Zerodha co-founder Nithin Kamath has proposed a significant shift in India's corporate social responsibility framework, suggesting that companies should pay 27% corporate tax instead of the current 25% to fund social programmes. According to reports from Live Mint, Kamath argues that this approach would allow the government to direct additional revenue towards areas where it can potentially achieve greater social impact. His proposal centers on the fundamental question of whether companies should be required to spend a fixed share of profits on social projects, or whether the focus should be on where money can achieve the greatest long-term results. As reported by NDTV Profit, Kamath acknowledged the obvious question: Would the government allocate the money any better, suggesting this approach could distribute resources more evenly across the country rather than tying CSR spending to the locations of profitable businesses.
Kamath raised several concerns about the mandatory 2% CSR spending requirement, stating that businesses often lack the expertise, time and institutional capacity to determine which social projects will deliver the greatest impact. As reported by Live Mint, he argued that companies may naturally choose projects close to their operations, potentially contributing to CSR spending being concentrated in states such as Maharashtra, Gujarat and Delhi rather than areas with greater need. The 2% requirement can also turn spending itself into the target, rather than encouraging companies to assess whether their projects are producing measurable outcomes. According to NDTV Profit, Kamath pointed to another concern: the focus on spending targets rather than outcomes, noting that while 'planting X lakh trees' can provide a straightforward CSR target, the more meaningful questions are whether companies plant native species and whether those trees survive for a decade.
Using environmental and education projects as examples, Kamath illustrated the difference between measuring expenditure and measuring impact. According to Live Mint, he noted that while 'planting X lakh trees' can provide a straightforward CSR target, the more meaningful questions are whether companies plant native species and whether those trees survive for a decade. Similarly, building schools or adding classrooms is easy to quantify, but the ultimate measure should be whether students are learning. As reported by NDTV Profit, constructing a school may be measurable, but the real outcome should be whether students are actually learning. Kamath also pointed to governance concerns, arguing that greater emphasis on deploying predetermined budgets increases the possibility of resources being wasted or misused.
Kamath contrasted his concerns about mandatory CSR with Zerodha's own approach, stating that the company has allocated approximately 10% of profits towards 'investing for the future' through the RainmatterOrg. As reported by Live Mint, he emphasized the distinction between spending for the sake of spending and investing for long-term impact. He also raised concerns about the anchoring effect of the 2% figure, arguing that once companies are told CSR spending should equal 2% of profits, businesses may treat that as the appropriate target rather than a minimum requirement, potentially preventing firms from allocating 5% or 10% of profits to social initiatives. According to NDTV Profit, Kamath said the debate is therefore less about how much companies spend and more about what that money achieves, stating that 'spending for the sake of spending and investing for future are two very different things'.
