The recent Corporate Laws (Amendment) Bill, 2026, tabled in the Lok Sabha in March 2026, proposes major overhauls to the Companies Act, 2013, and Limited Liability Partnership Act, 2008. With the objective of enabling ease of doing business in India, this amendment intends to simplify compliance mechanisms, strengthen the governance framework, and relax the nature of penalties for non-compliance. One important change introduced is the relaxation of Corporate Social Responsibility (“CSR”) norms. The Government has hailed relaxation as a necessary change to shift from a model of mandatory CSR to voluntary activities, to incentivise companies. The proposal emerges with the promise that this may, in fact, increase CSR activities.[1] However, the amendment has faced major backlash from the Opposition, claiming that the amendment aims to dilute the current CSR requirements.
The Current CSR Requirements
After deliberation for many years, CSR policy was statutorily introduced in the Companies Act 2013 to align corporate development and social welfare, to ensure that the larger public interest is not hampered in the wake of corporate growth. Section 135 of the Companies Act specifies the following threshold to be met by any company in the immediate preceding year for the development of mandatory CSR policies by companies –
- Net worth of Rupees Five Hundred Crores or more
- Turnover of Rupees One Thousand Crore or more
- Net profit of Rupees Five Crores or more
Any company falling into any one of the categories must spend at least 2% of its net profits on any of the CSR activities mentioned in Schedule VII of the Act.[2]
The provision further mandates that any unspent amount on CSR must be transferred to a specified account within thirty days of the end of the financial year and then must be spent within a period of three financial years from the date of transfer.
Major Proposed Relaxations
The Corporate Laws Amendment Bill proposes the following amendments to the current provisions –
- Increase of Net Profit Threshold – the Bill has increased the threshold requirement for Net Profit of a company from Rupees Five Crores or more to Rupees Ten Crores.
- Increased Time Limit for Transfer of Unspent CSR Amount – the time limit for transferring unspent CSR amount to a specified Unspent Corporate Social Responsibility Account has been increased to 90 days at the end of the financial year.
- Prescription of companies exempted from CSR – the bill also introduced powers of the executive to exempt certain companies from CSR.
- Higher Threshold for CSR Committee – the requirement to form a dedicated CSR Committee has been waived if the CSR expenditure is lesser than Rupees One Crore. [3]
The Possible Implications and Dilution of CSR
The relaxation of committee requirements and the increased timeline for the transfer of unspent CSR are a welcome change to the compliance mechanism. However, certain proposed amendments require deeper scrutiny as they have the potential to dilute the welfare objectives of CSR.
Increase in Net Profit Threshold
The introduction of this proposal is much welcomed for companies having lower net profit. This effectively removes smaller but profitable companies from the CSR net. This proposal, while incentivising companies and saving them the costs of compliance, however, leaves the burden of sustaining CSR on companies with higher net worth or turnover. Whether this is a tenable change must be examined.
Further, what deserves attention is the proposed language of the provision. The provision states “ten crore, or such sum as may be prescribed”.[1] The language of the provision allows the Executive to amend the threshold requirement of minimum net profit. It is pertinent to highlight that under such delegated powers by the Parliament, the Government can amend the threshold by notifying the same in the Gazette, without any requirement of Parliamentary scrutiny. These powers may have far-reaching consequences for CSR policies, as they may be subject to change at the whim of the Government at any point.
Exemption of Companies
Another noteworthy proposal is the addition of delegated powers to the Government to exempt companies from CSR requirements entirely. The proposed insertion of sub-clause (10) to Section 135 states –
“ (10) Such class or classes of companies which fulfil such conditions, as may be prescribed shall not be required to comply with the provisions of this section.”[2]
The clause advances two crucial amendments –
- Entire classes of companies may be exempted, irrespective of statutory prescriptions.
- The conditions for exemption will be laid down by the Executive in exercise of its delegated powers.
This amendment has significant implications. Though the bill argues that this provides the Government flexibility to sustain any specific industry which may be struggling by removing the CSR obligations, the power gives excessive leeway to the Government. The statutory silence on which classes of companies may be exempted leaves much to the subjective wisdom of the Executive, which may lead to arbitrary delegation of exemption. The lack of any conditions or guidelines for the Executive to prescribe conditions for exemptions provides unprecedented powers to the Executive to decide the conditions without having to receive Parliamentary approval. This creates regulatory uncertainty for the functioning of companies. The Executive may exempt any loss-making PSUs or industries favouring them politically, without returning to Parliament for approval.
Conclusion
The Bill has been tabled before the Joint Parliamentary Committee for detailed scrutiny. However, the underlying objective of the proposed amendment is clear – corporate development in India may take precedence over social welfare obligations. While this would increase the ease of doing business, the implications for CSR obligations are important to be considered and remain to be seen.
[1] The Corporate Laws (Amendment) Bill 2026, cl 43 (a).
[2] The Corporate Laws (Amendment) Bill 2026, cl 43 (d).
[1] “Sitharaman refers corporate laws bill to JPC amid CSR row in Parliament’ (India News | The Financial Express, 23 March 2026) accessed 16 April 2026.
[2] The Companies Act 2013, s 135.
[3] The Corporate Laws (Amendment) Bill 2026, cl 43.
