Corporate Social Responsibility (CSR) in India is not just a moral obligation—it is a legal mandate for companies meeting certain criteria. Since the introduction of Section 135 of the Companies Act, 2013, along with the CSR Rules, 2014 (amended in 2021), businesses must contribute a portion of their profits towards social development.
Navigating these legal requirements can be complex, but compliance is non-negotiable. At Chrysalis Services, we help organizations understand CSR laws, ensure seamless compliance, and design impactful initiatives that align with regulatory expectations. We work with CSR consulting firms and directly with corporates to turn legal obligations into genuine social value.
Overview of CSR Laws & Regulations in India
India is among the few countries where CSR spending is legally binding for eligible companies. The key provisions include the following:
Companies that meet any one of the following 3 criteria are required to comply with CSR spending:
- Net worth of ₹500 crores or more
- Turnover of ₹1,000 crores or more
- Net profit of ₹5 crore or more during a given financial year
Eligible companies must spend at least 2% of their average net profits (of the last three years) on CSR activities. The permissible CSR activities are listed in Schedule VII of the Companies Act and include:
- Eradicating hunger, poverty, and malnutrition, including support for preventive healthcare and sanitation.
- Promoting education, including special education and employment-enhancing vocational skills, particularly among children, women, elderly, and the differently-abled.
- Ensuring environmental sustainability, ecological balance, and the protection of flora and fauna, along with conservation of natural resources.
- Providing access to safe drinking water and improved sanitation facilities.
- Advancing gender equality and empowering women through livelihood, safety, and skill development initiatives.
- Promoting rural development and reducing poverty through holistic, community-based interventions.
- Preserving and promoting India's national heritage, art, and culture, including restoration of buildings and support for artists.
- Encouraging sports, including training for rural sports, nationally recognized games, and Paralympic and Olympic sports.
- Supporting armed forces veterans, war widows, and their dependents through welfare programs.
- Contributing to government relief and welfare funds, such as the Prime Minister's National Relief Fund.
- Funding incubators and research initiatives in science, technology, engineering, and medicine, in association with recognized academic or governmental institutions.
- Disaster response and management, including relief, rehabilitation, and reconstruction activities.
Companies meeting the threshold must form a CSR Committee (with at least 3 directors, including one independent director) to oversee policy formulation and implementation. Non-compliance can lead to penalties, including fines and potential imprisonment for company officers.
Compliance Requirements for Companies
To stay compliant, companies must adhere to the following obligations:
1. CSR Policy & Board Approval
- Draft a CSR Policy outlining focus areas, implementation mechanisms, and monitoring processes.
- The policy must be approved by the Board and disclosed in the company's annual report.
2. Spending & Utilization
- Ensure the mandatory 2% spending is met within the financial year.
- If funds remain unspent, they must be transferred to an Unspent CSR Account and utilized within 3 years—or moved to a specified government fund.
3. Implementation & Reporting
Companies can execute CSR projects:
- Independently (through their own teams and internal programs).
- Via NGOs/Trusts registered under Section 8 companies, trusts, or societies — here, strong corporate-NGO partnerships are essential.
- In collaboration with other businesses through pooled CSR initiatives.
Annual CSR Reporting is mandatory, including details of expenditure, projects undertaken, and reasons for any shortfall in spending. These reports often incorporate CSR impact assessment data to demonstrate genuine social outcomes.
Aligning CSR Initiatives with Legal Mandates
Many companies find it difficult to manage compliance and still make a real difference. Here's how to keep CSR work aligned with the law while maintaining a straight path toward meaningful social impact:
Strategic CSR Planning
Identify focus areas from Schedule VII that resonate with the core functions and values of your business. Conduct needs assessments to ensure that projects address and solve real social deficits. A robust CSR strategy is the foundation of compliant, high-impact spending.
Partnering with the Right NGOs
Collaborate with credible non-governmental organizations to ensure effective implementation. These organizations must have registration under Section 8 or 12A of the relevant statutes. Perform rigorous due diligence on all partners to ensure compliance and avoid reputational and legal risks. Expert CSR consulting support is invaluable here.
Monitoring & Impact Measurement
Establish quantifiable objectives—such as number of beneficiaries reached, eco-friendly outcomes achieved, or literacy rates improved. Track progress and ensure transparency by using audits conducted by independent third parties. Chrysalis offers CSR monitoring and evaluation services that keep projects on track and documentation audit-ready.
Leveraging Technology & Innovation
As companies grow larger and their operations more global, CSR management becomes increasingly complex. Digital platforms help maintain visibility across multiple programs, ensure stakeholder transparency, and keep the company on a desired strategic trajectory. Innovative models—such as sustainable farming or skill development programs—can maximize social return on investment. A proper environmental and social impact assessment ensures technology investments deliver real change.
Turning Compliance into Impact
Corporate social responsibility in India is more than just a regulatory requirement—it is a chance to bring about lasting, sustainable change. At Chrysalis Services, we assist companies and NGOs not only in meeting the legal obligations of CSR but also in creating true, lasting social impact through their projects.
We help design, implement, and monitor projects so that compliance is a given and social impact is not just a hope—but a likely outcome. Engaging a specialist impact assessment firm ensures that your investments are evaluated rigorously and that you can demonstrate value to regulators, boards, and communities alike.
Require expert oversight for CSR compliance? We can steer you through the legal requirements so you can be a good corporate citizen—and do exceedingly well in all your CSR efforts, leaving behind a legacy of meaningful programs that matter.
Frequently Asked Questions
FAQs: CSR Legal Requirements in India
What are the CSR compliance requirements under the Companies Act, 2013 in India?
Under Section 135 of the Companies Act, 2013, companies in India meeting certain financial thresholds must spend 2% of their average net profits from the past three years on eligible CSR activities. They must also form a CSR Committee, disclose their CSR policy, and report their activities in their annual board report. Chrysalis Services helps companies stay compliant and impactful by providing deep sector knowledge, guidance on CSR law, strategic planning, NGO due diligence and partnerships, project monitoring, impact assessment, and transparent reporting. We ensure your CSR goes beyond compliance to create real value for communities and your brand.
Which companies are required to do CSR in India?
As per Indian CSR law, any company (including foreign companies with Indian operations) is required to spend on CSR if it meets any one of the following: Net worth of ₹500 crore or more; Turnover of ₹1,000 crore or more; Net profit of ₹5 crore or more in any financial year. If your company crosses this threshold, CSR compliance is mandatory. Chrysalis Services supports such companies by offering end-to-end CSR management—from policy advisory to project implementation and impact reporting—ensuring you're not only compliant but impactful.
What happens if a company does not spend 2% on CSR in India?
As per the Companies (Amendment) Act, 2019, unspent CSR amounts must be transferred to a specified fund (like PM CARES or Schedule VII-compliant funds) within 6 months of the financial year-end. Failure to comply can result in financial penalties and individual liability for directors. Chrysalis Services helps ensure that your CSR strategy is timely, compliant, and strategically aligned—avoiding last-minute fund transfers or reputational risks. We also assist in monitoring utilization to avoid audit red flags.
What are valid CSR activities under Schedule VII of the Companies Act?
CSR activities must fall under the areas listed in Schedule VII—including education, gender equality, environmental sustainability, rural development, healthcare, skilling, and more. Contributions to political parties or employee welfare are not valid CSR expenses. At Chrysalis Services, we help you design CSR programs that are not just legally valid but also meaningful and aligned with your brand purpose. We assist corporates to strategize and plan CSR keeping in mind the larger objectives, connect with credible NGO partners, and track impact to ensure full compliance and real impact.
