MCA Expands CSR Scope To Include Zero Coupon Zero Principal Instrument

02 Jun 2026 CW Team

The changes introduce definitions of Not-for-Profit Organisation and Zero Coupon Zero Principal Instrument in Rule 2 and set out criteria for implementation under a new Rule 4A. Not-for-Profit Organisation (NPO) and Zero Coupon Zero Principal Instrument (ZCZPI) are now referenced in the Companies (Corporate Social Responsibility Policy) Rules, 2014, and the responsibility for project execution and project evaluation is placed on the NPO, raising funds through the instrument. The amendments specify governance and compliance conditions for entities seeking to issue ZCZPIs.

The amendment is intended to provide significant ease of compliance for companies while enabling NPOs to mobilise funds for public welfare projects in a transparent and regulated manner. NPOs will be able to issue ZCZPIs on the Social Stock Exchange in accordance with Securities and Exchange Board of India regulations and applicable listing requirements. The measure is expected to broaden the financing options available to charitable entities without altering the core CSR obligations of companies.

Expenditure by companies mandated to spend on CSR for such instruments shall not exceed 10 per cent of the total CSR expenditure for that financial year. The legal framework remains anchored in Section 135 of the Companies Act, 2013, Schedule VII of the Act and the Companies (Corporate Social Responsibility Policy) Rules, 2014. The relevant amendment notifications have been placed on the Ministry of Corporate Affairs website for reference.

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The Ministry of Corporate Affairs (MCA) has widened the ambit of Schedule VII of the Companies Act, 2013, by introducing a new item, number xiii, to permit subscription to zero-coupon zero-principal instruments on the Social Stock Exchange. The amendment, notified on 27 May 2026 through Gazette Notification nos. G.S.R. 415(E) and G.S.R. 416(E) seek to facilitate corporate social responsibility implementation through a regulated market mechanism. The development was presented as aligned with the government vision of Viksit Bharat. The changes introduce definitions of Not-for-Profit Organisation and Zero Coupon Zero Principal Instrument in Rule 2 and set out criteria for implementation under a new Rule 4A. Not-for-Profit Organisation (NPO) and Zero Coupon Zero Principal Instrument (ZCZPI) are now referenced in the Companies (Corporate Social Responsibility Policy) Rules, 2014, and the responsibility for project execution and project evaluation is placed on the NPO, raising funds through the instrument. The amendments specify governance and compliance conditions for entities seeking to issue ZCZPIs. The amendment is intended to provide significant ease of compliance for companies while enabling NPOs to mobilise funds for public welfare projects in a transparent and regulated manner. NPOs will be able to issue ZCZPIs on the Social Stock Exchange in accordance with Securities and Exchange Board of India regulations and applicable listing requirements. The measure is expected to broaden the financing options available to charitable entities without altering the core CSR obligations of companies. Expenditure by companies mandated to spend on CSR for such instruments shall not exceed 10 per cent of the total CSR expenditure for that financial year. The legal framework remains anchored in Section 135 of the Companies Act, 2013, Schedule VII of the Act and the Companies (Corporate Social Responsibility Policy) Rules, 2014. The relevant amendment notifications have been placed on the Ministry of Corporate Affairs website for reference.

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