- Why in news
- On 29 May 2026 the Ministry of Corporate Affairs said it has added a new item (xiii) to Schedule VII of the Companies Act, 2013, allowing CSR spending on zero coupon zero principal instruments on the Social Stock Exchange. The notifications are dated 27 May 2026.
- What it is
- CSR in India rests on Section 135 of the Companies Act, 2013, Schedule VII and the CSR Policy Rules, 2014. Schedule VII lists the activities on which CSR money may be spent. A zero coupon zero principal instrument is issued by a not-for-profit organisation on the Social Stock Exchange to raise funds for social projects. The investor gets no interest and no principal back.
- New Schedule VII item
- Item (xiii) allows subscription to zero coupon zero principal instruments on the Social Stock Exchange as a CSR activity.
- Rules amended
- The CSR Policy Rules, 2014 now define 'Not for Profit Organization' and the instrument in Rule 2. Rule 4A sets the criteria for CSR through the instrument.
- Issuer and regulator
- Not-for-profit organisations issue the instrument on the Social Stock Exchange under SEBI Regulations.
- Legal framework of CSR
- CSR is governed by Section 135 of the Companies Act, Schedule VII and the CSR Policy Rules, 2014.
Don’t confuse with Zero coupon bond vs zero coupon zero principal instrument: A zero coupon bond pays no interest but returns principal at maturity. The zero coupon zero principal instrument returns neither interest nor principal.
Don’t confuse with Schedule VII vs Section 135: Section 135 sets who must do CSR and the 2% spending norm. Schedule VII lists the permitted activities.
Laws, judgments and statutory bodies: 30 Prelims questions since 2013 (what the law says, who chairs, legal basis). In Mains, 44 news-triggered questions, most in GS2, asking for provisions and challenges.
Why it matters
- Gives companies another way to meet CSR obligations and adds to funding for the Social Stock Exchange.
- Helps non-profits raise money through a regulated, transparent route.
Problems
- Investors get no financial return, so uptake depends on how CSR spending is counted and on trust in the non-profit.
- Outcome measurement and evaluation of funded projects need strong oversight.
Way forward
- Enforce project execution and evaluation duties on non-profits, with public disclosure of results.
- Review the 10% cap after seeing how much companies use the route.
Put in your answer
CSR legal framework: Cite Section 135, Schedule VII and the CSR Rules, 2014 as the base, now widened by item (xiii).
- 2013Mains GS3 · Q1Challenges in implementing CSR as a mandatory obligation under the Companies Bill 2013
- 2022Mains GS4 · Q6Whether corporate social responsibility is efficient and sufficient for corporate social roles
- 2017Mains GS4 · Q4Analyse how corporate social responsibility makes companies more profitable and sustainable
UPSC’s own questions that come close to this issue, from our Prelims and Mains banks.
No practice question for this one; the card may still help an answer. Why: Schedule VII widened to include subscription to ZCZP instruments on the Social Stock Exchange; Companies Act provisions are testable, but this is a narrow amendment.
Worth revising until Prelims 2027: most news questions come within two years of the event.