4A and 5 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 4A, inserted on 27 May 2026, lets a company carry out CSR through a zero coupon zero principal instrument issued by a Not for Profit Organization. Rule 5 says how the CSR Committee is constituted and what its annual action plan must contain. This article is as amended up to G.S.R. 415(E) dated 27 May 2026 per the MCA e-book. Later amendments should be checked before you rely on it. For help setting up the committee and the plan, see our 12A, 80G and CSR registration service.
A company may carry out CSR through a zero coupon zero principal instrument, but the expenditure on such instruments must not exceed ten per cent of its total CSR expenditure for that financial year. The subscriber is exempt from impact assessment for projects funded this way. The CSR Committee formulates and recommends the annual action plan with five contents, and the Board may alter it during the year on reasonable justification.
Rule 4A: CSR through a zero coupon zero principal instrument
Rule 4A was inserted by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026 dated 27 May 2026 (G.S.R. 415(E)). Rule 2(1)(l) defines the instrument as one declared as a security, issued by a Not for Profit Organization registered with the Social Stock Exchange segment of a recognised Stock Exchange in accordance with SEBI regulations; see our article on the definitions.
| Sub-rule | What it says |
|---|---|
| 4A(1) | A company may carry out CSR activities through a zero coupon zero principal instrument. The proviso: the expenditure incurred for such instrument shall not exceed ten per cent of the total CSR expenditure of the company for that financial year |
| 4A(2) | A company that has subscribed in such an instrument is exempted from undertaking impact assessment of any project funded by it |
| 4A(3) | The Not for Profit Organisation issuing the instrument and raising funds must (a) undertake a project with a duration of not more than three succeeding financial years from the issue; and (b) on termination of listing of the instrument, transfer the unspent amount to any fund included in Schedule VII to the Act and submit its compliance report to the Securities Exchange Board of India |
| 4A(4) | The provisions of rule 4 apply to CSR through such an instrument, except sub-rules (5) and (6) |
The exception in 4A(4) matters: rule 4(5) is the Board's duty to satisfy itself on utilisation, with the CFO's certificate, and rule 4(6) is monitoring of an ongoing project. Neither applies to this route, while the rest of rule 4, including the implementing entities and CSR-1 registration, does; see our article on rules 3 and 4. The impact assessment itself is in rule 8; see rule 8 and the Annexures.
Rule 5(1): the CSR Committee
The companies mentioned in rule 3 must constitute a CSR Committee as follows:
- A company covered under section 135(1) that is not required to appoint an independent director under section 149(4) shall have its CSR Committee without such director.
- A private company having only two directors on its Board shall constitute its CSR Committee with two such directors.
- For a foreign company, the CSR Committee shall comprise at least two persons, of which one shall be the person specified under section 380(1)(d) of the Act and another shall be nominated by the foreign company.
The composition of the committee for other companies is set by section 135 of the Act; see section 135 of the Companies Act, 2013 and our articles on the CSR Committee and the Board resolution to constitute the committee.
Rule 5(2): the annual action plan
The CSR Committee must formulate and recommend to the Board an annual action plan in pursuance of its CSR Policy, including:
| Clause | Content |
|---|---|
| (a) | The list of CSR projects or programmes approved to be undertaken in areas or subjects specified in Schedule VII of the Act |
| (b) | The manner of execution of the projects or programmes as specified in rule 4(1) |
| (c) | The modalities of utilisation of funds and implementation schedules |
| (d) | The monitoring and reporting mechanism for the projects or programmes |
| (e) | Details of need and impact assessment, if any, for the projects undertaken by the company |
A proviso lets the Board alter the plan at any time during the financial year, as per the recommendation of its CSR Committee, based on reasonable justification. Our article on the annual action plan and its five mandatory contents goes through each clause.
Rule 6 in a line
Rule 6, which once dealt with the CSR Policy, is omitted. The contents of the CSR Policy now sit in the definition in rule 2(1)(f), in the annual action plan in rule 5(2) and in the Act.
The two rules together
| Subject | Rule | Key point |
|---|---|---|
| CSR through a zero coupon zero principal instrument | 4A | Up to ten per cent of total CSR expenditure of the year |
| Impact assessment | 4A(2) | Subscriber exempt for projects funded by the instrument |
| Issuer's project | 4A(3) | Not more than three succeeding financial years |
| Committee for company not needing an independent director | 5(1)(i) | Without such director |
| Committee for private company with two directors | 5(1)(ii) | Two directors |
| Committee for foreign company | 5(1)(iii) | At least two persons |
| Annual action plan | 5(2) | Five contents; Board may alter during the year |
A worked example
Quest Industries Limited has a total CSR expenditure of rupees ten crore for the year. It decides to subscribe to zero coupon zero principal instruments issued by a Social Stock Exchange registered not for profit. Under rule 4A(1), the instruments cannot account for more than ten per cent of the year's CSR expenditure, that is, rupees one crore. The company need not do an impact assessment of the projects those instruments fund. Its CSR Committee prepares the annual action plan listing the projects under Schedule VII, the manner of execution, the utilisation modalities and schedules, the monitoring mechanism and the impact assessment details. Midway through the year, the Board alters the plan on the committee's recommendation, recording the reasonable justification.
Need help with the CSR Committee and plan?
Constituting the right committee, writing the plan to the five clauses and handling the new instrument route need care. Our 12A, 80G and CSR registration team can prepare the Board resolutions, the plan and the implementing agency papers.
Key takeaways
- A company may use zero coupon zero principal instruments for CSR, up to ten per cent of the year's total CSR expenditure.
- The subscriber is exempt from impact assessment for projects funded by such instruments.
- The issuing not-for-profit's project runs not more than three succeeding financial years and unspent money goes to a Schedule VII fund when the listing ends.
- Rule 4 applies to this route except sub-rules (5) and (6).
- The CSR Committee prepares an annual action plan with five contents; the Board can alter it during the year.
Read next
- Rules 3 and 4: implementing agencies and CSR-1
- Rules 7 and 9: CSR expenditure, set-off and website display
- Annual action plan: five mandatory contents
- CSR Committee under section 135
Disclaimer: Based on the Companies Act, 2013 rules (and the Companies (Auditor's Report) Order, 2020) named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.