CSR Implementation Gets Stricter: Only Tax-Verified NGOs Allowed from July 14
Starting 14 July 2025, companies in India can only engage NGOs registered under Sections 80G and 12A of the Income Tax Act for implementing their Corporate Social Responsibility (CSR) activities. This major compliance shift, notified via an update to Form CSR-1 by the Ministry of Corporate Affairs (MCA), aligns CSR with income tax registration and aims to stop diversion of CSR funds through unverified or shell entities.
Let’s break down what this change means, who’s affected, and how companies and NGOs can stay compliant.
Why This Move Matters
India is the only country with mandatory CSR laws under Section 135 of the Companies Act, 2013. In FY 2023–24 alone:
- 27,000+ companies undertook CSR
- ₹34,900 crore was spent on various social development initiatives
- Major contributors included HDFC Bank, Reliance Industries, TCS, and Infosys
This volume of funds has prompted the government to improve traceability and ensure that CSR money is not siphoned off or misused.
New CSR Eligibility Rule: What Changed?
Old Rule (before July 14, 2025):
- Any registered public trust, society, or Section 8 company could be eligible as CSR implementers after filing Form CSR-1 with MCA.
New Rule (from July 14, 2025):
- Only those NGOs registered under both Section 12A and Section 80G of the Income Tax Act can be CSR implementers.
- MCA has updated Form CSR-1 to capture these tax registrations.
What Are Section 80G and 12A?
| Section | Purpose | Benefit |
|---|---|---|
| 12A | Income tax exemption for charitable NGOs | NGO’s income becomes tax-free |
| 80G | Tax benefit to donors contributing to NGOs | Donors get tax deduction on donation |
By insisting on both, the government ensures:
- The NGO is genuinely charitable (12A)
- Donors (in this case, companies via CSR) have a tax-benefited relationship (80G)
Who Else Can Execute CSR Projects?
MCA also permits institutions covered under Section 10(23C)—like:
- Recognised educational institutions
- Government hospitals
- Religious or charitable trusts approved under this section
These entities, if also 80G/12A registered, qualify to undertake CSR projects.
Legal and Compliance Perspective
This change finds root in:
- Rule 4(1) of the Companies (CSR Policy) Rules, 2014
- Updated Form CSR-1 format under MCA portal
- Income-tax validation under CBDT guidelines for 12A and 80G registration
⚖️ Legal Insight:
CBDT had already tightened norms via Rule 17A and Rule 18AB (relating to revalidation and annual statement in Form 10BD). This MCA move now synchronises CSR compliance with tax transparency, creating a robust framework for corporate donations.
Action Points for Companies and NGOs
✅ For Companies:
- Review existing NGO partners for 80G and 12A status
- Re-file CSR-1 with updated information if necessary
- Maintain Form 10BD linkage for donations made
✅ For NGOs:
- Ensure valid 12A and 80G registrations
- If expired, reapply under new CBDT rules
- Update profile on MCA CSR Portal
Expert View: Don’t Wait Till Deadline
“NGOs should treat this like KYC. If your 80G or 12A is under process, you won’t qualify for CSR after July 14. Companies too need to vet documents thoroughly before funding,” says a Delhi-based CSR consultant.
Impact on India’s CSR Landscape
This change could:
- Weed out paper NGOs or shell entities
- Improve the quality of social impact reporting
- Align CSR with Sustainable Development Goals (SDGs) through verified partners
- Bring CSR and tax administration under a common lens for transparency
CSR Due Diligence Checklist for July 2025 Onwards
| Step | Responsibility | Proof/Document Needed |
|---|---|---|
| Verify 12A & 80G registration | Company & NGO | Registration certificates |
| File Form CSR-1 | Implementing NGO | Acknowledgement from MCA |
| Link PAN & Income Tax details | Company & NGO | IT portal verification |
| Validate via CSR portal | Company | CSR-1 status, project disclosure |
| File Form 10BD for donations | Company/NGO (as applicable) | Tax reporting |
FAQs
Q1. Can an NGO without 80G still do CSR projects after July 14, 2025?
No. Both 12A and 80G registration are mandatory as per the revised MCA Form CSR-1.
Q2. Are hospitals or schools under government schemes exempt?
Only if they fall under Section 10(23C) and have tax registrations, they may qualify.
Q3. What if Form CSR-1 was already filed before July 14, 2025?
It needs to be updated to reflect current 80G/12A status. Fresh validation may be required.
Final Thoughts: Aligning CSR with Accountability
With over ₹35,000 crore spent annually, CSR is no longer just a statutory obligation—it’s a financial commitment. By demanding tax-verified credentials from NGOs, the government is ensuring that money meant for social good reaches real beneficiaries.
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Summary
Only 80G and 12A registered NGOs can execute CSR from July 14, 2025, per MCA update. Companies must verify tax status before funding. Updated Form CSR-1 required.