A Joint Parliamentary Committee has recommended that the government examine the feasibility of allowing Corporate Social Responsibility (CSR) contributions in kind through a statutory or regulatory framework, while also supporting a proposal to increase the CSR applicability threshold from ₹5 crore to ₹10 crore in net profit.
The recommendations form part of the committee’s report on the Corporate Laws (Amendment) Bill, which seeks to update India’s CSR framework and simplify compliance for businesses, particularly Micro, Small and Medium Enterprises (MSMEs).
Proposal to Allow CSR Contributions in Kind
The committee recommended that companies should be allowed to make CSR contributions in the form of goods, services or other in-kind support, provided a robust regulatory framework is established.
It noted that recognising in-kind contributions could improve the flexibility and effectiveness of CSR programmes by allowing companies to leverage their expertise, products and resources for public welfare.
However, the panel stressed that such a framework should include:
- Objective valuation norms
- Independent verification
- Transparent disclosure and reporting
- Effective monitoring mechanisms
- Safeguards against misuse or overvaluation
The committee also referred to the National Disaster Management Authority (NDMA) proposal to treat the free distribution of products during disaster relief as eligible CSR expenditure. It noted that valuation under the GST framework is being considered for determining the value of such contributions.
Support for Raising CSR Applicability Threshold
The committee endorsed the proposal to raise the minimum net profit threshold for mandatory CSR spending from ₹5 crore to ₹10 crore.
Currently, companies are required to spend 2% of their average net profits on CSR if they meet any one of the following criteria:
- Net worth of ₹500 crore or more
- Annual turnover of ₹1,000 crore or more
- Net profit of ₹5 crore or more
The proposed increase is expected to reduce the compliance burden on many MSMEs while allowing larger companies to continue driving CSR investments.
Stricter Rules for Implementing Agencies
The panel also recommended stronger safeguards regarding CSR implementing agencies.
It proposed that CSR funds should not qualify for compliance if routed through organisations placed on a government-notified negative list, including NGOs, trusts, societies or Section 8 companies that become ineligible.
The committee recommended that:
- The negative list should be based on objective statutory provisions or orders from competent authorities.
- The restriction should remain valid only for the notified period.
- A mechanism should exist for removing entities from the negative list once the grounds for their inclusion cease to exist.
These measures aim to improve transparency, accountability and governance in CSR implementation while ensuring that funds reach eligible and compliant organisations.
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