Stricter Disclosure Norms Under Revised Form CSR-1 to Ensure Transparency in Corporate Social Responsibility Funding
NEW DELHI (India CSR): In a significant move to enhance transparency in corporate social responsibility (CSR), the Indian government has introduced stricter regulations for non-profits seeking to implement CSR projects. The Ministry of Corporate Affairs (MCA) has rolled out an updated Form CSR-1, requiring trusts, societies, and not-for-profit companies to meet stringent tax compliance and disclosure standards. This change ensures that only genuine, tax-verified entities can access CSR funds, aligning corporate philanthropy with robust financial oversight. For non-profits and corporations alike, this marks a pivotal shift toward accountability, ensuring that billions in CSR funds drive meaningful social impact.
Why the Change? Tackling Misuse and Ensuring Credibility
The revised Form CSR-1 is part of a broader effort to prevent the misuse of CSR funds by shell or fraudulent entities. Over the years, concerns have grown about non-profits exploiting CSR mandates for tax evasion or financial irregularities. The Income Tax Department’s crackdown on bogus charitable trusts has highlighted the need for stricter oversight. By aligning CSR regulations with the Income Tax Act, the government aims to ensure that only credible organizations with proper tax registrations can execute CSR initiatives.
“This is a progressive step to weed out non-compliant entities and ensure CSR funds are channeled to genuine causes,” said Amit Maheshwari, a tax expert at AKM Global. “The mandatory submission of tax registration certificates under Sections 80G and 12A ensures that only verified non-profits can participate.”
What’s New in Form CSR-1?
The updated Form CSR-1 introduces several key changes to the registration process for non-profits. Previously, only entities registered under Section 12A of the Income Tax Act, which certifies charitable status, were eligible to implement CSR projects. The revised form now expands eligibility to include organizations qualifying for tax exemptions under Section 10(23C), such as universities, hospitals, and other educational or medical institutions.
Additionally, the form requires more detailed disclosures, including:
- A copy of the Income Tax Department’s registration certificate under Sections 80G and 12A, where applicable.
- Enhanced details about the non-profit’s governance structure, financial history, and operational scope.
- A structured application process to verify alignment with CSR objectives and tax compliance.
Subodh Dandawate, Associate Director of Regulatory Services at Nexdigm, noted, “The new form is far more comprehensive, leaving little room for ambiguity. It ensures that non-profits are thoroughly vetted before they can access CSR funding.”
A Boost for Transparency and Stakeholder Confidence
The tightened regulations are expected to enhance trust among stakeholders, including corporations, investors, and the public. In FY24, over 27,000 companies in India spent more than ₹34,900 crore on CSR initiatives, with major players like HDFC Bank, Reliance Industries, and Tata Consultancy Services leading the charge. However, the lack of centralized data on non-profits implementing these projects has long been a challenge. The revised Form CSR-1 aims to bridge this gap by creating a transparent and verifiable registry of eligible organizations.
“Companies can now partner with mission-aligned, tax-compliant non-profits with greater confidence,” Maheshwari added. “This move not only protects corporate funds but also ensures that social impact initiatives are executed by credible partners.”
Broader Implications for Corporate Philanthropy
The updated CSR norms reflect a broader policy shift toward aligning corporate giving with regulatory governance. Recent scrutiny of surrogate advertising through CSR channels and fraudulent tax benefit claims has prompted the government to tighten oversight. By requiring non-profits to comply with income tax regulations, the MCA is ensuring that CSR funds are used for genuine social good, rather than being diverted for ulterior purposes.
The inclusion of Section 10(23C) entities also broadens the scope of CSR activities. Universities, hospitals, and other institutions can now play a larger role in areas like education, healthcare, and research, aligning corporate contributions with national development goals.
Challenges and Opportunities for Non-Profits
While the new rules promote transparency, they may pose challenges for smaller or newly established non-profits that lack the resources to meet stringent compliance requirements. The mandatory tax registrations and detailed disclosures could create barriers for organizations still navigating the regulatory landscape. However, experts believe this will ultimately strengthen the sector by encouraging non-profits to adopt robust governance practices.
“For non-profits, this is an opportunity to build trust and credibility,” said Dandawate. “By aligning with tax laws and improving their operational transparency, they can attract more CSR partnerships and create lasting impact.”
You Learn: A New Era for CSR in India
As India’s CSR ecosystem evolves, the revised Form CSR-1 marks a significant step toward accountability and impact. By ensuring that only tax-verified non-profits can execute CSR projects, the government is fostering a culture of trust and responsibility in corporate philanthropy. For companies, this means greater assurance that their CSR investments are driving meaningful change. For non-profits, it’s a call to elevate their governance standards and align with national priorities.
With billions of rupees flowing into CSR each year, these changes are poised to reshape how corporate India and non-profits collaborate to address pressing social challenges. As the new norms take effect, stakeholders across the board are watching closely to see how this reform strengthens India’s journey toward sustainable and impactful development.
(India CSR)
