Stricter CSR Rules: What Tax-Exempt Trusts Must Know from July 14, 2025
The government has introduced stricter CSR rules from July 14, 2025, making it mandatory for NGOs, trusts, and societies to prove their tax-exempt status (12A or 10(23C)) to qualify for CSR funding.
This move aims to bring transparency, prevent fund misuse, and ensure only genuine organisations benefit from corporate social responsibility initiatives.
Why CSR Compliance Just Got Tougher
According to MCA guidelines under the Companies Act, 2013, companies with:
- Net worth over ₹500 crore
- Turnover over ₹1,000 crore
- Net profit over ₹5 crore
must spend 2% of average net profits (last 3 years) on CSR.
In FY 2023–24, as per ClearTax, 24,392 Indian companies spent ₹51,966 crore on CSR projects. But a key concern emerged — misuse by shell NGOs and unregistered entities.
To tackle this, the Ministry of Corporate Affairs (MCA) has revised rules to:
- Prevent fake organisations from tapping into CSR money
- Verify beneficiary NGOs’ tax exemption certificates
What’s New in CSR Compliance from July 14, 2025
Here’s what non-profits must now submit to receive CSR funding:
| Requirement | Details |
|---|---|
| Form CSR-1 (Revised) | Now requires disclosure of valid 12A/10(23C) registration numbers |
| Tax Registration Proof | Mandatory submission of Income Tax exemption certificate |
| Active NGO Registration | Must be registered on MCA’s CSR portal with proper PAN, 12A, and TAN |
| Annual Filing & Audit | More stringent scrutiny on fund utilisation and compliance documents |
Why Sections 12A and 10(23C) Matter
To receive CSR funds:
- Section 12A: Certifies the NGO/trust as tax-exempt under the Income Tax Act
- Section 10(23C): Covers educational/charitable institutions with specific exemptions
If your organisation doesn’t hold either of these, CSR funds cannot be lawfully transferred.
Expert Insight: Don’t Rely on MoUs Alone
Many trusts operate based on informal tie-ups with corporates. But now, says CA Arvind Krishnan (CSR & Tax Expert):
“An MoU is not enough. If your trust lacks a valid 12A or 10(23C), any CSR fund transfer can be questioned in audit or even attract penalties under Income Tax and Companies Act.”
Legal and Government Push for CSR Oversight
This isn’t an isolated change. The push for CSR transparency is growing:
- Jharkhand’s 2025 Bill proposes state oversight of all CSR fund usage
- Himachal Pradesh already mandates geo-tagged tracking of CSR-funded projects
- A 2021 Journal of Business Ethics study revealed that 68% of stakeholders support stricter CSR regulation over voluntary reporting
The shift is clear: CSR can no longer be discretionary philanthropy — it’s a compliance-bound activity.
Action Plan for NGOs & Trusts
If your trust or society receives CSR funding, here’s what to do now:
- ✅ Apply for 12A/10(23C) registration via Income Tax portal (if not already)
- ✅ Update CSR-1 form with revised details
- ✅ Ensure all past CSR fund use is audited and reports filed
- ✅ Use CSR funds strictly for eligible activities under Schedule VII
Will Companies Face Extra Burden?
Yes, but it’s necessary. Companies must:
- Verify tax registrations before disbursing CSR funds
- Maintain documentation trail to pass scrutiny by auditors and ROC
- Use Form CSR-2 for reporting and MCA portal for NGO verification
FAQs on New CSR Compliance Norms
Q1. Can a non-registered trust receive CSR funds?
No. Only trusts/societies with 12A or 10(23C) registration can receive CSR contributions from companies post July 14, 2025.
Q2. What happens if a company gives CSR funds to an unregistered NGO?
Such expenditure may be treated as non-compliant, disallowed under Income Tax, and attract ROC scrutiny.
Q3. Is FCRA registration also mandatory for foreign CSR funds?
Yes. For receiving foreign CSR contributions, valid FCRA registration is mandatory under FEMA and FCRA laws.
Q4. Are these rules applicable to all companies?
Only companies falling under Section 135 of Companies Act need to comply with CSR rules.
Summary
From July 14, 2025, only tax-registered NGOs with valid 12A or 10(23C) status can receive CSR funds. MCA’s revised CSR rules aim to stop fake trusts from misusing corporate donations. Non-compliant companies risk disallowance and audit scrutiny.
Final Thoughts:
CSR in India has moved from intent to impact with accountability. If you’re a company or a trust involved in CSR activities, make sure your compliance is watertight.