How to Comply with India's CSR Amendment Rules 2026, Step-by-step Process for Companies

The Companies (CSR Policy) Amendment Rules, 2026 require every company subject to mandatory corporate social responsibility obligations under the Companies Act, 2013 to revisit its CSR policy, board approvals and implementation channels before the next annual reporting cycle. The amendments, notified by the Ministry of Corporate Affairs (MCA) in May 2026, formally recognise Zero Coupon Zero Principal (ZCZP) instruments issued through the Social Stock Exchange (SSE) as a permissible route to deploy CSR expenditure, subject to new procedural and percentage limits. This guide explains how to comply with the CSR Amendment Rules 2026 in India, step by step: from internal gap analysis and board resolution through to SSE instrument subscription, accounting treatment, statutory filing and annual disclosure.

Whether you are a company secretary preparing board papers, an in-house counsel advising the CSR committee, or a CFO budgeting for the financial year ahead, the procedure below maps every action, document and deadline you need.

Overview of the CSR Compliance Process and Who It Applies To

India’s CSR regime applies to every company, including its holding and subsidiary entities, that meets any one of three thresholds in the immediately preceding financial year: net worth of INR 500 crore or more, turnover of INR 1,000 crore or more, or net profit of INR 5 crore or more. These thresholds, set out in Section 135 of the Companies Act, 2013, remain unchanged by the 2026 amendments. What changes is the mechanism for deploying CSR spend.

Under the Companies (CSR Policy) Amendment Rules, 2026, a company may now allocate a portion of its mandatory CSR expenditure through ZCZP instruments issued by not-for-profit organisations (NPOs) listed on a recognised Social Stock Exchange. The rules introduce Rule 4A, which sets out the conditions, percentage cap and due-diligence obligations that companies must satisfy before subscribing to such instruments. The official notification is available on the MCA website, and the government’s policy rationale was summarised in a PIB press release dated 29 May 2026.

The compliance process, at a high level, follows six stages: internal legal review, CSR policy amendment, board approval, implementation (including SSE/ZCZP subscription where applicable), accounting and certification, and statutory reporting and filing. Each stage is detailed below.

Eligibility and Prerequisites for CSR Compliance Under the 2026 Rules

Before starting the compliance process, confirm two distinct eligibility questions: whether the company is subject to CSR obligations at all, and whether it qualifies to use the new SSE/ZCZP channel.

Company-level eligibility. Any company registered under the Companies Act, 2013, whether private, public or a foreign company’s subsidiary, that breaches any one of the three Section 135 thresholds in the immediately preceding financial year must constitute a CSR Committee, adopt a CSR policy, and spend at least two per cent of its average net profits of the three immediately preceding financial years on eligible CSR activities listed in Schedule VII of the Companies Act. Companies below these thresholds are not required to undertake mandatory CSR, though they may do so voluntarily.

SSE/ZCZP eligibility. The 2026 amendments permit CSR expenditure through ZCZP instruments only where those instruments are issued by NPOs listed on a Social Stock Exchange recognised by SEBI. The issuing NPO must hold valid SSE registration and must deploy the funds raised toward activities falling within Schedule VII. Industry observers expect that SEBI will continue to require SSE-listed NPOs to file annual impact reports, which companies should obtain as part of their own CSR due diligence.

Who Must Form or Maintain a CSR Committee

Under Section 135(1) of the Companies Act, 2013, every company that meets the applicable thresholds must establish a CSR Committee of the Board consisting of three or more directors, of whom at least one must be an independent director. The committee recommends the CSR policy to the Board, monitors implementation and reports on amounts spent. Companies already maintaining a CSR Committee need only ensure the committee’s terms of reference are updated to reflect the new SSE/ZCZP channel introduced by the 2026 amendments. Where a company has been exempted from appointing an independent director, the CSR Committee may consist of two directors.

Step-by-Step CSR Compliance Procedure Under the 2026 Amendment Rules

The CSR compliance process in India under the 2026 rules breaks down into six sequential stages. The timeline table below summarises each stage, the responsible party and the typical duration; the detailed sub-steps follow.

Step 1, Conduct an Internal Legal Review and Gap Analysis

Begin by mapping the company’s existing CSR policy against the requirements introduced by the Companies (CSR Policy) Amendment Rules, 2026. The legal or CSR team should identify every clause in the current policy that refers to permissible implementation modes, spending limits, reporting obligations and the role of implementing agencies. Flag any clause that conflicts with or does not contemplate the new SSE/ZCZP channel under Rule 4A.

The deliverable at this stage is a gap memo addressed to the CSR Committee. It should list: (a) clauses requiring amendment, (b) whether the company intends to use SSE/ZCZP instruments in the current or forthcoming financial year, (c) any Schedule VII activities the company is funding that could be delivered through SSE-listed NPOs, and (d) a preliminary assessment of the percentage of CSR spend the company may wish to allocate through ZCZP instruments (subject to the cap set out in Rule 4A). Circulate the gap memo to the Company Secretary and CFO before proceeding.

Step 2, Draft the CSR Policy Amendment and Board Papers

Using the gap memo, draft an amended CSR policy that expressly authorises the company to deploy CSR expenditure through ZCZP instruments issued by SSE-listed NPOs, subject to the limits prescribed under the CSR Amendment Rules 2026. A sample policy clause might read:

“The Company may, in accordance with Rule 4A of the Companies (Corporate Social Responsibility Policy) Rules, 2014 (as amended), subscribe to Zero Coupon Zero Principal instruments issued by not-for-profit organisations listed on a Social Stock Exchange recognised by SEBI, provided that such subscription does not exceed the percentage limit prescribed under the said Rule in any single financial year.”

Prepare the board papers in parallel. These should include: the gap memo, a marked-up CSR policy showing tracked changes, a draft board resolution approving the amended policy, and a brief note on the due-diligence process that will apply before any ZCZP subscription. The Company Secretary should circulate these papers to directors at least seven days before the board meeting, or within the notice period prescribed by the company’s articles of association.

Step 3, Obtain Board Approval and Pass the Resolution

The CSR Committee should first review and recommend the amended policy to the Board. The Board then considers the recommendation at a duly convened meeting and passes a resolution. The board resolution for CSR 2026 compliance should, at minimum, record the following:

1. Approval of the amended CSR policy (annexed to the minutes).
2. Authorisation for the CSR Committee or management to subscribe to ZCZP instruments issued by SSE-listed NPOs, within the percentage cap prescribed by Rule 4A.
3. Direction that the Company Secretary update the CSR register and ensure the amended policy is disclosed on the company’s website.
4. Confirmation that the company will conduct due diligence on any SSE-listed NPO before subscribing to its ZCZP instruments.

The Company Secretary should file the resolution and updated policy in the company’s statutory records and upload the amended policy to the company’s website, as required by Rule 9 of the Companies (CSR Policy) Rules, 2014.

Step 4, Implement CSR Programmes or Subscribe to SSE/ZCZP Instruments

Companies retain the option to implement CSR activities directly, through implementing agencies, or, now, through the Social Stock Exchange process. Where a company elects to use the SSE/ZCZP route, the following sub-steps apply:

1. Identify eligible SSE-listed NPOs. Verify that the NPO holds a valid SSE listing confirmed by SEBI and that its stated activities fall within Schedule VII of the Companies Act.
2. Conduct due diligence. Obtain and review the NPO’s SEBI/SSE registration certificate, audited financial statements, governance structure and prior impact reports. The due-diligence report should be prepared jointly by the CSR team, legal counsel and finance, and retained on file.
3. Execute the subscription agreement. The ZCZP instrument subscription is documented by an agreement between the company and the NPO (or its trustee). Confirm escrow or fund-transfer arrangements and obtain a receipt or allotment confirmation.
4. Monitor deployment. Track the NPO’s utilisation of funds against the stated project objectives. Obtain periodic updates and, at year-end, request a certificate of utilisation or impact report for the company’s own records and statutory filings.

Companies that continue to implement CSR through direct programmes or traditional implementing agencies need not follow the SSE-specific sub-steps, but should still update their CSR policy and board resolution to reflect awareness of the 2026 rule changes.

Step 5, Record Accounting Entries and Certify CSR Spend

The CFO or finance team must ensure that CSR expenditure, whether through direct programmes or ZCZP instruments, is recorded in the company’s books of account in accordance with applicable accounting standards. For ZCZP instruments, record the subscription amount as CSR expenditure in the period in which the instrument is subscribed, supported by the subscription agreement and allotment confirmation. The statutory auditor should review CSR spend as part of the annual audit process. Where the rules require a separate certificate of CSR expenditure, obtain it from the auditor or the relevant certifying body before finalising the annual financial statements.

Step 6, File Statutory Reports and Disclose in the Directors’ Report

Under Section 134(3)(o) of the Companies Act, 2013, the Board’s report must include an annual report on CSR containing prescribed particulars. The CSR reporting requirements for 2026 mandate disclosure of: the CSR policy, total amount spent, details of projects undertaken (including amounts channelled through ZCZP instruments), any unspent amounts transferred to the Unspent CSR Account, and reasons for any shortfall. Annex the annual CSR report in the format prescribed under the Companies (CSR Policy) Rules (Annexure I / Annexure II, as applicable) and file it with the Registrar of Companies as part of the company’s annual return and financial statement filings.

CSR Documents Needed Under the 2026 Rules

The following table lists the key documents that companies should prepare, obtain or maintain as part of the CSR compliance process under the 2026 amendments. Treat this as a practitioner checklist.

Companies that do not intend to use SSE/ZCZP instruments in the current financial year should still prepare the amended CSR policy and board resolution to demonstrate awareness of and readiness for the 2026 rules. The CSR documents needed for 2026 compliance are largely the same as in prior years, with the addition of the due-diligence report and ZCZP subscription agreement where that channel is used.

CSR Timeline and Key Deadlines for Approvals and Filings

India’s corporate financial year runs from 1 April to 31 March. The CSR timeline and approvals process should be mapped against this cycle and the statutory deadlines for annual filings. The table below sets out the principal deadlines.

Companies planning to subscribe to ZCZP instruments for the first time should complete the board approval and due-diligence steps well in advance, ideally in Q3 or Q4 of the preceding financial year, to allow sufficient time for NPO identification, instrument issuance and documentation before the target spending window opens.

Costs, Fees and Tax Considerations

The costs of complying with the CSR Amendment Rules 2026 vary by company size, complexity and choice of implementation channel. The table below provides indicative ranges; companies should obtain specific quotes from their advisers.

Tax treatment. CSR expenditure is not deductible as a business expense under Section 37(1) of the Income Tax Act, 1961, to the extent that it is incurred to meet the mandatory obligation under Section 135 of the Companies Act, 2013. However, specific CSR activities may qualify for deduction under other provisions (for example, contributions to the Prime Minister’s National Relief Fund under Section 80G). Companies should consult tax counsel to confirm the treatment of ZCZP instrument subscriptions under the applicable provisions.

What Changes Under the CSR Amendment Rules 2026

The Companies (CSR Policy) Amendment Rules, 2026, notified by the MCA on 29 May 2026, introduce the following principal changes to the existing CSR framework:

• New Rule 4A, ZCZP instruments through the Social Stock Exchange. Companies may now undertake CSR by subscribing to Zero Coupon Zero Principal instruments issued by NPOs listed on a Social Stock Exchange recognised by SEBI. This formally integrates the SSE, originally established under the SEBI framework, into the MCA’s CSR rules as a permissible deployment channel.
• Percentage cap on ZCZP deployment. Rule 4A prescribes a cap on the proportion of total CSR expenditure that may be routed through ZCZP instruments in any single financial year. Companies must ensure their CSR policy and board resolution reflect this limit.
• Due-diligence and record-keeping requirements. Companies are expected to conduct due diligence on the SSE-listed NPO before subscribing and to retain records of the subscription and the NPO’s utilisation of funds.
• No change to Section 135 thresholds. The financial thresholds triggering mandatory CSR (net worth, turnover, net profit) remain unchanged.

The policy rationale, as set out in the PIB press release of 29 May 2026, is to create an additional, transparent and regulated channel for CSR deployment that leverages the Social Stock Exchange process already supervised by SEBI.

Common Pitfalls and How to Avoid Them

• Omitting SSE/ZCZP language from the board resolution. A generic resolution approving the CSR policy without specific reference to Rule 4A and ZCZP instruments may be challenged as insufficient authorisation. Include explicit wording.
• Skipping due diligence on the NPO. Subscribing to ZCZP instruments without verifying the NPO’s SSE listing status, registration and governance creates regulatory and reputational risk. Prepare a formal due-diligence report for each NPO.
• Exceeding the ZCZP percentage cap. Allocating CSR spend through ZCZP instruments above the cap prescribed by Rule 4A will result in the excess amount being treated as non-qualifying expenditure. Track percentages against total CSR spend throughout the financial year.
• Late transfer to the Unspent CSR Account. Failure to transfer unspent amounts within 30 days of the financial year-end (by 30 April) attracts penal provisions under Section 135(7). Set calendar reminders and pre-authorise the transfer.
• Failing to update the company website. The amended CSR policy must be disclosed on the company’s website under Rule 9. Omission is a common compliance gap flagged in MCA inspections.
• Incorrect accounting entries for ZCZP instruments. Treating ZCZP subscriptions as investments rather than CSR expenditure distorts financial statements. Record the subscription as CSR spend in the period of subscription, supported by documentary evidence.

Conclusion

The CSR Amendment Rules 2026 add a significant new channel, the Social Stock Exchange and ZCZP instruments, to India’s mandatory CSR framework, but they do not fundamentally alter the underlying obligation or the Section 135 thresholds. Companies that follow the six-step CSR compliance process outlined above, from gap analysis through board approval, implementation, accounting and statutory filing, will be well positioned to satisfy the amended rules. The key to smooth compliance is early preparation: begin the internal review and board paper drafting cycle well before the target financial year, conduct thorough due diligence on any SSE-listed NPO, and ensure the board resolution CSR 2026 wording explicitly addresses Rule 4A authorisation.

For companies managing CSR obligations alongside other corporate compliance processes, such as winding down a private limited company or restructuring group entities, coordinating timelines across workstreams is essential. Monitor the MCA and SEBI websites for further clarifications, and engage qualified legal counsel before committing to ZCZP subscriptions or amending existing CSR programmes.

Sources

1. Ministry of Corporate Affairs, Official Notifications and Companies (CSR Policy) Amendment Rules, 2026
2. Press Information Bureau, MCA Press Release on CSR Amendment Rules (29 May 2026)
3. Companies Act, 2013, Government of India Legislative Repository
4. Gazette of India / eGazette, Official Notification Publication
5. Securities and Exchange Board of India, Social Stock Exchange Framework and SEBI Circulars