CSR under the Companies Act, 2013

Corporate Social Responsibility (CSR) in India moved from being largely a voluntary corporate practice to a statutory responsibility with the introduction of Section 135 of the Companies Act, 2013. The CSR provisions and Schedule VII came into effect from 1 April 2014. Section 135 specifies which companies are covered by CSR, the minimum expenditure requirement, the role of the Board and CSR Committee, and the manner in which CSR activities are to be governed and reported.

The Indian CSR framework is distinctive because it combines corporate responsibility with legal accountability. However, the law does not prescribe one particular project for every company. Companies can select suitable projects from the areas specified in Schedule VII according to their CSR Policy and community needs.

Applicability of CSR

CSR provisions apply to a company if, during the immediately preceding financial year, it satisfies any one of the following conditions:

1. Net worth: ₹500 crore or more; or
2. Turnover: ₹1,000 crore or more; or
3. Net profit: ₹5 crore or more.

Therefore, a company does not need to satisfy all three conditions. Meeting even one of these thresholds makes the company subject to the CSR provisions, subject to the applicable

CSR Committee and the Role of the Board

Companies covered by Section 135 are generally required to constitute a CSR Committee of the Board. However, where the amount required to be spent by a company under Section 135 does not exceed ₹50 lakh, the company is not required to constitute a separate CSR Committee. In such cases, the functions of the CSR Committee are performed by the Board of Directors.

The CSR Committee/Board plays an important role in ensuring that CSR is treated as a structured corporate responsibility rather than as an occasional charitable activity.

Major responsibilities include:

• Formulating the CSR Policy
• Recommending CSR expenditure
• Monitoring CSR activities
• Reviewing and recommending changes
• Ensuring compliance

CSR Spending Requirement

A company covered under Section 135 is required to spend at least 2% of the average net profits made during the three immediately preceding financial years on CSR activities.

The important point is that the 2% is not calculated on the current year's profit. It is calculated on the average of the preceding three financial years' net profits, as determined in accordance with the provisions applicable to CSR calculation.

Example of CSR Calculation

Suppose XYZ Ltd. has the following net profits:

Financial Year	Net Profit
FY 2023–24	₹80 crore
FY 2024–25	₹100 crore
FY 2025–26	₹120 crore

Step 1: Calculate average net profit

Average net profit:

(₹80 crore + ₹100 crore + ₹120 crore) ÷ 3 = ₹100 crore

Step 2: Calculate minimum CSR obligation

CSR obligation:

2% × ₹100 crore = ₹2 crore

Therefore, XYZ Ltd. would generally have a minimum CSR spending obligation of ₹2 crore for the relevant financial year.

CSR Activities under Schedule VII

Schedule VII of the Companies Act provides the broad areas in which companies may undertake CSR activities. These areas cover health, education, gender equality, environmental sustainability, heritage, rural development, sports, disaster management and other social-development priorities.

The following examples illustrate how Indian companies have undertaken initiatives corresponding to these broad

1. Eradicating Hunger, Poverty and Malnutrition; Healthcare, Sanitation and Safe Drinking Water

 Example: Tata Steel – MANSI/MANSI+: The MANSI (Maternal and Newborn Survival Initiative) uses a home-based newborn and child-care model delivered through community-level health workers, and was designed from field research identifying the major causes of neonatal deaths in tribal communities; the programme subsequently expanded across Jharkhand and Odisha and reported a 47% decline in child mortality across 1,600 villages over ten years.

2. Promoting Education, Vocational Skills and Livelihood Enhancement

CSR can support education from basic schooling to higher education, digital learning, vocational training and employability.

Example: Infosys Springboard: Infosys Springboard is implemented through a free digital-learning platform supported by educational institutions, NGOs and curriculum partners, and its India programme had reached nearly 400,000 learners and 300+ educational institutions, NGOs and support groups, while the subsequent Springboard Livelihood Programme committed more than ₹200 crore in its first phase with an ambition to create employment opportunities for 500,000 job seekers by 2030.

3. Gender Equality and Empowerment of Women

CSR initiatives in this area may include women's education, livelihood programmes, entrepreneurship, skill development, support facilities and measures addressing social inequalities.

Example: Project Shakti: Project Shakti follows a micro-entrepreneurship model in which rural women are trained and supported to operate as local distributors, combining livelihood creation with access to products and community-level outreach.

4. Environmental Sustainability

This area includes: afforestation, Water conservation, Biodiversity protection, Waste management, Renewable energy, Pollution reduction and Conservation of natural resources.

Example: ITC – Social and Farm Forestry Programme: ITC Limited has implemented large-scale social and farm forestry programmes involving farmers and rural communities. The programme links environmental improvement with livelihood generation by encouraging tree-based activities among rural households.

5. Protection of National Heritage, Art and Culture

CSR can support the preservation of India's historical monuments, traditional arts, cultural heritage, libraries and handicrafts.

Example: Tata Group – Heritage Conservation: Tata Group companies and Tata-related philanthropic institutions have historically supported heritage conservation, art, culture and preservation initiatives.

6. Measures for the Benefit of Armed Forces Veterans, War Widows and Their Dependents

Example: Bharat Forge – Support for Defence Personnel and Veterans. Bharat Forge and the broader Kalyani Group have supported initiatives connected with defence personnel, veterans and their families through philanthropic and social-development interventions.

7. Promotion of Rural Sports, Nationally Recognised Sports, Paralympic and Olympic Sports

CSR can support sports infrastructure, training, coaching and opportunities for talented athletes.

Reliance Foundation – Sports for Development: Sports for Development is implemented through programmes such as Reliance Foundation Youth Sports, Young Champs, Jr. NBA and Olympic initiatives, combining grassroots participation with professional athlete development; in FY2024–25, Reliance Foundation reported 23+ million minutes of play by RFYC graduates, illustrating the scale of its sports-development ecosystem.

8. Contributions to Specified Government Funds and Programmes

Schedule VII permits contributions to specified funds and programmes, including government-established funds covered by the relevant provisions.

Example: PM CARES Fund: Reliance Industries contributed ₹500 crore to the PM CARES Fund during the COVID-19 crisis, representing a rapid-response CSR approach in which corporate resources were channelled through a national emergency mechanism rather than through a newly established company-specific implementation network.

9. Technology Incubators and Research and Development

Schedule VII also includes contributions or funding provided to technology incubators located within academic institutions approved by the Central Government.

Indian Example: Tata Consultancy Services – Academic and Innovation Initiatives. Tata Consultancy Services has undertaken initiatives involving academic institutions, technology education, innovation and digital capability development.

10. Rural Development Projects

Rural development CSR can address multiple dimensions of rural life

Tata Steel – Integrated Village Development. Tata Steel has implemented community development programmes in villages around its operating locations, covering areas such as education, health, livelihoods, infrastructure and rural development.

 

The CSR Management Cycle

CSR under the Companies Act can be understood as a continuous management cycle:

Plan → Implement → Monitor → Evaluate → Disclose

Impact Assessment

Impact assessment examines whether a CSR project has produced meaningful social or environmental change. It is different from simply checking whether the money was spent.

CSR Reporting

CSR reporting is a mandatory component of the framework. A CSR-eligible company is required to include the prescribed annual CSR report in its Board's Report. The report provides information about the company's CSR policy, governance structure, expenditure, projects and other prescribed details.

Important Amendments and Evolution of the CSR Framework

The CSR framework has developed significantly since 2014.

2014 – CSR Rules introduced: The Companies (CSR Policy) Rules, 2014 established detailed operational requirements for implementing Section 135.

2019–2020 – Greater emphasis on impact and accountability

2021 – Major CSR Rules Amendment: The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 introduced important changes, including clearer definitions, implementing-agency requirements, CSR-1 registration and provisions relating to impact assessment.

2022 – Further refinement: The 2022 amendment further modified provisions relating to CSR Committees, implementing agencies, impact assessment and CSR reporting. For example, the Rules were amended to require a CSR Committee where a company has an amount lying in its Unspent CSR Account.