Business · India Bureau
Corporate tax hike could replace CSR mandate, suggests Zerodha chief
Zerodha founder Nithin Kamath has proposed eliminating the mandatory 2% Corporate Social Responsibility spending requirement in favour of a higher corporate tax rate, arguing the approach would distribute social spending more equitably across the economy.
LSN India ·
The fintech entrepreneur has challenged the existing CSR framework, which requires listed companies and those meeting specific financial thresholds to allocate 2% of their average net profits toward social welfare initiatives. Kamath suggests that increasing the corporate tax rate to 27% could serve as a more effective mechanism for funding social programmes.
The proposal stems from concerns that the current CSR mandate creates uneven social impact, with spending concentrated in areas chosen by individual corporations rather than being guided by broader societal needs. By channelling social spending through the tax system, the approach could theoretically ensure more uniform distribution of resources across different regions and sectors.
The CSR requirement, mandated under Section 135 of the Companies Act 2013, has been credited with directing billions towards education, healthcare, and community development projects since its implementation. However, critics argue the decentralised nature of CSR spending often leads to duplication of efforts and gaps in coverage, particularly in underserved regions.
Kamath's proposal raises questions about the effectiveness of different mechanisms for directing corporate resources toward social welfare. While proponents of the current CSR system contend it encourages corporate participation in nation-building, questions persist about whether mandatory spending requirements or higher taxation represent the optimal approach to addressing India's social development needs.