Corporate Social Responsibility (CSR) means the commitment of companies to operate responsibly by contributing to social welfare, environmental protection, and sustainable economic development while conducting their business activities.
In India, CSR is not just a voluntary business practice—it is a statutory requirement for certain companies under the Companies Act, 2013, making it an integral part of corporate governance and ethical business conduct.
What is CSR?
Corporate Social Responsibility means the responsibility of companies to contribute to society by spending a part of their profits on social, environmental, and community development activities—like education, healthcare, poverty alleviation, environmental sustainability, etc.
In India, CSR is mandatory for certain companies under the Companies Act, 2013.
Objective of CSR Reporting
- Ensures legal compliance
- Promotes ethical business practices
- Enhances corporate transparency
- Builds stakeholder trust
Applicability of CSR (As per Section 135 of Companies Act, 2013)
CSR provisions apply to a company if, during any financial year, it meets any one of the following criteria:
| Criteria | Limit |
|---|---|
| Net Worth | ₹500 crore or more |
| Turnover | ₹1,000 crore or more |
| Net Profit | ₹5 crore or more |
**If any one condition is satisfied, CSR becomes applicable.
Example:
ABC Pvt Ltd has the following details for FY 2024–25:
- Net Worth: ₹120 crore
- Turnover: ₹850 crore
- Net Profit: ₹6 crore
Since net profit is more than ₹5 crore, CSR is applicable, even though the other two limits are not met.
CSR Amount Calculation:
- Average net profit of last 3 years = ₹5 crore
- CSR obligation = 2% of ₹5 crore = ₹10 lakh
ABC Pvt Ltd must spend ₹10 lakh on CSR activities.
CSR Spending Requirement
- The company must spend at least 2% of the average net profits of the last 3 financial years on CSR activities.
- If the company is newly incorporated, average profits are calculated for the years available.
CSR Committee
- Companies covered under CSR must form a CSR Committee of the Board.
- However, if the CSR spending obligation is up to ₹50 lakh, forming a CSR Committee is not mandatory (the board itself can handle CSR).
Eligible CSR Activities
CSR activities must fall under Schedule VII, such as:
- Education & skill development
- Healthcare & sanitation
- Environmental sustainability
- Women’s empowerment
- Rural development
- Disaster relief
- Promotion of sports
# Activities done only for employees or normal business activities are not considered CSR.
Types of Companies Covered
CSR applies to:
- Private Limited Companies
- Public Limited Companies
- Listed Companies
- Unlisted Companies
- Foreign companies having a branch/project office in India (if criteria met)
Who is NOT Required for CSR?
CSR does not apply to:
- Partnership firms
- LLPs
- Sole proprietorships
- Individuals/professionals
- HUFs
- Companies not meeting the above limits
Penalty for Non-Compliance (Section 135)
If a company fails to spend or transfer the CSR amount:
| Person | Penalty |
|---|---|
| Company | Twice the unspent amount OR ₹1 crore (whichever is less) |
| Officer in default | 1/10th of unspent amount OR ₹2 lakh (whichever is less) |
Important Point (Very Common Doubt)
Once CSR becomes applicable:
- The company must comply with CSR provisions
- Even if it later falls below the limits, CSR continues for next 3 years
CSR Reporting and Disclosure
CSR reporting and disclosure refer to the mandatory reporting of corporate social responsibility activities, expenditure, and compliance by companies to ensure transparency and accountability.
Under the Companies Act, 2013, companies to which CSR is applicable must disclose CSR-related information in the following manner:
Board’s Report
The company must include a detailed CSR Report in its Board’s Report, covering:
- Brief outline of the CSR Policy
- Composition of the CSR Committee (if applicable)
- Average net profit of the last three financial years
- Prescribed CSR expenditure (2%)
- Actual CSR amount spent during the year
- Details of ongoing and completed CSR projects
- Reasons for not spending the full CSR amount, if any
Disclosure on Company Website
- The CSR Policy and approved CSR projects must be displayed on the company’s website, if available.
- The website link must be mentioned in the Board’s Report.
Annual CSR Report (Format)
- CSR reporting must be done in the prescribed format as per the Companies (CSR Policy) Rules, 2014.
- The report must be annexed to the Board’s Report.
Disclosure of Unspent CSR Amount
- If the CSR amount remains unspent:
- Ongoing projects → Transfer to Unspent CSR Account within 30 days
- Other cases → Transfer to a specified fund within 6 months
- Details of such transfers must be clearly disclosed.
Impact Assessment Disclosure (If Applicable)
- Companies required to conduct impact assessments must disclose:
- Details of impact assessment reports
- Key findings and outcomes
- Impact assessment reports must be placed on the company’s website and referred to in the Board’s Report.
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