CSR Rules Amendment 2026: Zero Coupon Zero Principal Instruments Now Eligible for CSR Spending
The Ministry of Corporate Affairs (MCA) issued G.S.R. 415(E) dated May 27, 2026, amending the Companies (Corporate Social Responsibility Policy) Rules, 2014. The amendment introduces Zero Coupon Zero Principal (ZCZP) instruments as a permissible route for companies to fulfil their CSR obligations. The rules came into force on the date of publication in the Official Gazette.
What Has Changed
The amendment makes two sets of changes to the CSR Rules, 2014:
1. New Definitions Inserted in Rule 2(1)
Two new definitions have been added:
“Not for Profit Organization” [Clause (ha)] Refers to an entity as defined under Clause (e) of Regulation 292A of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 — essentially an NPO registered on the Social Stock Exchange (SSE) segment of a recognised stock exchange.
“Zero Coupon Zero Principal Instrument” [Clause (l)] A security issued by a Not for Profit Organization (NPO) that is:
- Registered with the Social Stock Exchange (SSE) segment of a recognised stock exchange, and
- Issued in accordance with SEBI regulations.
Unlike conventional bonds or debentures, ZCZP instruments carry no coupon (interest) and no repayment of principal — the investor’s contribution is essentially a donation channelled through a regulated market mechanism.
2. New Rule 4A Inserted — CSR Implementation via ZCZP Instruments
The core of the amendment is the newly inserted Rule 4A, which governs how companies can use ZCZP instruments for CSR.
Key Provisions of Rule 4A
| Provision | Details |
|---|---|
| Eligibility | Any company can carry out CSR activities through ZCZP instruments |
| Cap on Expenditure | Spending via ZCZP instruments cannot exceed 10% of total CSR expenditure for that financial year |
| Impact Assessment Exemption | Companies subscribing to ZCZP instruments are exempt from conducting impact assessments for projects funded through such instruments |
| Project Duration | The NPO issuing the instrument must undertake projects with a duration of not more than three succeeding financial years from the date of issue |
| Unspent Amount on De-listing | Upon termination of listing of the ZCZP instrument, any unspent amount must be transferred to a fund specified under Schedule VII of the Companies Act, 2013, and a compliance report submitted to SEBI |
| Applicability of Rule 4 | Provisions of existing Rule 4 apply, except sub-rules (5) and (6) |
Practical Implications for Companies
Who Benefits?
- Companies with CSR obligations under Section 135 of the Companies Act, 2013 — particularly those looking for transparent, market-regulated CSR avenues.
- Not for Profit Organizations registered on the SSE, who gain access to a new pool of corporate funding.
Key Compliance Points
- 10% Cap: Boards must ensure that ZCZP investment is tracked separately and does not cross 10% of the annual CSR budget.
- No Impact Assessment Required: This is a significant procedural relief. Companies are ordinarily required to conduct impact assessments for CSR projects above ₹1 crore (under Rule 8). ZCZP-funded projects are explicitly exempted.
- Rule 4(5) and 4(6) Do Not Apply: Rule 4(5) relates to ongoing project treatment and unspent amounts; Rule 4(6) deals with multi-year project scheduling. Companies and NPOs should note this exclusion carefully.
- Unspent Fund Treatment on De-listing: If the ZCZP instrument is de-listed before the project is completed, the NPO must transfer unspent funds to Schedule VII funds (PM CARES, Clean Ganga Fund, etc.) and report to SEBI.
Background: Social Stock Exchange and ZCZP Instruments
The Social Stock Exchange (SSE) was introduced by SEBI in 2022 as a platform for NPOs and for-profit social enterprises to raise funds from the public and institutional investors. ZCZP instruments are the primary fundraising tool for NPOs on the SSE — they work like a zero-interest, non-repayable bond where investors know upfront they will not receive any financial return.
By recognising ZCZP instruments as a valid CSR avenue, the MCA has effectively linked the corporate CSR framework with the SEBI-regulated social finance ecosystem, bringing greater accountability, transparency, and traceability to CSR spending.
Amendment History of CSR Rules, 2014
For reference, the Companies (CSR Policy) Rules, 2014 have been amended as follows:
| Notification | Date |
|---|---|
| G.S.R. 129(E) | 27 February 2014 (Principal Rules) |
| G.S.R. 644(E) | 12 September 2014 |
| G.S.R. 43(E) | 19 January 2015 |
| G.S.R. 540(E) | 23 May 2016 |
| G.S.R. 895(E) | 19 September 2018 |
| G.S.R. 526(E) | 24 August 2020 |
| G.S.R. 40(E) | 22 January 2021 |
| G.S.R. 715(E) | 20 September 2022 |
| G.S.R. 452(E) | 7 July 2025 |
| G.S.R. 415(E) | 27 May 2026 (Current Amendment) |
Key Takeaways
- Companies can now invest in ZCZP instruments issued by SSE-registered NPOs as part of their CSR activities.
- Such investment is capped at 10% of annual CSR expenditure.
- Companies subscribing to ZCZP instruments are exempt from impact assessment for those projects.
- NPOs must complete funded projects within 3 financial years and transfer any unspent funds to Schedule VII funds upon de-listing.
- This amendment strengthens the bridge between SEBI’s Social Stock Exchange framework and MCA’s CSR regime.
Source
Ministry of Corporate Affairs, G.S.R. 415(E), Gazette of India Extraordinary, Part II, Section 3, Sub-section (i), dated May 27, 2026. File No. CSR-10/13/2025-CSR-MCA.