Corporate Social Responsibility in India
Corporate Social Responsibility (CSR) in India is no longer just a voluntary philanthropic gesture; it is a mandatory statutory obligation for certain large companies under Section 135 of the Companies Act, 2013. This framework compels businesses to actively engage in CSR activities in India that contribute to the social, environmental, and economic development of the country. This guide explains the core requirements, compliance forms, and the types of CSR Activities in India that companies must undertake.
CSR-1 Registration: Updated Online Framework
To strengthen transparency and accountability in CSR implementation, the Ministry of Corporate Affairs (MCA) has launched a new web-based CSR-1 registration process, effective from 14 July 2025. The revised system has been introduced under the amended Companies (Corporate Social Responsibility Policy) Rules, 2025.
This online mechanism replaces the earlier PDF-based filing process and introduces stricter eligibility and disclosure norms for non-profit organizations intending to undertake CSR projects on behalf of companies. At Nirmala Foundation, we align our compliance practices with these updated guidelines to ensure smooth collaboration with corporate CSR partners.
Requirements Under the New CSR-1 System
As part of the process, organizations are required to submit detailed institutional and compliance information, including:
- PAN details and legal constitution of the organization
- Valid 12A and 80G registrations under the Income Tax Act
- Details of trustees, directors, or key functionaries
- Track record of completed CSR or social development projects
- Address verification through an email-based OTP system
- NGO Darpan ID, where registration exists with the NITI Aayog portal
- Digital Signature Certificate (DSC) of an authorized signatory
- Certification by a practicing Chartered Accountant (CA), Company Secretary (CS), or Cost Accountan
These disclosures ensure that CSR funds are channelled through credible and experienced organizations with proven governance standardIndependent Filing of CSR-2 Form
In a parallel compliance update, the MCA has simplified CSR reporting by allowing Form CSR-2 to be filed independently on the MCA21 portal. As per the Companies (Accounts) Third Amendment Rules, 2025, notified on 19 May 2025, CSR-2 no longer needs to be attached to Form AOC-4. This change reduces procedural delays and improves accuracy in CSR disclosures.
The Strategic Evolution: Moving from CSR to ESG
In recent years, the concept of corporate social responsibility in India has evolved from simple “feel-good” projects into a core business strategy. There is a growing convergence between CSR and ESG (Environmental, Social, and Governance) frameworks. While CSR often focuses on specific social projects (the ‘S’ in ESG), ESG embeds these values into the very fabric of how a business operates.
Strategic communication has become essential in this new era. For a project to be successful, it must align with the company’s core values and engage stakeholders like employees, customers, and local communities. At Nirmala Foundation, we advocate for a “marathon, not a sprint” approach, where long-term commitment and transparent reporting create a lasting brand reputation and real social value
Legal Framework and Eligibility
A company must comply if it fulfills any one of the following criteria:
- Net worth of more than Rs. 500 crore (INR 5 billion).
- Turnover of more than Rs. 1000 crore (INR 10 billion).
- Net profit of more than Rs. 5 crore (INR 50 million).
The Mandatory 2% Spending Rule
If a company meets any of the above thresholds, its Board of Directors must ensure the company spends a minimum of at least 2% of its average net profits.
This calculation is based on the net profits made during the immediately preceding three financial years. For newly incorporated companies that have not completed three financial years, the average net profits are calculated for the financial years completed since incorporation. The computation of net profit for this purpose is done as per Section 198 of the Act.
Strategic importance of CSR in modern businesses
In India, Corporate Social Responsibility has evolved beyond a statutory requirement and now plays a vital role in business planning. When companies embed CSR into their long-term strategies, they strengthen brand credibility, earn public trust, and connect better with ethically driven consumers and investors. Well-planned CSR programs also contribute to higher employee morale, minimize operational risks, and support sustainable business growth over time.
CSR approach and implementation practices
Impact-focused evaluation:
A strong CSR framework begins with understanding how business operations affect stakeholders, including customers, employees, supply chains, local communities, and the environment. Measuring these impacts helps organizations design responsible and meaningful initiatives.
Strategic alignment and long-term focus:
Businesses are increasingly aligning CSR initiatives with their core objectives to ensure continuity and real-world impact. This approach allows companies to support social development while maintaining operational efficiency and profitability.
Structured CSR governance:
Many organizations now operate dedicated CSR units responsible for planning, budgeting, and monitoring social initiatives. These teams often design programs that reflect the company’s values, industry expertise, and commitment to social responsibility.
Permitted CSR Activities Under Schedule VII
The government provides a broad list of activities that qualify as valid CSR spending under Schedule VII of the Act. These activities are designed to address the most pressing social and environmental needs of the country. Key areas include:
• Healthcare and Sanitation: Eradicating hunger and poverty, promoting preventive healthcare, and contributing to the Swachh Bharat Kosh.
• Education and Livelihoods: Supporting special education and vocational skills, particularly for children, women, and the elderly.
• Environmental Sustainability: Initiatives focusing on ecological balance, conservation of natural resources, and agroforestry.
• Rural and Slum Development: Projects specifically aimed at improving life in rural areas or declared slum regions.
• Disaster Management: Relief, rehabilitation, and reconstruction activities during natural or man-made disasters
The Importance of Compliance: Forms CSR-1 and CSR-2
To ensure transparency and accountability, the Ministry of Corporate Affairs has introduced strict reporting requirements.
CSR-1: Since April 2021, any entity—whether an NGO or a registered trust—that intends to undertake CSR activities on behalf of a company must register using Form CSR-1. This registration generates a unique CSR Registration Number, allowing the government to monitor spending effectively.
CSR-2: This is an annual reporting form where companies detail their CSR activities for the previous financial year. It serves as an addendum to the company’s financial statements and must include details on the CSR committee, the funds allocated, and the specific projects implemente Failure to comply with these rules can lead to heavy penalties for both the company and the officers in default, with fines potentially reaching up to INR 10 million
Frequently Asked Questions (FAQs)
If a company spends more than the required 2%, it can set off that extra amount against its spending requirements for the next three years
Any "surplus" or income generated from a CSR activity (like interest on funds) cannot be added to the company’s profit. It must be used back for more CSR work
Since 2021, any NGO, trust, or society that wants to receive CSR funds must file Form CSR-1 with the government to be eligible
It is calculated as 2% of the company’s average net profits made during the three immediately preceding financial years
If a company fails to spend its required amount or transfer unspent funds to a government-specified fund, it can face a penalty of up to INR 10 million