CSR compliance in India is no longer optional—it’s a legal requirement under the Companies Act, 2013. But many companies still make simple mistakes when trying to follow these rules. These errors can lead to penalties, damaged reputation, and missed social impact. In this blog, we’ll walk you through the top 5 CSR compliance mistakes businesses in India often make—and how to avoid them.
1. Not Understanding CSR Applicability Under Section 135
One of the most common mistakes is not knowing whether CSR rules even apply. Under Section 135 of the Companies Act, CSR is mandatory for companies that meet any of these criteria:
- Net worth of ₹500 crore or more
- Turnover of ₹1,000 crore or more
- Net profit of ₹5 crore or more
Many small or mid-size companies assume CSR doesn’t apply to them without checking the financials properly. Failing to comply when you’re actually covered by the law is a big risk.
🔹 Tip: Review your financials annually and consult a professional to confirm CSR applicability.
2. Failing to Form a CSR Committee
The law clearly says that every eligible company must form a CSR Committee. This group plans and monitors CSR activities and spending. However, many businesses skip this or create a committee just for show.
Without an active and responsible committee, the company may:
- Choose the wrong projects
- Miss out on proper planning
- Fail in documentation and reporting
🔹 Tip: Create a dedicated CSR Committee and ensure they meet regularly to plan, track, and evaluate initiatives.
3. Unclear or Irrelevant CSR Activities
Another big mistake is spending CSR funds on projects that don’t qualify under Schedule VII of the Act. CSR activities should focus on areas like:
- Education
- Healthcare
- Gender equality
- Environmental sustainability
- Rural development
Spending CSR money on routine business expenses or employee events does not count as valid CSR.
🔹 Tip: Carefully match your CSR activities with the approved list and always check new updates in the law.
4. Poor CSR Reporting and Documentation
Many companies in India miss proper CSR reporting, which is mandatory. Under the Companies Act, companies must include a CSR Report in the Board’s Report and also upload details on their website.
Common mistakes include:
- Not filing annual CSR reports properly
- Missing data in the report
- No public disclosure of CSR spending
Poor reporting creates legal issues and damages public trust.
🔹 Tip: Maintain detailed records of CSR projects, budgets, outcomes, and board approvals. Hire experts for compliance if needed.
5. Not Using CSR Funds Properly or Timely
Misuse or late use of funds is one of the most serious CSR violations in India. The law requires companies to spend 2% of their average net profits (of the last 3 years) on CSR every year. If they don’t spend it:
- The unspent amount must be transferred to a specific government fund within a deadline.
- For ongoing projects, the money should be transferred to a special “Unspent CSR Account.”
Companies often delay this or don’t maintain proper accounts.
🔹 Tip: Set up a tracking system for CSR fund utilization, deadlines, and financial transfers.
Final Thoughts
CSR compliance in India is more than just giving money—it’s about being responsible, organized, and transparent. Avoiding these five common mistakes will not only keep you legally safe but also help your company make a real difference in society.
Following CSR rules in India shows that your business cares about more than profit. It builds trust, boosts your brand, and creates long-term value for the community.
