CSR Obligations in 2026: The Impact of the New ₹10 Crore Net Profit Threshold#
Corporate Social Responsibility (CSR) under Section 135 of the Companies Act, 2013, mandates that certain profitable companies must spend at least 2% of their average net profits on societal development.
Currently, a company gets hit by the mandatory CSR requirement if it meets any of three thresholds in the preceding financial year:
- Net Worth of ₹500 Crore or more, OR
- Turnover of ₹1000 Crore or more, OR
- Net Profit of ₹5 Crore or more.
The ₹5 Crore net profit threshold has long been a pain point. Many mid-sized MSMEs and growing startups cross this relatively low bar quickly, pulling them into complex CSR compliance, committee formations, and project monitoring when they should be reinvesting that modest profit into business growth.
The Big Relief in the 2026 Bill#
The Corporate Laws (Amendment) Bill 2026 proposes a major rationalization of Section 135.
The Proposal: The net profit threshold for CSR applicability is proposed to be doubled, moving from ₹5 Crore to ₹10 Crore.
Immediate Impact#
If passed, thousands of mid-sized private limited companies and SMEs that report profits between ₹5 Crore and ₹9.99 Crore will instantly fall out of the mandatory CSR net.
- Compliance Relief: They will no longer need to constitute a CSR Committee, draft complex CSR policies, or file detailed Annexures on CSR activities in their Board Reports.
- Capital Retention: Companies can retain that 2% capital and deploy it toward capacity expansion, employee welfare, or debt reduction.
What if you were already doing CSR?#
A common question is: If we are currently under CSR because our profit was ₹7 Crore last year, what happens when the law changes?
Under the general rules of Section 135, if a company ceases to meet any of the three thresholds (Net Worth, Turnover, Net Profit) for three consecutive financial years, it is no longer required to comply with CSR provisions. However, transitional provisions in the new Bill will likely clarify whether companies falling below the new ₹10 Crore mark can exit the CSR regime immediately upon the amendment's enactment.
The shift to a ₹10 Crore threshold is a pragmatic move by the government, acknowledging inflation and ensuring that the heavy machinery of mandatory CSR is reserved for genuinely large, highly profitable corporations.