Budget 2026: India Inc may get income tax exemptions for deploying CSR funds into vocational training
Officials aware of the issue told ET that a formal proposal has been submitted to the finance ministry and some of the benefits are expected to be announced in the Union budget to be presented on February 1.
ALSO READ: Will Trump be an uninvited guest at Sitharaman’s Budget table?
“This is about creating a more integrated pathway that allows companies to invest in skills infrastructure while seamlessly aligning CSR objectives and tax incentives to significantly unlock private sector participation,” one of the people quoted said. Currently, corporate investments in skills are governed by multiple provisions in CSR and tax frameworks, each serving a different purpose. While CSR expenses are treated separately from business expenses, tax incentives like Section 35CCD and 80G are subject to certain eligibility conditions.
ALSO READ: Budget 2026-27: Key figures to watch as Nirmala Sitharaman banks on growth
“Such alignment will not only facilitate compliance, but will also facilitate long-term industry investment in training,” the person quoted earlier said.
Opportunity in Global Services
A recent report by Crisil said that of the 2.22 lakh crore rupees spent by companies on CSR since fiscal 2015, only 3.5% was channeled towards skills.
It was also noted that CSR initiatives are fragmented and focused on traditional or informal trades, disconnected from the global employment ecosystem.
ALSO READ: Budget 2026: Future of Indian cities lies beyond metros
The Ministry of Skill Development and Entrepreneurship feels that India has a huge opportunity to meet the skill needs of developed economies in Europe, the Middle East, Japan and Australia, which face severe skills shortages in areas such as healthcare, aged care, logistics and construction. However, this will require better policy alignment for the corporate sector to address skills at scale, as the government has limited capacity to increase skills infrastructure and expand access. Skills training in the country is being provided under the flagship program called Pradhan Mantri Kaushal Vikas Yojana 4.0, which runs from 2022 to 2026 and aims to provide skill training to 15 million youth.
According to the Skill India dashboard, 2.7 million candidates have been trained so far out of a total of 3.34 million registrations.
The corporate affairs ministry already runs the Prime Minister’s Internship Programme, which is partly funded by the Center and partly by corporates through CSR funds. The program aims to provide one-year internship training to 10 million young people in the top 500 companies within five years.
