Only Tax-Verified Non-Profits Can Now Execute CSR Work, Says Govt

(MENAFN- Live Mint) New Delhi: The government has tightened disclosure norms for non-profits executing corporate social responsibility (CSR) projects on behalf of companies, introducing a more detailed registration process to ensure only genuine, tax-compliant entities receive CSR funds.

According to a new version of Form CSR-1 issued by the Ministry of Corporate Affairs (MCA), trusts, societies, and not-for-profit companies must now submit a more structured application with enhanced disclosures to be eligible to implement CSR activities. The updated form, effective 14 July, reflects a push to align corporate giving with tax law and financial scrutiny.

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The move aims to prevent shell or bogus entities from accessing CSR funds and ensure that recipient organizations meet the criteria laid out in the Income Tax Act.

It also expands the categories of eligible institutions.

Over the last few years, the Income Tax Department has raised the reporting requirements for charitable trusts to prevent the abuse of this legal form for tax evasion.

The latest move to streamline registration for CSR implementation is part of the overall effort to improve transparency.

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The updated Form CSR-1 also broadens the scope of entities eligible to register. Under the earlier regime, only those registered under Section 12A of the Income Tax Act, which certifies an entity as a genuine charitable institution, could apply. The revised form now allows entities that qualify for tax exemptions under Section 10(23C) of the Act, such as universities and hospitals, to register for executing CSR work as well.

The new version of the form includes more elaborate fields compared to the earlier format, explained Subodh Dandawate, associate director, Regulatory Services at Nexdigm, a business advisory firm.

A key change in the revised form is the mandatory requirement to furnish a copy of the registration certificate issued by the Income Tax Department under Sections 80G and 12A, as applicable, of the Income Tax Act, said Amit Maheshwari of AKM Global, a tax and consulting firm.

“This effectively means that implementing agencies must obtain income tax registration prior to receiving any CSR funds from corporations,” said Maheshwari.“The amendment is a progressive step towards greater transparency and regulatory alignment in CSR implementation, ensuring that CSR funds are routed only through tax-verified and credible entities.”

This move is expected to enhance stakeholder confidence and promote more effective deployment of CSR funds, enabling companies to engage with credible and mission-aligned partners in their social impact initiatives, Maheshwari said.

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It also reflects a broader policy direction towards aligning corporate philanthropy with regulatory governance and financial oversight, he said.

In FY24, over 27,000 companies spent over ₹34,900 crore on CSR, led by HDFC Bank , Reliance Industries Ltd, and Tata Consultancy Services. The number of trusts and other entities implementing CSR projects is not readily available.

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