Corporate Social Responsibility (CSR) in India: Implementation, Impact and Recent Developments
A UPSC guide to CSR in India — Section 135 of the Companies Act, applicability, Schedule VII, the 2021 rules, implementation, impact, challenges and recent developments.
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Table of contents
UPSC master note
Exam snapshot
- UPSC papers
- Prelims GS-I; Mains GS-II (Governance) and GS-III overlap; Essay
- Syllabus area
- Role of the private sector, corporate responsibility and development
- Prelims importance
- High — Section 135, thresholds, Schedule VII, rules and ESG/BRSR
- Mains importance
- High — implementation, impact and the state-responsibility debate
- Key law
- Section 135 of the Companies Act, 2013 (effective 2014)
- Obligation
- 2% of average net profit of the preceding three years
- Key committee
- High Level Committee on CSR (Injeti Srinivas, 2018)
- Recent scale
- CSR spending of about ₹40,800 crore reported in FY 2024–25
- Distinctive fact
- India was the first country to mandate CSR by law
Direct answer
What is Corporate Social Responsibility (CSR) in India?
Corporate Social Responsibility (CSR) is a company’s responsibility toward society and the environment beyond making profit. India became the first country to make CSR a legal obligation: under Section 135 of the Companies Act, 2013, qualifying companies must spend at least 2% of their average net profits on activities listed in Schedule VII. Once voluntary philanthropy, CSR in India is now a statutory, monitored duty — with mandatory spending, impact assessment and penalties.
Introduction: making business accountable to society
A business exists to make profit — but does it owe anything to the society whose resources, workers and markets make that profit possible? The idea of Corporate Social Responsibility answers yes: that companies have obligations to people and the planet, not just to shareholders. For most of history this was left to conscience and charity. India did something unprecedented — it made it the law.
Under Section 135 of the Companies Act, 2013, India became the first country in the world to statutorily mandate CSR, requiring large companies to spend a share of their profits on social good. In a single decade this has channelled an enormous sum — corporate CSR spending is reported to have reached around ₹40,800 crore in FY 2024–25, taking cumulative spending since 2014 past ₹2.6 lakh crore — into education, health, rural development and the environment. CSR has become a major pillar of India’s development industry, sitting alongside the state, NGOs and SHGs.
Yet mandating a moral duty raises hard questions. Does legal compulsion turn responsibility into a box-ticking compliance exercise? Is CSR spent where it is needed or where it is visible? And does corporate welfare quietly let the state offload its own responsibilities? This note explains what CSR is, India’s statutory framework and its recent evolution, how it is implemented, its impact, and the challenges that decide whether it genuinely serves society. It complements the notes on NGOs and development processes.
What CSR means
Defining corporate social responsibility
CSR is the integration of social, environmental and ethical concerns into a company’s operations and its interactions with stakeholders, reflecting a responsibility to society that goes beyond legal compliance and profit maximisation. In India, the statutory meaning is narrower and specific: the CSR obligation and the permitted activities are defined by Section 135 and Schedule VII of the Companies Act.
The theories: triple bottom line, stakeholders and ESG
Several ideas frame CSR. The triple bottom line (John Elkington) holds that business should be measured on People, Planet and Profit, not profit alone. Stakeholder theory (Edward Freeman) argues that a company is accountable to all its stakeholders — employees, customers, communities, the environment — not only shareholders. Carroll’s pyramid ranks corporate responsibilities as economic, legal, ethical and philanthropic. And the modern, investor-facing evolution is ESG (Environmental, Social and Governance), which turns responsibility into a measurable, disclosed dimension of corporate performance.
Key takeaways
CSR in nine propositions
- CSR is a company’s responsibility to society and the environment beyond profit.
- India was the first country to mandate CSR by law — Section 135, Companies Act 2013.
- Eligible companies must spend 2% of average net profits (of three years) on CSR.
- Permitted activities are listed in Schedule VII; some things are expressly excluded.
- The 2021 rules made spending mandatory, with unspent-fund transfer and penalties.
- Impact assessment and implementing-agency registration (CSR-1) are now required.
- The Injeti Srinivas Committee (2018) shaped this statutory turn.
- ESG and SEBI’s BRSR extend responsibility into mandatory disclosure.
- The debate is whether CSR complements the state or lets it offload welfare.
The evolution of CSR in India
From trusteeship to voluntary CSR
India has a long tradition of business philanthropy — the Tata, Birla and Bajaj houses built schools, hospitals and institutions, and Gandhi’s idea of trusteeship held that the wealthy hold their wealth in trust for society. For decades, corporate social contribution was voluntary charity, dependent on the values of individual industrialists.
India's statutory turn
The turning point was the Companies Act, 2013, whose Section 135 made CSR a statutory obligation for large companies from 1 April 2014 — the first such mandate anywhere. Initially framed as “comply or explain,” it evolved, through the 2019 and 2021 amendments, into a mandatory-spend regime with penalties, transforming CSR from optional generosity into an enforceable corporate duty.
Pre-2013
Trusteeship and philanthropy
Voluntary corporate charity, from the Tatas and Birlas to Gandhian trusteeship.
2013–14
Section 135 mandates CSR
The Companies Act makes India the first country to legally mandate CSR.
2018
High Level Committee on CSR
The Injeti Srinivas Committee recommends a stronger, accountable regime.
2020
PM CARES made eligible
Contributions to PM CARES recognised as CSR amid the pandemic.
2021
Mandatory-spend rules
Unspent-fund transfer, penalties, CSR-1/CSR-2 and impact assessment introduced.
2022–25
ESG reporting and revised forms
SEBI BRSR for top listed firms; the 2025 CSR-1 amendment refreshes registration.
The statutory framework: Section 135
Applicability and the 2% obligation
Section 135 applies to a company that, in the immediately preceding financial year, has a net worth of ₹500 crore or more, or a turnover of ₹1,000 crore or more, or a net profit of ₹5 crore or more. Such a company must spend, in every financial year, at least 2% of the average net profits made during the three immediately preceding financial years on CSR. It must also constitute a CSR Committee of the Board — though companies whose CSR obligation is small (up to ₹50 lakh) are exempted from the committee requirement and may have the Board itself discharge the function.
Schedule VII and permitted activities
CSR money can be spent only on activities listed in Schedule VII of the Act, which includes eradicating hunger, poverty and malnutrition; promoting education and gender equality; women’s empowerment; environmental sustainability; health and sanitation; rural and slum development; protection of national heritage; support to armed-forces veterans; sports; disaster management; and contributions to certain government funds (such as the PM National Relief Fund and PM CARES). Crucially, some things are not CSR: activities in the normal course of business, benefits confined to the company’s own employees, political contributions, and activities outside India (with limited exceptions).
The CSR Committee and governance
CSR is governed at the Board level. The CSR Committee formulates the CSR policy, recommends activities and the expenditure, and monitors implementation; the Board approves the policy, ensures the 2% spend, and discloses CSR in its report. This embeds CSR within corporate governance, making the Board answerable for it.
Recent developments: the 2021 rules and beyond
Unspent funds and mandatory spending
The most significant change is that CSR is now mandatory, not merely “explain if not spent.” Under the current rules, if a company does not spend its full CSR amount: for ongoing projects, the unspent amount must be transferred to a separate “Unspent CSR Account” within 30 days of the year-end and spent within three financial years; for other cases, the unspent amount must be transferred to a Schedule VII fund (such as PM CARES) within six months of the year-end.
Impact assessment, registration and penalties
Several accountability measures now apply. Implementing agencies (Section 8 companies, registered trusts or societies) must register with the Ministry of Corporate Affairs through Form CSR-1 — a requirement refreshed by the 2025 CSR-1 amendment — and reporting is done through Form CSR-2. Impact assessment by an independent agency is mandatory for companies with larger CSR obligations. And non-compliance now attracts penalties — on the company, up to twice the unspent amount (capped at ₹1 crore), and on each defaulting officer, up to one-tenth of the unspent amount (capped at ₹2 lakh).
ESG and business-responsibility reporting
Alongside CSR, corporate responsibility has extended into mandatory disclosure. SEBI’s Business Responsibility and Sustainability Reporting (BRSR) requires the top 1,000 listed companies (by market capitalisation) to disclose their environmental, social and governance performance, from FY 2022–23, with BRSR Core assurance being phased in progressively. ESG and BRSR mark the shift from doing good with 2% to being accountable for the whole footprint of a business.
Current relevance
Why CSR is a live governance theme
CSR is at the centre of current governance debate. Reported CSR spending reached about ₹40,800 crore in FY 2024–25, with cumulative spending since 2014 crossing ₹2.6 lakh crore — a vast, growing development resource. The regime keeps tightening: mandatory unspent-fund transfer, penalties, impact assessment, implementing-agency registration (CSR-1, refreshed in 2025) and CSR-2 reporting. And responsibility is broadening from CSR spending into ESG disclosure through SEBI’s BRSR for the top listed companies. The recurring questions — is CSR spent where it is needed, is it measured for impact, and does it complement or substitute the state — make it a rich GS-II theme.
How CSR is implemented
- Step 1
Determine eligibility
Apply the net-worth, turnover or profit thresholds
- Step 2
Compute the 2%
Two per cent of the average net profit of three years
- Step 3
Plan via the Board
CSR Committee frames the policy and selects Schedule VII activities
- Step 4
Implement
Directly or through registered agencies, NGOs, SHGs or collaboration
- Step 5
Assess and report
Impact assessment, CSR-2 reporting and disclosure
- Step 6
Handle unspent funds
Transfer to the Unspent CSR Account or a Schedule VII fund
The cycle shows that CSR is no longer a cheque written at year-end but a governed, tracked process — planned by the Board, implemented through accountable agencies, assessed for impact, and audited for the treatment of any unspent amount.
The constitutional and ethical backdrop
The welfare and justice mandate
CSR activities mirror the Directive Principles.
Articles 38–39
A welfare order and equitable distribution of resources
Article 43A
Participation of workers; a socially responsible enterprise
Environmental responsibility
Business owes duties to the environment and future generations.
Articles 48A and 51A(g)
State and citizen duties to protect the environment
Article 21
A healthy environment as part of the right to life
The legislative basis
CSR is a statutory, not a constitutional, obligation.
Companies Act, Section 135
The mandatory CSR provision
Seventh Schedule (Union List)
Company law is a Union legislative subject
Reading CSR against the Directive Principles
The map shows that CSR is a statutory instrument advancing constitutional goals. It is not itself constitutional — it rests on company law under the Union List — but its Schedule VII activities closely mirror the Directive Principles: eradicating poverty and hunger (Article 39), education and welfare (Articles 38, 41, 46), environmental protection (Articles 48A, 51A(g), 21). In effect, CSR mobilises private capital toward the welfare-state objectives the Constitution sets for the State, which is both its promise and, as we shall see, the source of a key criticism.
The legal foundation of corporate responsibility
CSR has little direct case law, because it is a statutory scheme, not a litigation subject — but Indian courts long ago built the principle that enterprises owe heightened duties to society and the environment.
M.C. Mehta v. Union of India
1987- Constitutional issue
- The liability of hazardous enterprises for harm to society
- Articles / provisions
- Articles 21 and 32; the Oleum gas leak case
- Background
- A leak of oleum gas from a factory raised the question of how far an enterprise is liable for harm caused to the community.
- Decision
- The Court laid down the principle of absolute liability — an enterprise engaged in a hazardous activity is absolutely liable for harm, without exceptions, given the duty it owes to the community.
- Doctrine / principle
- Enterprises bear a heightened, non-delegable responsibility to the society in which they operate.
- Why it matters
- It established the constitutional idea of corporate responsibility that CSR later extended into a statutory welfare obligation.
Indian Council for Enviro-Legal Action v. Union of India
1996- Constitutional issue
- Corporate liability for industrial pollution
- Articles / provisions
- Articles 21 and 32; the Bichhri case
- Background
- Chemical industries had caused severe pollution, devastating village land and water.
- Decision
- The Court applied the polluter-pays and absolute-liability principles, holding the polluting industries responsible for the cost of restoring the environment.
- Doctrine / principle
- Industry must bear the social and environmental cost of its activity — the polluter pays.
- Why it matters
- It reinforced that corporate responsibility to society and the environment is a legal duty, not mere charity.
Vellore Citizens Welfare Forum v. Union of India
1996- Constitutional issue
- Balancing industrial development with environmental protection
- Articles / provisions
- Articles 21, 47, 48A and 51A(g)
- Background
- Pollution from tanneries pitted economic development against the environment.
- Decision
- The Court held sustainable development to be part of Indian law and adopted the precautionary and polluter-pays principles.
- Doctrine / principle
- Development must be sustainable; business must internalise its environmental responsibilities.
- Why it matters
- It embedded sustainable development into law, the ethic that ESG and CSR now operationalise for business.
How the courts built corporate accountability
These cases show the judiciary establishing, over decades, that business owes society more than profit — through absolute liability (M.C. Mehta), the polluter-pays principle (Enviro-Legal Action), and sustainable development (Vellore Citizens). CSR and ESG are the statutory and market-based extensions of this ethic: where the courts imposed responsibility for harm caused, the Companies Act and BRSR now require companies to contribute positively and disclose their impact. The through-line is that corporate responsibility to society is a duty, not a favour.
The impact of CSR
The mandate’s impact is substantial. It has created a large, predictable pool of development finance — tens of thousands of crores a year — flowing chiefly into education, health, rural development, environment and skilling, and supporting NGOs and SHGs as implementing partners. CSR has funded disaster and pandemic relief, incubated innovation, and made social responsibility a board-level, disclosed concern rather than an afterthought. By institutionalising corporate contribution and, through ESG, corporate transparency, India’s regime has globally influenced the conversation on mandatory corporate responsibility.
CSR versus related concepts
| Feature | Philanthropy | Statutory CSR (India) | ESG |
|---|---|---|---|
| Nature | Voluntary charity | Legal obligation (2%) | Disclosure and risk framework |
| Basis | Individual conscience | Section 135, Companies Act | SEBI BRSR and investor demand |
| Focus | Giving | Schedule VII activities | Whole-business footprint |
| Accountability | To the donor | To the Board, MCA and law | To investors and markets |
The comparison clarifies a frequent confusion: statutory CSR is not the same as charity or ESG. Philanthropy is voluntary giving; CSR is a legally mandated 2% spend on defined activities; and ESG is a disclosure-and-performance framework covering the entire footprint of the business — the newest and broadest of the three.
Challenges and criticisms of CSR
Compliance mindset and skewed spending
Making a moral duty legal risks turning it into a box-ticking compliance exercise — spending the 2% to satisfy the law rather than to solve problems. Spending is also skewed: concentrated in a few sectors (education, health) and regions (developed states, company home locations and urban areas), often bypassing the neediest aspirational districts and the poorest communities.
Impact measurement and accountability
Despite mandatory impact assessment for larger spenders, measuring real impact remains weak, and much CSR is judged by money spent, not outcomes achieved. There are also concerns about “greenwashing” — using CSR and ESG claims for reputation rather than genuine change.
The state-responsibility question
A deeper criticism is that mandatory CSR risks blurring the line between corporate and state responsibility — allowing the government to offload its welfare obligations onto private funds, or channel CSR into government funds (like PM CARES) rather than grassroots need. CSR should complement, not substitute, the state’s duty to its citizens.
Critical analysis
A duty legislated, but impact still voluntary
India’s CSR mandate is a bold, world-first experiment in legislating corporate responsibility, and it has unlocked a genuinely large development resource. But compulsion can only guarantee spending, not impact. The reform frontier is to move CSR from compliance to consequence: needs-based targeting toward the poorest districts and communities, rigorous, independent impact assessment judged on outcomes rather than expenditure, transparency through public CSR data, and a clear understanding that CSR complements the state and empowers communities rather than substituting for public duty or serving mere reputation. Corporate responsibility becomes real only when the 2% is spent as if it mattered — because it does.
The Injeti Srinivas Committee and reform
The High Level Committee on CSR (2018), chaired by Injeti Srinivas, shaped the modern regime. Its key recommendations — many since adopted — moved CSR toward accountability and rigour.
| Problem | Recommendation | Status |
|---|---|---|
| “Comply or explain” weakness | Make CSR a mandatory, enforceable obligation | Adopted via the 2019/2021 amendments |
| Unspent funds unaccounted | Transfer unspent amounts to a designated account/fund | Adopted (Unspent CSR Account) |
| No outcome focus | Mandatory impact assessment for larger spenders | Adopted for large CSR obligations |
| Weak transparency | Registration and reporting of implementing agencies | Adopted (CSR-1 and CSR-2) |
| Skewed, low-impact spending | Focus on need, local areas and measurable outcomes | Partly adopted; still a challenge |
Comparative perspective and lessons
| Context | Approach | Lesson for India |
|---|---|---|
| India | Mandatory 2% CSR by law | Compulsion ensures spend; focus now on impact |
| United Kingdom / EU | Mandatory ESG and non-financial disclosure | Shift from spending to transparency and outcomes |
| United States | Voluntary CSR with strong philanthropy | Encourage a culture of giving alongside the mandate |
| Global (UN) | SDGs and the UN Global Compact | Align CSR with the Sustainable Development Goals |
The recurring lesson is that the world is moving from mandated spending to mandated transparency and outcomes — which is exactly the direction India’s own ESG-and-impact-assessment reforms are taking CSR.
Reforms and the way forward
- From spend to impact: judge CSR by measurable outcomes, with independent impact assessment and public reporting, not by the amount spent.
- Target need: direct CSR toward aspirational districts, the poorest communities and neglected sectors, correcting the geographic and sectoral skew.
- Strengthen transparency: make CSR data public and comparable through the national portal and integrate it with ESG/BRSR disclosure.
- Empower communities: implement CSR with communities, NGOs and SHGs, aligning it with local plans rather than corporate convenience.
- Preserve the state’s duty: keep CSR complementary to public welfare, avoiding its use to offload state responsibility.
Mains insight
Argue compulsion-versus-impact, then localise to India
The high-value argument is that India legislated the duty but cannot legislate the impact — the frontier is moving CSR from compliance to consequence. Use Section 135 and the 2% mandate for the framework, the Injeti Srinivas Committee and the 2021 rules for the accountability turn, the FY 2024–25 spending figure for scale, and ESG/BRSR for the transparency shift. Anchor CSR in the Directive Principles and the polluter-pays jurisprudence. Conclude on need-based, impact-measured, community-led CSR that complements the state.
UPSC Prelims focus
High-yield facts for quick recall
- India was the first country to mandate CSR by law — Section 135, Companies Act 2013 (effective 2014).
- Applicability: net worth ≥ ₹500 cr, or turnover ≥ ₹1,000 cr, or net profit ≥ ₹5 cr.
- Obligation: 2% of the average net profit of the preceding three years.
- Permitted activities are in Schedule VII; political contributions and normal-course-of-business are not CSR.
- CSR is administered by the Ministry of Corporate Affairs.
- Unspent (ongoing) funds → Unspent CSR Account (30 days), spend in 3 years; other → Schedule VII fund (6 months).
- Impact assessment and CSR-1/CSR-2 registration and reporting are required; penalties apply.
- The High Level Committee on CSR (2018) was chaired by Injeti Srinivas.
- SEBI’s BRSR applies to the top 1,000 listed companies (from FY 2022–23).
Prelims traps and confusions
Prelims trap
Four traps on CSR
- The 2% is of average net profit of three years, not turnover or net worth.
- Political contributions and normal-course-of-business are not CSR.
- CSR is under the Ministry of Corporate Affairs, via the Companies Act — not a constitutional provision.
- Statutory CSR is mandatory now — the old "comply or explain" gave way to penalties.
UPSC Mains analysis and answer framework
Analytical dimensions to develop
Cover the legal (Section 135, Schedule VII, 2021 rules), conceptual (triple bottom line, stakeholders, ESG), developmental (funds, sectors, impact), governance (Board, MCA, transparency), critical (compliance mindset, skew, state responsibility) and reform (impact, need-based, community-led) dimensions.
Introduction, body and conclusion approaches
Open with business’s duty to society, or India’s world-first mandate, or the compulsion-versus-impact tension. In the body, cover the framework and recent rules, implementation and impact, then the criticisms. Conclude that CSR must move from spending to impact — need-based, measured and complementary to the state.
Think like a UPSC examiner
Think like the examiner
How the examiner frames CSR
- Will you state the Section 135 thresholds and the 2% obligation correctly?
- Do you know Schedule VII and what is excluded from CSR?
- Can you explain the 2021 rules on unspent funds, penalties and impact assessment?
- Will you distinguish CSR from philanthropy and ESG/BRSR?
- Can you argue the compliance-versus-impact and state-responsibility debates?
Practice MCQs with detailed explanations
Corporate Social Responsibility: 15-question knowledge check
Score: 0/0
Scenario-based governance problems
A company spends its CSR only near its headquarters on visible, publicity-friendly activities, ignoring the neediest areas. What is the concern and what reform would help?
This reflects skewed, reputation-driven CSR — spending where it is visible rather than where it is needed, and a box-ticking or greenwashing mindset. Reforms: direct CSR toward aspirational districts and the poorest communities through needs-based selection, judge it by independent impact assessment on outcomes rather than expenditure, and make CSR data public so allocation can be scrutinised. CSR should solve problems, not burnish image.
A company fails to spend its full 2% CSR obligation in a financial year. What must it do under the current rules?
It cannot simply keep the money. If the unspent amount relates to an ongoing project, it must be transferred to a separate Unspent CSR Account within 30 days of the year-end and spent within three financial years; otherwise, it must be transferred to a Schedule VII fund within six months. Failure to comply attracts penalties on the company (up to twice the unspent amount) and on defaulting officers.
A company wishes to route its CSR through an NGO. What is required, and how should it ensure the money is well used?
The NGO or implementing agency (a Section 8 company, registered trust or society) must be registered with the MCA through Form CSR-1. The company should conduct due diligence, define outcomes, monitor implementation, commission independent impact assessment for larger projects, and report through CSR-2, with Board oversight throughout. Partnering with credible NGOs and SHGs aligned to local needs makes CSR effective rather than merely compliant.
Critics argue that mandatory CSR lets the government offload its welfare duties onto private funds. How should this be assessed?
The concern is real: CSR risks blurring corporate and state responsibility, especially when channelled into government funds rather than grassroots need. The correct principle is that CSR complements, not substitutes, the state — the government’s constitutional duty to welfare remains, while CSR adds private resources and community partnership. The safeguard is to keep CSR need-based, community-led and transparent, and to resist treating it as a replacement for public provision.
Match the following: concepts, provisions and committees
- Section 135
- Schedule VII
- Injeti Srinivas Committee
- Triple bottom line
- CSR provision in the Companies Act
- List of permitted CSR activities
- High Level Committee on CSR
- People, Planet, Profit
Show answer
A-1, B-2, C-3, D-4 — Section 135 is the CSR provision; Schedule VII lists permitted activities; the Injeti Srinivas Committee is the High Level Committee on CSR; the triple bottom line is People, Planet, Profit.
Chronology exercise: order the milestones
- Companies Act mandates CSR (Section 135)
- High Level Committee on CSR (Injeti Srinivas)
- PM CARES added as an eligible CSR destination
- CSR Amendment Rules on unspent funds and penalties
- SEBI BRSR for the top listed companies
Check chronology
Companies Act CSR / Section 135 (2013, effective 2014) → High Level Committee on CSR (2018) → PM CARES made eligible (2020) → CSR Amendment Rules (2021) → SEBI BRSR (2022–23).
The sequence tracks CSR from a world-first mandate, through a reform committee, to mandatory-spend rules and the shift toward ESG disclosure.
Diagram-based reasoning
Re-read “The CSR implementation cycle.” A company performs determine eligibility, compute the 2% and implement, but skips assess and report and handle unspent funds. Using the cycle, explain why this exposes the company and undermines CSR’s purpose. Skipping assessment and reporting means the spend is never judged for impact or disclosed — reducing CSR to unaccountable expenditure — and ignoring unspent-fund handling breaches the mandatory rules, attracting penalties. The cycle’s final steps are what convert spending into accountable impact and legal compliance, which is exactly what the 2021 reforms were designed to enforce.
Flashcards for rapid revision
Glossary of key terms
- Corporate Social Responsibility
- A company’s responsibility to society and the environment beyond profit, mandated in India by Section 135.
- Section 135
- The Companies Act, 2013 provision making CSR a statutory obligation for eligible companies.
- Schedule VII
- The schedule of the Companies Act listing activities eligible for CSR spending.
- Triple bottom line
- The idea that business should be measured on People, Planet and Profit.
- ESG
- Environmental, Social and Governance — a disclosure and performance framework for corporate responsibility.
- BRSR
- SEBI’s Business Responsibility and Sustainability Reporting, mandatory for the top listed companies.
- Unspent CSR Account
- A designated account for unspent CSR of ongoing projects, to be used within three years.
- Impact assessment
- An independent evaluation of CSR outcomes, mandatory for companies with larger CSR obligations.
- Stakeholder theory
- The view that a company is accountable to all its stakeholders, not only shareholders.
Frequently asked questions
Frequently Asked Questions (FAQs)
+What is CSR and how is it mandated in India?
CSR is a company’s responsibility toward society and the environment beyond profit-making. India became the first country to mandate it by law: under Section 135 of the Companies Act, 2013, a company crossing thresholds of net worth (₹500 crore), turnover (₹1,000 crore) or net profit (₹5 crore) must spend at least 2% of its average net profits of the preceding three years on activities listed in Schedule VII.
+What activities qualify as CSR, and what is excluded?
Eligible activities are listed in Schedule VII — eradicating hunger and poverty, education, gender equality and women’s empowerment, health, environmental sustainability, rural development, disaster management and contributions to certain government funds. Excluded are activities in the normal course of business, benefits only to a company’s own employees, political contributions and, generally, activities outside India.
+What happens if a company does not spend its CSR obligation?
For ongoing projects, the unspent amount must be transferred to a separate Unspent CSR Account within 30 days of the year-end and spent within three financial years; otherwise, it must be transferred to a Schedule VII fund within six months. Non-compliance attracts penalties — up to twice the unspent amount (capped at ₹1 crore) on the company and up to one-tenth (capped at ₹2 lakh) on each defaulting officer.
+How is CSR different from philanthropy and ESG?
Philanthropy is voluntary charity based on conscience. Statutory CSR is a legal obligation to spend 2% on defined Schedule VII activities, governed by the Companies Act and the Board. ESG (Environmental, Social and Governance) is a broader disclosure and performance framework covering a company’s whole footprint, mandated for top listed firms through SEBI’s BRSR.
+What are the main criticisms of India’s CSR regime?
Critics argue that legal compulsion can produce a box-ticking compliance mindset rather than genuine impact; that spending is skewed toward certain sectors and developed regions rather than the neediest areas; that impact is poorly measured and success judged by money spent; and that mandatory CSR risks blurring corporate and state responsibility, allowing welfare duties to be offloaded onto private funds.
Last-minute revision capsule
Final recall
CSR: five-minute revision
- 1.CSR = corporate responsibility to society/environment beyond profit; India first to mandate it by law.
- 2.Section 135, Companies Act 2013 (2014): net worth ₹500cr / turnover ₹1000cr / net profit ₹5cr thresholds.
- 3.Spend ≥ 2% of average net profit of the preceding three years, on Schedule VII activities.
- 4.Not CSR: normal-course-of-business, employee-only benefits, political contributions.
- 5.Administered by the Ministry of Corporate Affairs; CSR Committee of the Board governs it.
- 6.Unspent (ongoing) → Unspent CSR Account (30 days), 3 years; other → Schedule VII fund (6 months).
- 7.Impact assessment, CSR-1/CSR-2 registration and penalties (2x unspent, up to ₹1 cr) now apply.
- 8.Injeti Srinivas High Level Committee on CSR (2018) drove the accountability reforms.
- 9.ESG: Environmental, Social, Governance; SEBI BRSR for top 1,000 listed firms (FY22-23).
- 10.Recent: CSR spend ~₹40,800 cr in FY2024-25, cumulative >₹2.6 lakh cr; 2025 CSR-1 amendment.
Fact-check record
Sources and references
Last legally and factually reviewed: .
- Ministry of Corporate Affairs — Section 135, the CSR Rules and Schedule VII.
- National CSR Data Portal — CSR spending, projects and company disclosures.
- India Code — Government of India — Companies Act, 2013 and CSR provisions.
- Securities and Exchange Board of India — ESG and the Business Responsibility and Sustainability Reporting framework.
- Supreme Court of India — judgments — M.C. Mehta, Enviro-Legal Action and Vellore Citizens.
- PRS Legislative Research — Analyses of CSR, the Companies Act and corporate governance.