SEBI Proposes CSR Tax Benefits For Zero Coupon Zero Principal Bond Investments

The Securities and Exchange Board of India has proposed that the government should allow tax benefits to companies investing in zero coupon zero principal bonds issued by non-profit organisations listed on the Social Stock Exchange, to encourage spending in the social sector.

The regulator has already submitted this proposal to the finance ministry and is optimistic about its approval, SEBI's Whole Time Member Kamlesh Chandra Varshney told reporters on Friday, at an event organised by NSE on SSE in New Delhi.

The Central Board of Direct Taxes has also clarified that investors or donors purchasing these bonds will receive tax benefits under section 80G of Income Tax rules, he said.

These measures would promote inclusive growth in the social sector, build trust, and expand the donor base for organisations, Varshney said.

ZCZP bonds are financial instruments for donating money to non-profit organisations listed on the SSE. The SSE is a new concept in India, introduced by Finance Minister Nirmala Sitharaman in her Union budget 2019-20 speech. It aims to bring together social enterprises and donors, facilitate funding and growth of social enterprises, and ensure high standards of social impact and financial reporting.

Currently, eight to nine non-profit organisations are listed on the SSE, collectively raising nearly Rs 11 crore. One organisation is soon expected to raise Rs 14 crore through the platform, according to NSE Managing Director and Chief Executive Officer Ashishkumar Chauhan.

"We believe that SSE has a great future ahead in India as the government is committed to supporting the platform, as this will help in the democratisation of investments," he said.

SEBI has also taken steps to increase participation in the SSE. In November, the regulator reduced the issue size of ZCZP bonds from Rs 1 crore to Rs 50 lakh, and lowered the minimum application size for donors from Rs 2 lakh to Rs 10,000.

Last month, SEBI required social enterprises that have registered or raised funds through the SSE to submit an 'annual impact report' for the financial year 2024 by October-end. This report captures both the qualitative and quantitative aspects of the social impact generated by the enterprise.

(With text inputs from PTI)