Corporate Social Responsibility (CSR) in India — The Ultimate Legal & Compliance Guide for FY 2024–25 & FY 2025–26

 Updated as on July 2025 | Law ⬩ Rules ⬩ Circulars ⬩ FAQs ⬩ Legal Interpretation

Legal Framework – Section 135 of the Companies Act, 2013

CSR is applicable if, during the immediately preceding financial year, the company satisfies any one of the thresholds under Section 135(1):

Criteria	Threshold
Net Worth	₹500 Crore or more
Turnover	₹1,000 Crore or more
Net Profit (Sec. 198)	₹5 Crore or more

CSR applicability is assessed afresh every year. It is not presumed or carried forward based on past status.

Amendments (2021–2025): Shift to Annual Trigger-Based CSR

Date	Amendment/Event	Impact
Jan 2021	Rule 3(2) introduced via GSR 40(E)	Allowed CSR exit after 3 consecutive ineligible years
Sept 2022	Rule 3(2) deleted via GSR 700(E)	✅ CSR is now triggered purely based on preceding year financials
Feb 2022	CSR-2 made mandatory	CSR digital compliance reporting initiated
Jan 2024	Rule 12(1B) amended	CSR-2 to be filed separately by 31 December each year
Jan 2024	Impact Assessment mandated (> ₹1 Cr projects)	Enhances project accountability via 3rd-party review
Nov 2023	MCA FAQs updated	Clarified deemed CSR fulfillment for eligible Section 8 companies

CSR Applicability 

Financial Year	CSR Applicability Based On	CSR Obligation?
FY 2024–25	FY 2023–24	If any threshold met in FY 2023–24
FY 2025–26	FY 2024–25	Fresh test required

 Applicability is rolling and real-time. CSR applies if any one condition is met in the immediately preceding FY.

Legal Interpretation – What the Law Now Requires

• Trigger Point: CSR becomes applicable in the next FY if any threshold is met in the preceding FY.

• Non-Applicability: If all criteria are missed in a given FY, CSR obligation does not arise in the following year.

• Exit Logic Abolished: Rule 3(2), which allowed continuation/exits over 3 years, was deleted in 2022.

• Re-Trigger: CSR re-applies whenever a company again satisfies any eligibility criteria under Section 135(1), even after a break.

CSR Spending Framework

Component	Requirement
Spend Requirement	Minimum 2% of average net profits (Sec. 198) over 3 preceding FYs
Eligible Activities	Must be aligned with items listed in Schedule VII
Net Profit Basis	As per Section 198 – excludes capital profits, revaluation reserves, etc.
Board Disclosure	Must be reported in the Board’s Report under Section 134(3)(o)

Mandatory Impact Assessment

When Required	Condition	Capped Cost Allowance
For any project spending > ₹1 Crore	Third-party Impact Assessment is mandatory	Max 2% of CSR obligation or ₹50 Lakhs, whichever is higher

Management of Unspent CSR Funds

Category	Action Required	Timeline
Ongoing Projects	Transfer to Unspent CSR Account	Within 30 days of FY end
Non-Ongoing Projects	Transfer to PM CARES / Govt. Fund	Within 6 months of FY end
Unused for 3 Years	Transfer to separate designated CSR Fund	After 3 years of inaction

CSR Compliance Calendar – FY 2024–25 & FY 2025–26

Compliance Task	Timeline	Relevant Law / Rule
Check CSR applicability (Sec. 135(1))	Post-audit every FY	Section 135(1)
Form CSR Committee (if spend > ₹50L)	At start of FY	Section 135(1), Rule 5
Draft/Revise CSR Policy	Within 6 months of applicability	Rule 6
Identify Schedule VII causes	Before allocation/spending	Rule 4
Transfer Unspent Funds (Ongoing)	Within 30 days of FY end	Rule 10
Transfer Unspent Funds (Other)	Within 6 months of FY end	Rule 10
File Form CSR-2	By 31 December	Rule 12(1B)
Conduct Impact Assessment (> ₹1 Cr)	Before next cycle begins	Rule 8(3)
Disclosure in Board Report	Along with financial statements	Section 134(3)(o), Rule 8

FAQs – Clarified with Law & Reasoning

Question	Answer	Law / Guidance
If only one criterion is met, does CSR apply?	✅ Yes. Any one of net worth, turnover, or profit	Section 135(1)
Can CSR continue if criteria aren’t met for one year?	❌ No. Rule 3(2) deleted – annual re-testing only	GSR 700(E), Sept 2022
Can CSR re-apply after previous inapplicability?	✅ Yes. Once any threshold is met again	Section 135(1)
Are Section 8 companies exempt from CSR?	⚠️ No. But deemed fulfilled if 100% spent on Schedule VII	MCA FAQ, Nov 2023
What is the profit base for CSR spend calculation?	Net Profit as per Section 198	Section 135(5) + Sec. 198
Can a new company be tested for CSR applicability?	❌ No. No preceding FY data available	MCA FAQ
Deadline for CSR-2 filing?	📌 31 December following FY (after AOC-4)	Rule 12(1B)

Legal Position Matrix – At a Glance

Scenario	CSR Applicable?	Legal Reasoning
Any one Section 135(1) trigger met	✅ Yes	Law requires only one criterion
All triggers missed in one FY	❌ No	No obligation for following year
Triggers missed for 3 consecutive years	❌ No	Irrelevant now – Rule 3(2) repealed
Trigger met again after break	✅ Yes	Re-triggered by fresh satisfaction of Sec. 135(1)
Newly incorporated company	❌ No	No previous year data for testing
Section 8 Company using all income on CSR	✅ Deemed fulfilled	Per MCA FAQ (Nov 2023)

CSR Is a Responsibility, Not a Ritual

“CSR is not a legacy — it is a live test of governance, impact, and intention.”

• CSR is dynamic, not frozen.

• Compliance must follow real-time financials — not legacy assumptions.

• Annual testing, transparent disclosure, and impact-driven outcomes are now the legal and ethical expectations.

• Boardrooms must institutionalize CSR into strategy, policy, compliance, and reputation management.