign currency inward remittances limit the remittances USD 1,000,000 per project for consultancy services. [Schedule III Clause 2 (iii) of Foreign Exchange Management (Current Account Transactions) Rules, 2000 states that remittances exceeding USD 1,000,000 per project for consultancy services shall require prior approval of the Reserve Bank of India] Additionally, non-profit organizations receiving foreign funds under service agreement must: Check that the activities for which the funds are received are permitted under the objects clause of the trust deed or memorandum of association Ensure that the agreement under which the funds are received are not styled as a “grant agreement” but in fact received as a consideration for specific services under a “services agreement” Determine the income tax treatment for such sums received prior to receiving the money Determine GST applicability for the transaction prior to receiving the money (GST will not apply only if there is an export of services) Foreign remittances received under FEMA must comply broadly with the purpose they are received for.    Non-compliances under FEMA   Non-compliance under FEMA can lead to various complications and penalties including financial   penalties such as:  Confiscation of the amount involved to the Central Government;  A penalty up to thrice the sum involved in such contravention where such amount is quantifiable; or  Up to two lakh rupees where the amount is not quantifiable; and  Where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues.  In addition to financial penalties, non-profit organizations may also receive a Show Cause Notice from the Enforcement Directorate which may lead to further investigation into the organization’s foreign transactions.  As a result of this, the non-profit organization will suffer:  Operational Disruption: Organizations may be forced to cease operations temporarily or permanently if they lose essential licenses or permits. They will also have to spend considerable time to deal with show cause notices and investigations.  Loss of Donor Trust  and Funding: Non-compliance with FEMA can damage the non-profit organization’s credibility, leading to loss of foreign donors and disqualification from grants.  Difficulties in Receiving Future Foreign Funds: RBI and the MHA may restrict the organization from receiving foreign contributions, making international fundraising impossible.  Regulatory Scrutiny and Delays: Non-compliant organizations face increased scrutiny in approvals, delays in fund transfers, and operational disruptions due to government monitoring.  Increased Costs: Regulatory scrutiny can increase compliance costs and administrative burdens.  Disclaimer: This article provides a general overview of FEMA compliances for non-profit organizations receiving foreign funds under service contracts and is intended for informational purposes only. It does not constitute legal advice. Organizations should consult with qualified legal and financial professionals to obtain advice tailored to their specific circumstances.

The Karnataka High Court, Bengaluru, recently delivered a significant judgment in the case of Jamnalal Bajaj Seva Trust v/s The State of Karnataka , dated February 3, 2025, addressing the contentious issue of land acquisition for a public purpose, even when it involves land owned by a charitable trust. The ruling offers crucial insights for non-profit organizations regarding their land holdings and interactions with governmental bodies on matters of acquisition. Background: The case revolved around the Agricultural Produce Marketing Committee's (APMC) plan to establish a Mega Market, necessitating the acquisition of land owned by the Jamnalal Bajaj Seva Trust. The acquisition process, initiated as far back as 1994, faced several legal challenges, primarily concerning delays, the invocation of the urgency clause, and allegations of project abandonment. Key Findings of the Karnataka High Court: Hon'ble Justice Krishna S. Dixit ultimately dismissed the Trust's petitions, upholding the validity of the land acquisition. The court's reasoning touched upon several critical aspects relevant to the non-profit sector: Broad Interpretation of "Public Purpose" : The court reiterated the wide scope of "public purpose," affirming that acquiring land for agriculture-related infrastructure like a Mega Market falls under this definition. This signals that even land held by charitable organizations can be acquired for projects deemed beneficial to the larger community. Justification of Urgency Clause : The invocation of the urgency clause under Section 17 of the Land Acquisition Act, 1894, was deemed justified based on governmental deliberations. This highlights the power of the state to expedite acquisition processes under certain circumstances, potentially limiting the avenues for non-profits to contest. Impact of Participation in Compensation Discussions : A significant point was the court's observation that the Trust's participation in compensation negotiations implied acceptance of the acquisition. This serves as a cautionary note for non-profits: engaging in discussions about compensation without explicitly reserving their right to challenge the acquisition itself could be interpreted as acquiescence. Deference to Executive Decisions : The judgment reflects a degree of judicial deference to the government's assessment of public need and the decision to invoke urgency. This underscores the challenges non-profits might face when legally contesting land acquisition. Importance of Statutory Timelines (with caveats) : While the Trust argued a lapse due to delays, the court excluded litigation-related periods, ultimately finding that statutory timelines were met. This emphasizes the need for non-profits to be aware of and adhere to legal timelines, while also understanding how legal challenges can impact these timelines. Compensation and Interest : The court directed the APMC to pay the agreed-upon compensation along with a significant 12% annual interest due to the prolonged litigation and rising property prices. This aspect offers some relief regarding fair compensation, especially in cases of extended legal battles. Why This Matters for Non-Profits: This case carries important lessons for non-profit organizations in Karnataka and potentially across India: No Immunity for Land Ownership : Non-profits, even those with charitable objectives, are not exempt from the state's power of eminent domain. Their land can be acquired for projects deemed to serve a public purpose. Understand Your Rights and the Law : It is crucial for non-profits to be well-versed in the land acquisition laws applicable in their region, including the definition of public purpose, provisions for urgency clauses, and procedures for compensation. Be Strategic in Negotiations : While engaging in discussions about compensation is important, non-profits must be careful not to inadvertently concede to the acquisition itself. Clearly articulating their stance and reserving their rights is essential. Assess the Viability of Legal Challenges : Given the potential for judicial deference to executive decisions, non-profits need to carefully evaluate the merits and costs of pursuing legal challenges against land acquisition. Focus on Fair Compensation : Even if the acquisition is deemed valid, non-profits have a right to fair compensation. They should actively engage in the valuation process and, if necessary, seek legal recourse to ensure just compensation, as highlighted by the interest directive in this case. Conclusion: The Jamnalal Bajaj Seva Trust case serves as a stark reminder of the realities of land acquisition in India. For the non-profit sector, it underscores the need for vigilance, legal awareness, and strategic engagement when faced with the possibility of their land being acquired for public purposes. While the court upheld the state's authority in this instance, the judgment also highlights the importance of fair compensation and due process, which non-profits can and should advocate for. Disclaimer: This article provides a general overview of the case and its implications for the non-profit sector and should not be considered legal advice. Organizations facing land acquisition should consult with legal professionals for specific guidance.

The constitutional validity of the Foreign Contribution (Regulation) Amendment Act, 2020 (FCRA Amendment) was challenged before the Supreme Court in a recent case in Noel Harper Vs. Union of India . [1] Sections 7,12 (1A), 12A and 17 (1) of the FCRA Amendment were challenged on the ground that these provisions are arbitrary, unreasonable and in violation of the fundamental rights provided under Articles 14, 19 and 21 of the Indian Constitution. Noel Harper, the chairperson of the Andhra Pradesh-based Care & Share Charitable Trust and the trustees of three other NGOs challenged the FCRA Amendment on the following grounds: a) It bars even registered recipients of foreign contributions from transferring funds t other persons or organisations irrespective of the registration status of the transferee. b) It mandates receiving funds only with a designated branch of State Bank of India, New Delhi, with compulsory quoting of Aadhaar Number of all its office bearers. After hearing both sides, the Apex Court held that mere plea of inconvenience is not enough to assail constitutional validity of legislation and upheld the FCRA Amendment. Key findings of the court in this regard are : Receiving foreign donations cannot be an “absolute or even a vested right”. The intention of the FCRA Amendment was to ensure effective regulatory measures regarding inflow and utilisation of foreign funds. Bar on ‘transfer’ within Section 7 of FCRA Amendment refers to simple transfers by the recipient of the foreign contributions to third parties who are not engaged in the former’s cultural, social, educational, and social programmes. The Parliament in order to eradicate the misuse and abuse of foreign contribution vide the FCRA  Amendment adopted a path of moderation by making it mandatory for all to accept foreign contribution only through one channel and to utilise the same “itself” for the purposes for which permission has been accorded. The rationale behind quoting of Aadhaar number in the application was merely to identify the key functionaries of the registered association and to make them accountable for violations, if any. Court further read down Section 12A of the FCRA Amendment and permitted the key functionaries or office bearers of the associations/NGOs, who are Indian nationals, to produce Indian passports for the purpose of their identification. Apex Court upheld the requirement under Section 17 of FCRA Amendment which provided for opening the FCRA account at the Sansad Marg branch of the State Bank of India in New Delhi by the persons seeking FCRA registration and recipients of foreign contributions. The Court in this regard observed that opening a bank account in SBI is a one-time exercise and it can be further operated online on real-time basis without the need for physical presence of the account holder or its officials. Impact of the Supreme Court ruling on Indian Social Sector   The Supreme Court has to a certain extent brought some clarity regarding the transfer restrictions placed under Section 7 of the FCRA Amendment. If the recipient of foreign contribution engages services of third party or outsources its activities to a third person, whilst undertaking definite activities itself and had to pay therefor, it would be a case of utilisation and the transfer restrictions under Section 7 will not be applicable in such cases. This should bring some relief to the Indian Social Sector.