Diaspora Philanthropy: FCRA Rules, Zakat and Village Funds in 2026

Uttarsanda, a village of about 12,000 people in Gujarat's Kheda district, has a modern bus stand, upgraded classrooms with projectors and CCTV, a beautified pond and new crematoriums. Most of it was paid for by people who no longer live there. Under the state's Vatan Prem scheme, emigrant families have put roughly Rs 9 crore into the village, including Rs 40 lakh from one donor for a crematorium. Drive an hour in almost any direction in central Gujarat, coastal Kerala or Punjab's Doaba belt and you will find the same pattern: a diaspora that sends money home not only to relatives but to the place itself.

Diaspora philanthropy is large, fast-growing and badly measured. It also runs into one of India's most tightly policed laws, the Foreign Contribution (Regulation) Act. This piece sets out what the data does show, how the main giving channels work, and why the same Rs 5 lakh gift can be routine or regulated depending on which passport the giver holds.

How big is diaspora giving?

No official series tracks diaspora donations to India. The best estimates come from the diaspora's largest and richest branch. A 2025 study by Dalberg for Indiaspora estimated that Indian Americans gave $4-5 billion in 2024, nearly triple the 2018 baseline, and that the gap between their giving potential and actual giving had narrowed from $2-3 billion to about $1 billion. The same report projects a $2 trillion intergenerational wealth transfer within the community over twenty years. Note that this is total giving, much of it to US causes such as universities; the study does not split out what goes to India.

For scale, Bain's India Philanthropy Report 2026 puts all private philanthropy inside India at Rs 1.43 lakh crore, or about $16 billion, in FY25, with families contributing about 42% through personal giving and family-business CSR. Bain projects private giving to grow 9-11% a year to FY30, well short of the 25%-plus it says would be needed to stop the social-sector funding gap from widening. It also flags the diaspora, which it puts at about 34 million people, as an under-tapped source of money, time and expertise.

Put those numbers next to India's $135.46 billion in annual remittances and the picture is clear: formal philanthropy is a thin slice of what the diaspora sends. A lot of giving is informal, routed through relatives, temple and mosque committees, alumni groups and caste or village associations, and appears in the statistics as family maintenance. Our analysis of what remittances pay for shows how blurred that line is.

The passport test at the heart of FCRA

The single most misunderstood rule in diaspora giving is that FCRA turns on citizenship, not residence. An Indian citizen living in Dallas or Dubai is generally not a "foreign source" under Section 2(1)(j) of the Act, so a donation from that person to an Indian charity is ordinarily treated as domestic money. A person of Indian origin who holds a US, UK or Canadian passport, including an OCI cardholder, can be a foreign source, and the same gift becomes a foreign contribution under Section 2(1)(h), even if it is paid from an NRO account in India.

That matters because only organisations with FCRA registration or prior government permission may accept foreign contributions, and the rules for those that do were tightened sharply in 2020. Under the current framework, as summarised in this guide to FCRA as amended up to June 2026:

• All foreign contributions must first land in a designated FCRA account at the State Bank of India's designated FCRA main branch.
• Administrative expenses are capped at 20% of foreign contributions, down from 50% before 2020.
• Foreign contributions cannot be passed on to another NGO; the penalty is Rs 1 lakh or 10% of the amount, whichever is higher.
• Registration lasts five years and requires a track record of at least three years and at least Rs 15 lakh of programme spending.
• Gifts from relatives abroad do not need FCRA registration, but if they exceed Rs 10 lakh in a financial year the recipient must file an intimation within three months.

Enforcement has been heavy. The Home Ministry has cancelled or refused renewal for more than 16,000 NGOs since 2020, according to data tabled in Parliament, and an FCRA Amendment Bill, 2026 is pending. Many small village trusts have simply stopped accepting money from foreign-citizen donors because compliance is not worth it.

In diaspora giving, the passport matters more than the postcode. Two siblings can send the same cheque to the same school and trigger two different legal regimes.

Channels compared

Matching schemes: Gujarat's Vatan Prem model

Gujarat launched the Vatan Prem Yojana on 7 August 2021, replacing an earlier 50:50 scheme. Non-resident Gujaratis contribute 60% of the cost of a village project and the state pays the remaining 40%, across a menu that includes smart classrooms, libraries, primary health centres, anganwadis, CCTV, drainage, sewage treatment, bus stands and solar street lights. The governing body proposed works worth Rs 1,000 crore at launch. Reporting from Kheda district shows what it looks like on the ground: Rs 72 lakh from emigrants for a new school serving nearly 400 children in Khadal, and the Rs 9 crore package in Uttarsanda.

The appeal for donors is leverage and accountability. The state's share stretches each rupee, and the asset is built through public works procedures rather than by an unknown local committee. The trade-off is speed and control: government execution can be slow, and donors cannot choose contractors. We think more states with large emigrant populations should copy the model, with published project-level dashboards so donors can see delivery, not just announcements.

Worked example: two siblings, one village school

Consider two siblings in New Jersey whose parents came from a Kheda village. Anjali still holds an Indian passport. Her brother Rohit is a US citizen with an OCI card. Each wants to give Rs 5 lakh to upgrade the village school.

1. Through a private village trust. Anjali's Rs 5 lakh is ordinarily domestic money; the trust issues a receipt and spends it. Rohit's Rs 5 lakh is a foreign contribution. If the trust lacks FCRA registration, it cannot accept it. If it has registration, the money must arrive in the trust's SBI designated main-branch FCRA account, no more than Rs 1 lakh of it may go on administration, and none can be passed to the school's own management committee if that is a separate entity.
2. Through the matching scheme. If the siblings pool Rs 10 lakh as the diaspora's 60% share, the project budget becomes about Rs 16.67 lakh, with the state adding roughly Rs 6.67 lakh. That is two-thirds more school for the same money, delivered through public works.
3. Through their mother in India. If both siblings send money to their mother, who then donates locally, gifts from relatives below Rs 10 lakh a year need no FCRA filing. But the money legally becomes hers first, which has tax and inheritance consequences in both countries.

None of this is legal or tax advice. FCRA is enforced strictly, and both donors and recipients should confirm the current rules with a qualified adviser. Our guides to FEMA rules for NRIs and tax on money sent to India cover the adjacent questions.

Zakat, sadaqah and the Gulf corridor

For millions of Muslim workers in the Gulf, giving is a religious obligation with a fixed rate. Zakat is calculated at 2.5% of savings and assets held for a lunar year above the nisab threshold. Zakat al-Fitr, paid before Eid, is small per person but universal: the UAE Fatwa Council set it for Ramadan 2026 at AED 25 in cash or 2.5 kg of rice per person.

Much of this money is distributed locally in the Gulf, but a significant share flows home through families to madrasas, orphanages and needy relatives in Kerala, Uttar Pradesh, Bihar and Hyderabad. Institutional zakat is also scaling. UNHCR's Islamic philanthropy programme received more than $23 million in zakat in 2025, distributed in full to over 579,000 eligible refugees and displaced people across 17 countries, alongside about $16 million in sadaqah. Rules on routing zakat to Indian institutions face the same FCRA passport test when the giver is a foreign citizen. For sending mechanics on the corridor, see our guide to UAE to India money transfer.

Crowdfunding and the trust problem

Village WhatsApp groups now raise money for borewells, temple roofs, flood relief and a classmate's chemotherapy within days. That speed is the strength and the weakness. Crowdfunded appeals are hard to verify, platforms vary in how they check beneficiaries, and the same FCRA rules apply to the recipient organisation whatever app collected the money. Fake appeals during floods and medical emergencies are a known scam pattern; our guide to money transfer scams covers the warning signs.

Three habits separate effective diaspora givers from frustrated ones: they give through a registered entity with published accounts, they ask for photos and receipts tied to specific milestones, and they pool money through alumni or village associations rather than writing many small cheques. Giving circles, which Dalberg found interest 24% of next-generation donors and a third of next-generation women, formalise exactly that.

What to watch next

• Winter Session of Parliament, late 2026: whether the pending FCRA Amendment Bill, 2026 is taken up, and whether it tightens rules further for small NGOs or for OCI donors.
• 2026-27: implementation of the FCRA Rules now in force, including purpose- and state-based registration and new utilisation thresholds for renewal.
• 7-9 January 2027: Pravasi Bharatiya Divas in Kolkata, a natural venue for new state-level matching schemes modelled on Gujarat's.
• Ramadan 2027 (around February-March): the next Zakat al-Fitr rate announcements from Gulf authorities.

Our view: the diaspora's appetite to give is not the constraint. The constraints are trust in recipients, the compliance cost FCRA imposes on small organisations, and the absence of good public data. States that build transparent matching schemes, and charities that make compliance visible rather than hidden, will capture a growing share of the money. For the investment side of diaspora engagement, see diaspora bonds explained.

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