Corporate Social Responsibility Laws and Schemes

Corporate Social Responsibility (CSR) in India is a statutory obligation for specified companies under Section 135 of the Companies Act, 2013. Eligible firms must spend a prescribed portion of their profits on activities listed in Schedule VII, covering areas such as education, health, gender equality, and environmental sustainability.

Statutory Framework and Thresholds

• Applicability: CSR provisions apply to any company that, in the preceding financial year, has a net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more.
• Mandatory spending: Covered companies must spend at least 2% of the average net profits made during the three immediately preceding financial years on CSR activities.
• Permissible activities: CSR expenditure must align with Schedule VII of the Act, which includes education, healthcare, gender equality, environmental sustainability, and other notified social development areas.
• CSR governance: Companies meeting the prescribed thresholds are required to comply with statutory CSR governance and reporting norms under the Companies Act, 2013.
• Project impact assessment: It is mandatory for companies with an average CSR obligation of ₹10 crore or more over the three preceding financial years.
• Assessment cost cap: The cost of undertaking impact assessment is capped at the lower of 5% of total CSR expenditure or ₹50 lakh.

CSR Committee and Exemption Provisions

• Committee requirement: The Companies Act framework provides for a CSR Committee, though smaller companies within the prescribed limits may be allowed board-level compliance instead of a separate committee.
• Board responsibility: Where the obligation is small and the company falls within the exemption limit, the board of directors may discharge CSR responsibilities directly.
• Unspent CSR funds: Unspent amounts must be transferred to the designated Unspent CSR Account within the statutory timeline and used in accordance with the Act.

Corporate Laws (Amendment) Bill, 2026

• Introduction: The Corporate Laws (Amendment) Bill, 2026 was introduced in the Lok Sabha on March 23, 2026.
• Coverage: The Bill proposes amendments to both the Companies Act, 2013 and the Limited Liability Partnership Act, 2008.
• CSR committee threshold: It proposes to raise the net profit threshold for constituting a dedicated CSR committee from ₹5 crore to ₹10 crore.
• Committee exemption limit: The exemption limit under which a company may avoid forming a CSR committee is proposed to increase from ₹50 lakh to ₹1 crore.
• Unspent fund transfer timeline: The Bill proposes to extend the period for transferring unspent CSR funds to the designated account from 30 days to 90 days.

CSR Amendment Rules, 2026 and ZCZP Instruments

• Notification: The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026 were notified on May 27, 2026.
• ZCZP facility: Companies may meet up to 10% of their mandatory annual CSR expenditure by subscribing to Zero Coupon Zero Principal (ZCZP) instruments.
• Issuer: These instruments must be issued by Not-for-Profit Organisations (NPOs) registered with the Social Stock Exchange (SSE) segment of a recognised stock exchange.
• Impact assessment exemption: CSR spending through ZCZP instruments is exempted from mandatory impact assessment for the funded projects.
• Project execution: NPOs raising funds through ZCZP instruments must complete the projects within three succeeding financial years from the date of issue.
• Unspent funds: Any unspent amount must be transferred to a Schedule VII-specified fund when the instrument’s listing terminates.

Implementing Agencies and Registration Portal

• Form CSR-1: Since July 14, 2025, the Ministry of Corporate Affairs (MCA) requires implementing agencies to register through Form CSR-1 on the MCA21 Version 3 portal.
• Eligible agencies: Registered Public Trusts, Registered Societies, and Section 8 companies can act as implementing agencies.
• Track record requirement: Agencies must have a minimum three-year track record in similar developmental work.
• Professional certification: Registration requires certification by a practising Chartered Accountant (CA), Company Secretary (CS), or Cost Accountant.
• Tax details: Agencies must disclose their PAN and Income Tax registration details.
• Grandfathering: Valid CSR registrations issued before July 2025 are grandfathered and need not be re-registered under the new web-based portal system.

Key Prelims Takeaways

• CSR law: CSR in India is mandatory under Section 135 of the Companies Act, 2013.
• Applicability thresholds: Net worth of ₹500 crore, turnover of ₹1,000 crore, or net profit of ₹5 crore trigger CSR obligations.
• Minimum spending: Covered companies must spend 2% of average net profits of the preceding three financial years.
• Impact assessment: Required for companies with average CSR obligation of ₹10 crore or more; cost cap is the lower of 5% of CSR expenditure or ₹50 lakh.
• ZCZP rule: Up to 10% of annual CSR spending can be met through ZCZP instruments issued by SSE-registered NPOs.
• ZCZP project timeline: Funded projects must be completed within three succeeding financial years.
• CSR-1 registration: Implementing agencies must register on the MCA21 Version 3 portal through Form CSR-1, subject to eligibility conditions.