In recent years, Corporate Social Responsibility (CSR) has emerged as a key pillar in responsible business practices, especially in developing economies like India. The country has gone a step further than many by legally mandating CSR under the CSR Act 2013, making it the first nation to do so.
For companies operating in India, understanding CSR rules in India is no longer optional—it’s a legal obligation with significant strategic benefits. From the applicability of CSR to the management of CSR funds and eligible activities, this guide explains everything Indian businesses must know about CSR in India.
If you’re looking to implement or refine your CSR strategy, Devaaksh Consulting Firm offers expert guidance to help you align with compliance while making meaningful impact.
What Is CSR and Why Is It Important?
Corporate social responsibility of business refers to the ethical obligation of companies to contribute to the social and environmental well-being of the communities in which they operate. It goes beyond philanthropy—it’s about integrating social good into core business strategy.
In India, CSR has evolved into a structured and enforceable component of business regulation under the CSR Act 2013, embedded within the Companies Act, 2013.
Applicability of CSR in India
The applicability of CSR is defined under Section 135 of the Companies Act, 2013. According to this section, CSR rules apply to companies that meet any one of the following criteria during the immediately preceding financial year:
- Net worth of ₹500 crore or more
- Turnover of ₹1,000 crore or more
- Net profit of ₹5 crore or more
Once a company falls under this threshold, it is legally required to:
- Form a CSR committee
- Develop a CSR policy
- Spend at least 2% of their average net profits (from the last three years) on eligible CSR activities
CSR Spending in India: What You Must Know
CSR spending in India must be directed toward activities specified under Schedule VII of the Companies Act. These include:
- Eradicating hunger, poverty, and malnutrition
- Promoting education, gender equality, and women empowerment
- Ensuring environmental sustainability
- Protecting national heritage and culture
- Supporting rural development and slum area upliftment
- Promoting healthcare and sanitation
- Disaster relief efforts
- Contributions to PM CARES Fund or other government-approved funds
CSR activities must be carried out within India and should not benefit employees or their families directly.
CSR Fund: Structure and Utilization
The CSR fund refers to the mandatory 2% of average net profits allocated for CSR activities. This amount must be:
- Disclosed in the annual report
- Spent during the financial year or transferred to a CSR Unspent Account if the project is ongoing
- Used only for activities listed under Schedule VII
If a company fails to spend the allocated CSR fund, it must provide reasons in the Board Report. Additionally, the unspent amount (in case of non-ongoing projects) must be transferred to a government-approved CSR fund within six months of the end of the financial year.
Key Provisions Under CSR Rules in India
Here’s a summary of the most important CSR rules in India:
1. CSR Committee
A three-member committee (with at least one independent director) must be formed. This team is responsible for formulating and monitoring the CSR policy.
2. Annual Reporting
Companies must report their CSR activities, expenses, and outcomes in their Board Report and include a CSR annexure in their financial filings.
3. Implementation Partners
CSR activities can be implemented directly or through third-party NGOs registered with the Ministry of Corporate Affairs (MCA). All implementation partners must have a valid CSR Registration Number.
4. Surplus from CSR
Any surplus arising out of CSR projects must be reinvested into CSR and not added to the business profits.
CSR in India: Challenges and Opportunities
India’s mandatory CSR model is globally unique, but it also comes with challenges:
- Lack of expertise in CSR planning and execution
- Difficulty in identifying credible NGOs or partners
- Complex compliance and reporting norms
- Risks of “token CSR” or superficial contributions
However, it also opens doors for companies to:
- Strengthen community relationships
- Enhance brand equity
- Improve employee morale
- Contribute to national development goals
Strategic CSR, when done right, creates shared value for both business and society.
How Devaaksh Helps You Stay Compliant and Purposeful
At Devaaksh Consulting firm, we specialize in helping Indian companies develop legally compliant and socially impactful CSR strategies. Our services include:
- CSR policy formulation
- Project identification and partner vetting
- Monitoring and evaluation
- Annual CSR reporting
- Impact assessments
Whether you’re navigating the CSR Act 2013 for the first time or refining your current efforts, Devaaksh ensures that your CSR investments yield real-world impact—and stay fully compliant.
Final Thoughts
The CSR Act 2013 has redefined the corporate social responsibility of business in India, transforming it from a voluntary initiative into a structured mandate. As expectations from businesses evolve, CSR in India offers an opportunity to move beyond compliance and contribute meaningfully to nation-building.
To navigate the intricacies of CSR rules in India, manage your CSR fund efficiently, and deliver measurable impact, partner with the experts at Devaaksh Consulting Firm. We’ll help you turn CSR compliance into corporate conscience—and business as a force for good.
FAQs – CSR Compliance for Indian Companies
1. Is CSR mandatory for all companies in India?
No, only companies meeting specific financial thresholds (₹500 crore net worth, ₹1,000 crore turnover, or ₹5 crore net profit) are required to comply with CSR rules.
2. What is the minimum CSR spending requirement?
Eligible companies must spend at least 2% of their average net profits (from the previous three years) on CSR activities listed in Schedule VII.
3. What happens if a company fails to spend the CSR amount?
Unspent funds (for non-ongoing projects) must be transferred to a government CSR fund within six months. For ongoing projects, the amount should be placed in an Unspent CSR Account and used within three years.
4. Can a company implement CSR projects through third parties?
Yes, but only through NGOs or agencies registered with the Ministry of Corporate Affairs and having a valid CSR Registration Number.
5. Are contributions to the PM CARES Fund considered valid CSR?
Yes, contributions to PM CARES Fund and other government-approved funds qualify as valid CSR spending under the law.
