The Ministry of Corporate Affairs (MCA) has issued two important notifications — G.S.R. 415(E) and G.S.R. 416(E), dated 27 May 2026 — introducing a new route for companies to undertake Corporate Social Responsibility (CSR) activities through Zero Coupon Zero Principal Instruments issued by eligible Not for Profit Organisations registered on the Social Stock Exchange (SSE). These amendments connect India’s CSR framework under the Companies Act, 2013 with SEBI’s Social Stock Exchange framework.
In simple terms, companies can now subscribe to eligible Zero Coupon Zero Principal (ZCZP) instruments and treat such subscription as CSR expenditure, subject to a 10% cap of total CSR expenditure for that financial year. MCA has also amended Schedule VII of the Companies Act, 2013 to expressly include subscription to ZCZP instruments on Social Stock Exchange as a recognised CSR activity.
At a glance
What has MCA changed?
- CSR spending through Zero Coupon Zero Principal instruments is now expressly permitted.
- Schedule VII now includes subscription to ZCZP instruments on Social Stock Exchange.
- The route is capped at 10% of the company’s total CSR expenditure for the financial year.
- Companies subscribing to ZCZP instruments are exempt from impact assessment for projects funded through such instruments.
- The NPO issuing the instrument must undertake projects of not more than three succeeding financial years from the issue date.
- Unspent amount on termination of listing must be transferred to a Schedule VII fund and reported to SEBI.
🔵 Quick Summary — Latest MCA Position
What is allowed?
A company may carry out CSR activities through subscription to Zero Coupon Zero Principal instruments issued on the Social Stock Exchange.
CSR Limit
Expenditure through ZCZP instruments cannot exceed 10% of total CSR expenditure of the company for that financial year.
Impact Assessment
Companies subscribing to ZCZP instruments are exempt from impact assessment for projects funded through such instruments.
🏛️ Section 1 — Background: CSR and Social Stock Exchange
Corporate Social Responsibility under Section 135 of the Companies Act, 2013 requires eligible companies to spend at least 2% of their average net profits on CSR activities. Traditionally, CSR projects were implemented directly by the company or through eligible implementing agencies such as Section 8 companies, registered trusts, registered societies and other eligible entities.
Separately, SEBI developed the Social Stock Exchange framework to help social enterprises and Not for Profit Organisations raise funds through recognised stock exchange platforms. One of the key instruments under this framework is the Zero Coupon Zero Principal Instrument, which allows an NPO to raise funds without paying interest and without repaying principal at maturity, because the instrument is designed for social funding rather than financial return.
Simple Meaning
A Zero Coupon Zero Principal instrument is like a listed social funding instrument. The investor does not receive interest and does not get principal repayment. The money is used by an eligible Not for Profit Organisation for a stated social project.
📌 Section 2 — What Was the Position Before This Amendment?
Before these MCA notifications, there was no express entry in Schedule VII allowing CSR spending by way of subscription to Zero Coupon Zero Principal instruments on the Social Stock Exchange. The CSR Rules also did not contain a dedicated rule explaining how companies could implement CSR through such instruments.
Why this matters
Earlier, companies could face uncertainty on whether subscription to ZCZP instruments would qualify as CSR expenditure. The new amendment removes that ambiguity by placing this route directly inside Schedule VII and the CSR Rules.
✅ Section 3 — G.S.R. 416(E): Schedule VII Amended
Through G.S.R. 416(E), MCA has amended Schedule VII of the Companies Act, 2013. A new item has been inserted after item (xii):
New Schedule VII Entry
“(xiii) Subscription to zero coupon zero principal instruments on Social Stock Exchange.”
This means that companies may now treat eligible subscription to ZCZP instruments on the Social Stock Exchange as a CSR activity under Schedule VII, subject to the detailed conditions inserted in the CSR Rules by G.S.R. 415(E).
📘 Section 4 — G.S.R. 415(E): CSR Rules Amended
Through G.S.R. 415(E), MCA has notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026. These rules amend the Companies (CSR Policy) Rules, 2014 by inserting two definitions and a new Rule 4A.
4A. New Definition of Not for Profit Organisation
The CSR Rules now define “Not for Profit Organization” by referring to Regulation 292A(e) of the SEBI ICDR Regulations, 2018. Under the SEBI framework, an NPO includes eligible social enterprises such as charitable trusts, registered societies, Section 8 companies and other specified entities registered with the Social Stock Exchange framework.
4B. New Definition of Zero Coupon Zero Principal Instrument
The CSR Rules now define “zero coupon zero principal instrument” as an instrument declared as a security, issued by an NPO registered with the Social Stock Exchange segment of a recognised stock exchange, in accordance with SEBI regulations.
🧩 Section 5 — New Rule 4A Explained in Simple Language
🔄 Section 6 — How CSR through ZCZP Instruments Will Work
📊 Section 7 — 10% CSR Cap Explained with Example
Example
Facts
ABC Ltd has total CSR expenditure obligation of ₹5 crore for FY 2026-27.
Result
ABC Ltd can spend up to 10% of ₹5 crore = ₹50 lakh through Zero Coupon Zero Principal instruments. The remaining CSR obligation must be met through other permitted CSR modes.
📌 Important: The 10% cap is calculated with reference to the company’s total CSR expenditure for that financial year, not its net worth, turnover or profits.
🏢 Section 8 — Who Can Issue the ZCZP Instrument?
The instrument must be issued by a Not for Profit Organisation registered with the Social Stock Exchange segment of a recognised stock exchange. The definition is linked to SEBI’s ICDR Regulations, particularly Chapter X-A dealing with Social Stock Exchange.
Eligible Issuer
A Not for Profit Organisation registered on the Social Stock Exchange segment of a recognised stock exchange.
Not Enough
A normal NGO or charity not registered under the SSE framework cannot automatically issue eligible ZCZP instruments for this CSR route.
📋 Section 9 — Conditions for Companies and NPOs
🧾 Section 10 — Impact Assessment Exemption
Rule 4A(2) provides that a company which has subscribed to a Zero Coupon Zero Principal instrument shall be exempted from undertaking impact assessment of any project funded by such instrument.
Why this exemption is important
- The company is not directly implementing the project.
- The instrument and project are routed through SEBI’s Social Stock Exchange framework.
- SEBI-linked disclosure, listing and reporting mechanisms already apply to the NPO and instrument.
- MCA has therefore carved out a specific exemption from project-level impact assessment for the subscribing company.
📈 Section 11 — Practical Impact of the Amendment
✅ Benefits for Companies
- New regulated route for CSR spending.
- Better access to verified social projects listed on SSE.
- Reduced implementation burden for certain CSR projects.
- Exemption from impact assessment for projects funded through ZCZP instruments.
- Cleaner legal recognition under Schedule VII.
🏛️ Benefits for NPOs
- Access to CSR capital through market-based platform.
- Higher credibility through SSE registration.
- Opportunity to raise funds for defined social projects.
- Better visibility before corporates and impact funders.
- Integration with SEBI disclosure framework.
⚠️ Compliance Watchpoints
- Check 10% CSR cap carefully.
- Confirm SSE registration of the NPO.
- Verify instrument eligibility under SEBI regulations.
- Document Board / CSR Committee approval properly.
- Do not treat ordinary donation to NGO as ZCZP subscription.
❌ What It Does Not Mean
- It does not allow 100% CSR spending through ZCZP instruments.
- It does not remove CSR Board responsibility.
- It does not allow subscription to unregistered NGO instruments.
- It does not override SEBI’s Social Stock Exchange framework.
- It does not convert ZCZP into a financial-return investment.
✅ Section 12 — Compliance Checklist for Companies
Before subscribing to a ZCZP instrument
- Confirm that the company is covered by Section 135 CSR provisions.
- Calculate total CSR expenditure for the financial year.
- Calculate the 10% cap for ZCZP subscription.
- Verify that the issuer is a Not for Profit Organisation registered on the Social Stock Exchange.
- Check whether the instrument is a valid Zero Coupon Zero Principal instrument under SEBI regulations.
- Place the proposal before the CSR Committee and Board, as applicable.
- Record the subscription clearly in CSR documentation and annual CSR reporting.
- Track project duration and SSE disclosures.
❓ Frequently Asked Questions
📝 Conclusion
Bottom Line
MCA’s 2026 CSR amendment creates a formal bridge between CSR spending and the Social Stock Exchange. Companies now have a regulated route to deploy a limited portion of CSR funds through Zero Coupon Zero Principal instruments issued by eligible NPOs.
📌
Schedule VII now expressly recognises ZCZP subscription on Social Stock Exchange.
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Companies can use this route only up to 10% of total CSR expenditure for the financial year.
✅
Impact assessment exemption applies for projects funded through such instruments.
📚 Sources & Legal References Used
Sources: MCA Notification G.S.R. 415(E) dated 27 May 2026 — Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026; MCA Notification G.S.R. 416(E) dated 27 May 2026 — Amendment to Schedule VII of the Companies Act, 2013; Companies Act, 2013 — Section 135 and Section 467; Companies (Corporate Social Responsibility Policy) Rules, 2014; SEBI ICDR Regulations, 2018 — Chapter X-A on Social Stock Exchange and Regulation 292A.
Note: This article is based on MCA Gazette Notifications G.S.R. 415(E) and G.S.R. 416(E), dated 27 May 2026, and the applicable Companies Act and SEBI Social Stock Exchange framework. Readers should verify subsequent amendments, circulars and notifications before relying on this note for professional use.
This article is for informational and educational purposes only and does not constitute legal, tax, investment or professional advice.
