By Shilpi Saurav Sharan and Rishabh Arora
Background
On 23rd March 2026, the Government introduced the Corporate Laws (Amendment) Bill, 2026 (the “Bill”) in the Lok Sabha, proposing amendments to the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. While introducing the Bill, the Finance Minister stated that it was aimed at facilitating greater ease of doing business for law-abiding corporates[1]. On the same day, the Lok Sabha referred the Bill to a Joint Parliamentary Committee — comprising representatives of both the Government and the Opposition from both Houses of Parliament — for further examination.
The Bill spans 98 pages of detailed amendments. This article focuses specifically on the proposed changes to the Corporate Social Responsibility (“CSR”) regime under Section 135 of the Companies Act, 2013 (the “Act”).
The Current CSR Framework Under Section 135(1)
Section 135(1) of the Act mandates that companies meeting any one of the following financial thresholds in the preceding financial year must constitute a special CSR Committee under the Board, and spend 2% of their average net profits over the three preceding financial years on activities under their CSR Policy, which have to be in accordance with Schedule VII of the Act:
- Net worth of ₹500 crore or more; or
- Turnover of ₹1,000 crore or more; or
- Net profit of ₹5 crore or more.
The disjunctive nature of these conditions is important: a company need only satisfy one of the three to fall within the scope of Section 135.
Proposed Amendment 1: Raising the Net Profit Threshold
The Bill proposes to amend Section 135(1) by substituting the words “five crore” with “ten crore, or such sum as may be prescribed.“[2] This change is two-fold.
First, it raises the net profit threshold — the minimum net profit that triggers CSR obligations — from ₹5 crore to ₹10 crore. Notably, however, the Bill proposes no corresponding increase to the net worth (₹500 crore) or turnover (₹1,000 crore) thresholds.
The asymmetry of this change warrants attention. Two illustrations make the point clearly:
- Company X has a net worth and turnover below ₹500 crore and ₹1,000 crore respectively, but a net profit of ₹6 crore. Under the current law, Company X falls within Section 135. If the Amendment Bill is passed into Law, it would fall outside the scope of the provision — a direct benefit of the raised threshold.
- Company Y has a net worth of ₹600 crore, but a turnover and net profit below ₹1,000 crore and ₹5 crore respectively. Since Company Y’s CSR obligations are triggered by its net worth — a threshold the Bill leaves untouched — it will continue to bear CSR expenditure obligations regardless of the amendment.
This disparity raises a question of horizontal equity: why should companies whose CSR obligations are triggered by net profit receive relief, while those brought within Section 135 on the basis of net worth or turnover do not? Ideally, if rationalisation of the thresholds was the objective, corresponding increases to the net worth and turnover limits should have accompanied the Bill.
One possible explanation is that the Government considered ₹5 crore to be an unduly low net profit threshold — too modest a benchmark to justify imposing CSR obligations — while viewing ₹500 crore (net worth) and ₹1,000 crore (turnover) as remaining appropriate. If that is indeed the rationale, it has not been stated expressly. And if stated, it would implicitly concede that since 1st April 2014 (The fate when Section 135 was brought into force), companies drawn into its ambit solely on the basis of net profit have been subject to an inequitably low threshold.
Second, and more subtly, the proposed language — “ten crore, or such sum as may be prescribed” — introduces a delegated legislation mechanism. Under this formulation, the Government would be empowered to revise the net profit threshold in the future simply by prescribing a new figure through Rules notified in the Official Gazette, without requiring Parliamentary approval. Rules prescribed under a statute constitute delegated (or subordinate) legislation and, unlike primary legislation, do not require a vote in Parliament.
During the Parliamentary debate on the Bill, Opposition members raised concerns that the proposed changes dilute the CSR regime, presumably by raising the net profit threshold[3]. However, what appears to have gone unnoticed is that future revisions to the threshold limits may be made by the executive without any Parliamentary scrutiny at all.
Proposed Amendment 2: Insertion of Sub-clause (10) — Exemption by Prescription
The Bill further proposes the insertion of a new Sub-clause (10) to Section 135, which reads as follows:
“(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.”[4]
This proposed provision would empower the Government to exempt entire classes of companies from CSR obligations — irrespective of their net worth, turnover, or net profit. Critically, Sub-clause (10) neither identifies which classes of companies may be exempted, nor specifies the conditions that would need to be met to qualify for such exemption. Both the identification of the exempt class and the conditions for eligibility are left entirely to be “prescribed” — that is, determined through delegated legislation, without Parliamentary approval.
The significance of this cannot be overstated. Through a single sub-clause, the Bill proposes to:
- Create a category of companies permanently exempt from CSR obligations;
- Leave the definition of that category entirely undefined in the statute; and
- Vest the power to define and populate that category in the Executive, bypassing Parliament.
This is a matter that deserves close scrutiny by the Joint Parliamentary Committee in the course of its examination of the Bill.
Two further proposed Amendments to Section 135, which are not as far reaching as the two discussed above, are as follows –
- Under Sub-section (6) of Section 135, a company is mandated to transfer any un-spent CSR funds to a “Unspent Corporate Social Responsibility Account”, which has to be created for such purposes, within thirty days of the end of the financial year. Now, companies are proposed to be given 90 days to do the same.[5]
- Under Sub-section (9) of Section 135, companies who’s CSR amount to be spent amounts to 50 Lacs or less do not have to constitute a special CSR Committee under the Board for the purpose of undertaking expenses for its CSR Policy. This figure is now proposed to be increased to “one crore rupees or such higher amount as may be prescribed”. As will be noticed, even this Amendment seeks to make any further changes to this amount through the Delegated Legislation route.[6]
Conclusion
The Bill’s proposal to rationalise the net profit threshold under Section 135(1) — raising it from ₹5 crore to ₹10 crore — is a welcome and arguably overdue correction. To that extent, the amendment is laudable.
However, the broader architecture of the proposed changes is concerning. Both the revision of threshold limits and the power to exempt entire classes of companies from CSR obligations are sought to be placed beyond the reach of routine Parliamentary oversight, to be exercised instead through executive prescription. The absence of any guiding principles or conditions in Sub-clause (10) compounds this concern significantly.
These are not merely technical issues — they go to the heart of a Parliamentary Democracy and the proper limits of delegated legislation. It is to be hoped that the Joint Parliamentary Committee will examine these provisions with the rigour they demand, and that the Bill, when it returns to Parliament, will reflect a more carefully calibrated balance between executive flexibility and legislative accountability.
[2] Section 43(a) of the Corporate Laws (Amendment) Bill, 2026, available at https://prsindia.org/files/bills_acts/bills_parliament/2026/Corporate_Laws_(A)_Bill_2026_Text.pdf.
[3] Supra, n.1.
[4] Section 43(d) of the Corporate Laws (Amendment) Bill, 2026.
[5] Section 43(b)(ii) of the Corporate Laws (Amendment) Bill, 2026.
[6] Section 43(c) of the Corporate Laws (Amendment) Bill, 2026.