CSR and income tax: what companies can and can’t deduct

CSR spending is not a tax-deductible business expense in India. Section 34(2)(b) of the Income-tax Act, 2025, in force since 1 April 2026, excludes it from the general deduction for business expenditure, as Explanation 2 to section 37(1) of the Income-tax Act, 1961 did before. Whether a company can instead claim a donation deduction for CSR contributions to approved NGOs and funds is contested, and for companies on the concessional tax rates it isn’t available at all.

The Ministry of Corporate Affairs (MCA) puts it plainly in its CSR FAQs: the amount spent on CSR can’t be claimed as business expenditure, and “No specific tax exemptions have been extended to CSR expenditure” (FAQ 3.10 and 3.11). So a company’s CSR budget is, in effect, paid out of its post-tax profit.

This guide is for CFOs, tax teams and CSR heads. It explains the business-expense bar, the donation deduction and its CSR exclusions, the effect of the concessional tax rates, other deductions people ask about, GST on CSR purchases, and what NGOs report. It reflects the law as in force on 3 October 2026. Tax law turns on facts, so treat it as a map for a conversation with your adviser, not a substitute for one.

The short answer

CSR isn’t a business expense

The rule isn’t new. The Finance (No. 2) Act, 2014 added Explanation 2 to section 37(1) of the 1961 Act, saying the same thing from assessment year 2015-16, which covered 2014-15, the first year of Section 135. The 2025 Act carried it over unchanged in substance.

In practice, a covered company adds the CSR expenditure in its accounts back when it computes taxable business income, whether the money was spent directly on projects, given to implementing agencies or contributed to Schedule VII funds. The bar is written into the general deduction in Section 34(1); whether it affects deductions claimed under other, specific provisions is discussed below.

Donation deductions under Section 133 (formerly 80G)

Section 133 of the 2025 Act replaced section 80G. It gives a deduction for gifts of money to listed funds and to approved charities: 100% for certain listed funds, such as the PM’s National Relief Fund and the PM CARES Fund, and 50% for gifts to a registered non-profit organisation approved under Section 354, counted only up to 10% of the donor’s adjusted gross total income. Gifts in kind don’t qualify, nor do cash gifts over ₹2,000. Our guide to tax deductions for donors explains the deduction in full.

For CSR, Section 133 contains two express exclusions, carried over from section 80G:

Those are the only CSR references in Section 133. Other funds, including the PM’s National Relief Fund and the PM CARES Fund, and gifts to approved NGOs, carry no CSR exclusion in the text. That gap is the source of the argument:

• The case for a deduction. In Goldman Sachs Services Pvt. Ltd v. JCIT (assessment year 2015-16), the Bangalore bench of the Income-tax Appellate Tribunal held under the 1961 Act that because section 80G excluded CSR only for those two funds, other CSR contributions could qualify for the 80G deduction if its conditions were met, and sent the case back for fresh examination. KPMG, reporting the decision in July 2020, noted that the Bangalore bench had allowed such claims in some other cases too, on the view that denying them would disallow the same spending twice.
• The case against. According to the same KPMG note, tax authorities contended that Parliament never meant CSR spending to be subsidised through tax deductions, and that CSR is mandatory rather than voluntary, so it isn’t a donation.
• Under the 2025 Act. The structure is the same: two express exclusions and nothing else. We found no ruling on Section 133 and CSR as of October 2026.

So the honest position is that whether a company can claim a Section 133 deduction for CSR contributions is contested. Don’t describe CSR as “tax-free” or “tax-deductible”, and take advice before claiming.

If your company pays tax at 22% or 15%

Companies can opt for concessional corporate tax rates. Under the 2025 Act, the main ones are the 22% option in Section 200 (the successor to section 115BAA) and the 15% option for new manufacturing companies in Section 201. Both require total income to be computed without any deduction under Chapter VIII of the Act, other than Sections 146 and 148.

Section 133 sits in Chapter VIII. So a company on either option can’t claim the donation deduction at all, CSR or not, and the contested question above doesn’t arise for it. The 25% option for certain manufacturing companies in Section 199 is different: it rules out the deductions in Part C of Chapter VIII, but not Part B, where Section 133 sits. Check which regime your company has opted into before your CSR team promises anyone a tax benefit.

Other deductions CSR spending might fit

Some CSR spending looks like expenditure the Act rewards elsewhere, such as contributions to research institutions under Schedule VII item (ix), or a project that also qualifies for a specific deduction. The bar in Section 34(2)(b) is written for the general deduction in Section 34(1). Whether CSR spending that meets the conditions of another, specific provision can be deducted under that provision isn’t settled. Some secondary sources say it can, but we couldn’t confirm that from an official source for either Act. Take advice, and don’t count on it in your CSR budget.

GST on CSR purchases

CSR budgets also carry GST. The Budget for 2023-24 proposed, and the Finance Act, 2023 made, an amendment to section 17(5) of the Central Goods and Services Tax Act, 2017: input tax credit isn’t available on goods or services that a taxable person receives and uses, or intends to use, for activities relating to its CSR obligations under Section 135. In other words, the GST a company pays on what it buys for CSR projects is a cost, not a credit, and budgets should include it.

What NGOs report

NGOs that are approved for donors’ deductions file an annual statement of donations, Form 113 (formerly Form 10BD), and give donors certificates in Form 114 (formerly Form 10BE). Form 113 has a separate category for donations from CSR funds under Section 135 of the Companies Act, alongside corpus donations, specific grants and other contributions. The first Form 113 under the 2025 Act covers tax year 2026-27, and the Income Tax Department’s manual treats 31 May 2027 as its deadline; donations received in 2025-26 were reported in Form 10BD under the 1961 Act.

Reporting a CSR receipt in Form 113 doesn’t settle whether the company can claim a deduction for it. It records the gift accurately, which matters if the company does claim. See donation statements and certificates.

To act as a CSR implementing agency, a Section 8 company, registered public trust or registered society needs both income-tax registrations, for exemption and for donors’ deduction, unless a government set it up, and every implementing agency needs a Form CSR-1 registration. The CSR Rules still describe them by their 1961 Act numbers, 12A and 80G. See Form CSR-1 and the Income-tax Act, 2025 for NGOs.

Which Act applies to which year

Two income-tax Acts are live in October 2026:

• 2025-26 and earlier fall under the Income-tax Act, 1961. For these years, CSR is barred as a business expense by Explanation 2 to section 37(1), and the CSR exclusions are in section 80G(2)(a)(iiihk) and (iiihl). Returns filed during 2026 are mostly for these years.
• Tax year 2026-27 onwards falls under the Income-tax Act, 2025. The new Act uses “tax year” instead of “previous year” and “assessment year”.

As of October 2026 we hadn’t found any 2026 amendment to Section 34 or Section 133, but check the latest Finance Act before you file.

Questions to take to your adviser

• Which corporate tax regime has the company opted for, and does it allow Chapter VIII deductions?
• For each CSR contribution to an NGO or fund, does the recipient hold a valid approval under Section 354, or under section 80G of the 1961 Act until it expires?
• Is the company prepared to defend a Section 133 claim for CSR contributions, given that the point is contested?
• Does any CSR spending also meet the conditions of a specific deduction, and what is the risk in claiming it?
• Has GST on CSR purchases been budgeted as a cost?
• Are the CSR figures in the tax computation reconciled with the annual report on CSR and Form CSR-2?

For the CSR side of the numbers, see how much a company must spend. The CSR Law in Depth course covers the CSR rules these tax questions sit on.