Contract management for nonprofits and foundations in India

What contracts does a foundation actually run?

A commercial legal team spends most of its time on customer and supplier contracts. A foundation's contract estate looks different, and software built for sales pipelines fits it badly. The categories that turn up in almost every Indian foundation or large NGO are:

• Grant agreements, in both directions: money coming in from donors, foundations and multilateral bodies, and money going out to grantees, each with reporting, utilisation and refund clauses.
• MoUs and implementing-partner agreements, where another organisation delivers a programme on the ground.
• CSR agreements with companies that are spending their obligation under section 135 of the Companies Act, 2013 through the foundation.
• Consultant, fellow and short-term expert agreements, often high in volume and low in value.
• Vendor contracts and statements of work: events, research agencies, technology, travel, printing.
• Data-sharing agreements with government departments, researchers and partners, increasingly shaped by the Digital Personal Data Protection Act, 2023.

Why do approval chains look different in a nonprofit?

In a company, approvals mostly follow value. In a foundation they follow value and source of funds and programme. The same Rs 5 lakh consultant agreement may need a programme head, finance and legal if it is charged to a foreign-funded grant, and only a programme head if it is charged to unrestricted domestic funds. Large grants and partnerships may need a trustee or board resolution, which meets on its own calendar.

The failure mode is predictable. Every contract is pushed through the heaviest path because nobody can tell quickly which path applies, so low-value agreements queue behind board items for weeks. The fix is not fewer controls. It is routing on the facts that actually matter, such as contract type, value band, funding source and programme, and a deliberately short signing path for low-risk, low-value paper.

Where does FCRA reach into contracts?

For an organisation registered under the Foreign Contribution (Regulation) Act, 2010, three provisions as amended in 2020 shape what its contracts can say.

• Section 17 requires foreign contribution to be received only in an account designated as the "FCRA Account" at the branch of State Bank of India at New Delhi notified by the Central Government, which is the New Delhi Main Branch. Donor agreements must name that account for receipt. Utilisation accounts at other banks can be opened, but receipt cannot be redirected.
• Section 7, as substituted in 2020, provides that a person registered or holding prior permission who receives foreign contribution shall not transfer it to any other person. A foreign-funded grant cannot simply be sub-granted to an implementing partner, so partner agreements funded from foreign contribution need structuring with advice.
• Section 8(1), as amended in 2020, caps administrative expenses at twenty per cent of the foreign contribution received in a financial year, down from fifty per cent. Overhead and management-fee clauses in donor agreements have to fit inside that cap.

What changed with the FCRA Amendment Rules, 2026?

The Ministry of Home Affairs notified the Foreign Contribution (Regulation) Amendment Rules, 2026 on 22 June 2026, in force the same day. They change the Foreign Contribution (Regulation) Rules, 2011 rather than the Act, but several of the changes land directly in grant and partner agreements.

• Registered purposes and geography. A registration certificate now states the approved purposes, chosen from a prescribed schedule, and the States or Union Territories in which the association may work. Organisations already registered must furnish these details in Form FC-6F within one year, that is by 21 June 2027. A donor agreement that funds an activity or a location outside the registration is now a visible mismatch, so the funded activities and locations should be written into the agreement and checked against the certificate before signing.
• Prior-permission instalments. Where foreign contribution received under prior permission rather than registration exceeds Rs 1 crore, the Central Government may release it in instalments, and the second and later instalments are released only after at least seventy-five per cent of the previous instalment has been used, supported by an application in Form FC-3BB, a chartered accountant's utilisation certificate and a field inquiry. Tranche schedules in donor agreements should allow for that gap rather than assume the next instalment arrives on a fixed date.
• Reasonable activity. An association is treated as having undertaken reasonable activity if it has used at least Rs 10 lakh of foreign contribution for its approved objectives over the preceding two financial years. Very small or dormant foreign-funded programmes are worth tracking against that figure.
• Reporting. The annual return in Form FC-4 now asks for a detailed activity report and a project-wise breakdown of how foreign contribution was used, including assets and administrative expenses. Grant budgets and partner reports should be coded the same way from the start, or the return becomes a reconstruction exercise.
• Key functionaries. A new definition of key functionary covers directors, trustees, office bearers and others responsible for managing the association, and associations with foreign nationals (other than persons of Indian origin or Overseas Citizens of India) as key functionaries are ordinarily not eligible. Donor agreements that give a foreign funder board seats or management control should be reviewed against that definition.

Is more change coming?

Yes. A separate Foreign Contribution (Regulation) Amendment Bill, 2026, which would amend the Act itself, was referred by the Lok Sabha to a Joint Parliamentary Committee on 12 August 2026 and was pending before that committee as of October 2026. Until it is passed and notified, the Act as amended in 2020 and the Rules as amended in June 2026 apply. Check whether sections 7, 8 or 17 have changed before relying on the summary above, and keep template clauses that cite FCRA provisions under review.

What does that mean in practice for grant agreements?

Each foreign-funded agreement should be tagged as such in the contract register, along with the receiving account and the budget lines for programme and administrative costs. That tag is what lets finance trace a payment back to its source when the annual return is prepared. FCRA-registered organisations file Form FC-4 on the FCRA portal, covering foreign contribution received and used in the financial year, and the filing falls due by 31 December following the year end. Since the June 2026 amendment the return also carries an activity report and a project-wise breakdown of use, so the contract register should hold the project or grant code for every agreement charged to foreign contribution.

The section 7 question deserves particular care. Payments for goods and services bought for the organisation's own activities are generally treated differently from passing funds on to another organisation to spend, but where that line falls is fact-specific and has been the subject of litigation. Get the structure of each partner relationship reviewed before the agreement is signed, not after the money moves.

Where do the CSR Rules reach into contracts?

A company spending its CSR obligation through a foundation is bound by the Companies (Corporate Social Responsibility Policy) Rules, 2014, as substantially amended on 22 January 2021. Two parts of rule 4 shape the agreement between the company and the foundation.

• Registration. From 1 April 2021, every implementing entity covered by rule 4(1), such as a section 8 company, a registered public trust or a registered society, that intends to undertake CSR activity must register with the Central Government by filing Form CSR-1 electronically, and is issued a CSR Registration Number. A company spending its CSR directly does not file CSR-1 for itself, but it will ask the foundation for its number before signing, and the number belongs in the agreement and in the counterparty record.
• Certification of use. The company's Board must satisfy itself that CSR funds were used for the purposes and in the manner it approved, and its Chief Financial Officer, or the person responsible for financial management, must certify to that effect. In practice the company pushes that burden down the contract: utilisation certificates, fund-wise accounts, field reports and audit access, on fixed dates.

Why do reporting obligations matter more than signatures?

A grant or CSR agreement is signed once and reported on many times. Utilisation certificates, quarterly narratives, audited statements, asset registers and refund of unspent balances are all dated obligations owed to a counterparty with the power to stop the next tranche.

These obligations usually live in a clause schedule that nobody reads after signature. They should be lifted out of the agreement into a register of tasks with owners and due dates, one per obligation, so that a missed utilisation certificate is visible weeks before it delays a tranche rather than after.

What about income-tax registration?

The Income-tax Act, 2025 came into force on 1 April 2026, replacing the Income-tax Act, 1961. The registration of charitable trusts and institutions, and the approval that lets donors claim a deduction, previously under sections 12A/12AB and 80G, now sit under renumbered provisions of the new Act. Donor and CSR counterparties routinely ask for these registrations. Keep the current certificates, their validity dates and the new section references in the organisation's own record, and update template clauses and annexures that still cite the 1961 Act sections.

What should a foundation's contract register hold?

Beyond the usual counterparty, value and dates, the fields that matter in a nonprofit are the ones that answer a regulator, an auditor or a donor quickly:

• Funding source: foreign contribution, CSR, domestic grant or unrestricted funds.
• Programme and grant code, so every outgoing agreement can be traced to the incoming agreement that funds it.
• Counterparty registrations: FCRA status, CSR Registration Number, income-tax registration, each with an expiry date.
• Reporting and utilisation obligations, broken out as dated tasks with owners.
• Approval path taken, including any trustee or board resolution reference.
• Personal-data flag for agreements that share beneficiary data with partners or researchers.