What Is CSR in India? A Complete Guide to Section 135
A plain-English guide to Corporate Social Responsibility under Section 135 of the Companies Act, 2013: who must spend, how much, on what, and how it is reported.
India is one of the few countries in the world where Corporate Social Responsibility (CSR) is required by law. Since 1 April 2014, larger companies have had to spend part of their profits on social development. A decade later, mandated CSR has grown from about ₹10,066 crore in FY 2014-15 to about ₹40,794 crore in FY 2024-25, according to the Ministry of Corporate Affairs (MCA).
This guide explains how the law works, in plain English.
Where CSR law comes from
CSR in India is governed by Section 135 of the Companies Act, 2013, the Companies (CSR Policy) Rules, 2014 (substantially amended in January 2021), and Schedule VII of the Act, which lists the activities that count as CSR.
Which companies must spend on CSR?
A company must comply with Section 135 if, in the immediately preceding financial year, it had any one of the following:
- a net worth of ₹500 crore or more;
- a turnover of ₹1,000 crore or more; or
- a net profit of ₹5 crore or more.
We cover the thresholds in detail in our guide to CSR applicability.
How much must be spent?
Eligible companies must spend at least 2% of their average net profit from the three immediately preceding financial years. Net profit here is calculated under Section 198 of the Act. See how to calculate the 2% CSR obligation for a worked example.
What counts as CSR?
Only activities that fall within Schedule VII qualify. These include eradicating hunger and poverty, promoting health care and sanitation, education, gender equality, environmental sustainability, rural development, disaster management and more. Activities in the normal course of business, or those that benefit only employees, do not count. Our Schedule VII guide covers each category.
The CSR committee and policy
Companies covered by Section 135 must form a CSR Committee of the board. The exception is a company whose CSR obligation is ₹50 lakh or less, whose board can perform the committee's functions itself. The committee formulates a CSR policy, recommends an annual action plan and monitors implementation.
What happens to money that isn't spent?
Since 2021, unspent CSR is no longer a matter of "comply or explain".
- Money allocated to an ongoing project must be moved to an Unspent CSR Account within 30 days of the end of the financial year and spent within three years.
- Money that is not tied to an ongoing project must be transferred to a fund listed in Schedule VII, such as the PM CARES Fund, within six months.
Read more in our guide to unspent CSR funds.
Who can implement CSR?
Companies can implement CSR directly or through implementing agencies. External agencies must register with the MCA using Form CSR-1. Registered trusts, societies, Section 8 companies, and entities set up by the government all qualify.
Reporting and disclosure
CSR spending is disclosed in the board's report and filed with the MCA through Form CSR-2. Companies with large CSR obligations must also commission independent impact assessments of bigger projects.
The bigger picture
CSR has made India's companies one of the country's largest sources of development funding. But the money is unevenly spread. In FY 2023-24, Bihar, home to about one in eleven Indians, received only about 1% of the CSR that can be traced to a state. Understanding the law is the first step; deciding where the money goes is where the real impact lies.
This article is for general information and is not legal advice. Always check the latest MCA notifications.
