Corporate Social Responsibility

Corporate Social Responsibilty

Kopal Jain | Updated: 28 December, 2021

The Corporate Social Responsibility concept in India is governed by Section 135 of the Companies Act, 2013 and Rules made thereunder. This section highlights the criteria for assessing the CSR eligibility of a Company, its implementation and reporting of the CSR policies.

Further, in case a Company fails to comply with the provisions of this section, heavy penalties going up to 1 crore rupees can be levied.

For the understanding of the Corporates, we have summarized the main provisions of CSR, which are as follows :

S. No.




Eligible Companies

A company including Section 8 companies satisfying any of the following criteria during the immediately preceding financial year

  • Net Worth of Rs. 500 crore or more, or
  • Turnover of Rs. 1000 crore or more or
  • Net Profit of Rs. 5 crore or more

Applicability of provisions of Section 135 of the Act is company specific. Hence, every company whether holding or subsidiary satisfying the prescribed criteria shall comply with the provisions. By mere relationship between two companies as Holding and Subsidiary, shall not extend the applicable provisions to the other company.


Constitution of CSR Committee

  • Every company on which CSR criteria is applicable shall constitute a CSR Committee.
  • However, where the amount to be spent by a company does not exceed fifty lakh rupees, the requirement for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee shall be discharged by the Board of Directors of such company

Listed Companies

Three or more directors, out of which at least one should be independent.

Unlisted Public Companies

Three or more directors, out of which at least one should be independent, however if there is no requirement of having independent directors in the company under Section 149 (4), then two or more directors.

Unlisted Private Companies

Any two Directors

Foreign Company

At least two persons out of which –

  1. one shall be as specified under Section 380(1)(d) of the Companies Act, 2013 and
  2. another shall be nominated by the foreign company.


Functions of the CSR Committee

The CSR Committee shall 

  • formulate and recommend a CSR policy to the Board, which shall indicate the CSR activities to be undertaken by the Company
  • recommend the amount of expenditure to be incurred on the CSR activities
  • monitor the CSR policy of the Company from time to time. 

The CSR Committee formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy, which shall include the following:

  • the list of CSR projects or programs that are approved to be undertaken;
  • the manner of execution of such projects or programs ;
  • the modalities of utilization of funds and implementation schedules for the projects or programs;
  • monitoring and reporting mechanism for the projects or programs; and
  • details of need and impact assessment, if any, for the projects undertaken by the company:



Board Report and website disclosures :

  • CSR Committee’s Composition
  • The Contents of CSR Policy
  • In case of CSR spending does not meet 2% as per CSR Policy, the reasons for the unspent amount, and details of the transfer of unspent amount relating to an ongoing project to a specified fund (transfer within a period of six months from the expiry of the financial year) 
  • Annual Report on CSR
  • Projects approved by the Board on their website, if any, for public access
  • Impact Assessment Report may also be disclosed on the website


Implementation of CSR Projects

A Company may undertake the implementation of CSR projects through the following methods :

  • Undertaking CSR activities by company itself
  • Section 8 company/ registered public trust/ registered society, registered under section 12A and 80 G of the Income Tax Act, 1961, established by the company, either singly or along with any other company
  • Section 8 company/ registered trust/ registered society, established by the Central Government or State Government.
  • Any entity established under an Act of Parliament or a State Legislature
  • Section 8 company/ registered public trust/ registered society, registered under section 12A and 80G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities.


Responsibility of Board in case of Ongoing Projects

In case of ongoing project, the Board of a Company shall:

  • approve a project as a multi-year on-going project, i.e., extend the duration beyond one year, based on reasonable justification,
  • monitor the implementation of the project with reference to the approved timelines and year-wise allocation ,
  • shall make modifications, if required, for smooth implementation of the project within the overall permissible time period.


Transfer and use of Unspent Amount

In case the company fails to spend the obligatory amount, the Board shall specify the reasons for not spending the same, in the Board’s report.


CSR Policy

“CSR Policy” means a statement containing the approach and direction given by the board of a company, taking into account the recommendations of its CSR Committee, and includes guiding principles for selection, implementation and monitoring of activities as well as formulation of the annual action plan.

The Board shall :

  1. approve the CSR Policy
  2. disclose contents of such Policy in its report and also place it on the company’s website, if any,
  3. ensure that the activities included in CSR Policy are undertaken by the company.
  4. ensure that the company spends, in every financial year, atleast two per cent. of the average net profits of the company made during the three immediately preceding financial years.


List of Activities as per Schedule VII of the Companies Act, 2013

  1. Abolishing poverty, malnourishment and hunger, improvising health care which includes preventive health care and sanitation and making available safe drinking safe water.
  2. Improvement in education which includes special education and employment strengthening vocation skills among children, women, elderly and the differently-abled and livelihood enhancement projects.
  3. Improving gender equality, setting up homes and hostels for women and orphans.
  4. Introducing the measures for reducing inequalities faced by socially and economically backward groups.
  5. Safeguarding environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining a quality of soil, air and water which also includes a contribution for rejuvenation of river Ganga.
  6. Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts.
  7. Areas for the advantage of skilled armed forces, war widows and their dependents.
  8. Training to stimulate rural sports, nationally recognized sports, Paralympic sports and Olympic sports.
  9. Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socio-economic development providing relief and welfare of the Scheduled Castes, the Scheduled and backward classes, minorities and women.
  10. Contributions or funds provided to technology incubators are approved by the Central Government.
  11. Rural development projects.
  12. Disaster management, including relief, rehabilitation and reconstruction activities.
  13. Slum area development where ‘slum area’ shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force.


Penal Provisions

Non-compliance of transferring unspent amount of a CSR project may attract the following penalties as per section 135(7):


Every Office in Default

Twice the amount required to be transferred to a fund specified in Schedule VII or Unspent CSR account, as the case may be or one crore rupees, whichever is less

1/10th of the amount required to be transferred to a Fund specified in Schedule VII or Unspent CSR account or two lakh rupees, whichever is less.

In case of any other non-compliance/default under any other provision of the section, or Rules, then the following penalties are applicable :

penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the contravention continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other person.


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