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Corporate Social Responsibility for CS Professional

Corporate Social Responsibility (CSR) is the legal duty under Section 135 of the Companies Act, 2013 for qualifying companies to form a CSR Committee, adopt a policy and spend at least two per cent of average net profit of the three preceding financial years. To solve cases, test applicability, then committee, spending, unspent amount and penalty.

What this chapter covers

This chapter covers how Indian law makes CSR a compliance duty. It starts with the idea and history of CSR in India, then moves to Section 135 of the Companies Act, 2013: who must comply, who sits on the CSR Committee, what the Board must do, how much must be spent, and what happens when money is left unspent.

It also covers the working side: the CSR Policy, the annual action plan, the activities allowed under Schedule VII, implementation, impact assessment and reporting. For these, the rules made under the Act fill in the detail. Where you need a rule that is not in Section 135 itself, learn it from the CSR Rules and the ICSI material.

This is the first half of the paper, called CSR in the syllabus. The second half, Social Governance, builds on it. The two halves carry equal marks in this elective (50 each). So the chapter gives you both the legal base and the practical vocabulary you will reuse in case answers.

CSR questions are case-based and follow a fixed pattern: read the facts, apply the section, reach a conclusion. Section 135 has clear numbers and conditions, so a prepared student can score well by being exact. The same logic of applicability, committee, spending, unspent amount and penalty repeats across many cases, so time spent here pays back across the paper. It also helps you in real work, since CSR compliance is a routine task for a company secretary.

Corporate Social Responsibility: topics in the order to study them

  1. 1Concept and Evolution of CSR in IndiaStart with the idea and history so the later legal rules make sense and you can write short background answers.
  2. 2Applicability of Section 135 of the Companies Act, 2013Every case begins by asking whether the company is covered, so learn the net worth, turnover and net profit thresholds first.
  3. 3CSR Committee and Board ResponsibilitiesOnce you know who is covered, learn who must act: the committee composition, its functions and the Board's duties.
  4. 4CSR Policy and Annual Action PlanThe policy and plan turn the committee's recommendations into a documented programme, so they follow the roles.
  5. 5CSR Expenditure and Unspent AmountThis is the most tested and number-heavy part, so study it once you know the policy and plan it depends on.
  6. 6Eligible CSR Activities under Schedule VIISpending must fall within Schedule VII, so learn the allowed areas after you understand how the spending rules work.
  7. 7Implementation, Impact Assessment and ReportingFinish with how projects are carried out, assessed and disclosed, which ties the whole cycle together.

How to prepare Corporate Social Responsibility

Treat this chapter as a compliance cycle: covered or not, set up, plan, spend, deal with leftovers, report. Learn it in that order and practise applying it to facts.

  1. Read the text of Section 135 slowly, sub-section by sub-section, and mark every number, time limit and condition.
  2. Make a one-page chart of the cycle: applicability, committee, policy, action plan, spending, unspent amount, reporting.
  3. Learn the thresholds and time limits by heart: net worth ₹500 crore, turnover ₹1,000 crore, net profit ₹5 crore, two per cent, thirty days, three financial years.
  4. Add the rules made under the Act from the ICSI study material, such as the action plan, impact assessment and Schedule VII details, to your chart.
  5. Practise short case problems: compute the two per cent from three years of net profit, then decide the transfer for ongoing and other projects.
  6. Write full answers in the exam format of provision, analysis of the facts and conclusion, and time yourself.
  7. Revise the chart and your mistake list in the last week.

Common mistakes in Corporate Social Responsibility

  • Requiring all three thresholds to be met before Section 135 applies.

    Fix: Remember the word "or". Meeting any one of net worth, turnover or net profit in the immediately preceding financial year is enough.

  • Calculating the two per cent on the current year's profit.

    Fix: Use the average net profit of the three immediately preceding financial years, computed as per Section 198. If the company is under three years old, use the years available.

  • Mixing up the two routes for unspent money.

    Fix: Ongoing project: Unspent CSR Account in thirty days, spend within three financial years. Otherwise: Schedule VII Fund within six months. Learn them side by side.

  • Forgetting the committee exception for small CSR obligations.

    Fix: When the amount to be spent is not more than ₹50 lakh, say that the Board discharges the committee's functions.

  • Quoting the penalty as a single figure.

    Fix: State both: company, twice the amount or ₹1 crore, whichever is less; officer, one-tenth or ₹2 lakh, whichever is less.

  • Writing general CSR essays instead of case answers.

    Fix: Structure each answer as the provision, the facts applied, and a clear conclusion, with the numbers worked out.

Last-day revision: Corporate Social Responsibility

  • Section 135 applies on net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more in the immediately preceding financial year.
  • The CSR Committee has three or more directors, with at least one independent director.
  • If a company need not appoint an independent director under Section 149(4), its CSR Committee needs two or more directors.
  • The Board's report must disclose the composition of the CSR Committee.
  • The Committee recommends the CSR Policy and the amount to be spent, and monitors the policy.
  • The Board approves the policy, discloses its contents in its report and places it on the company website, if any.
  • Spend at least two per cent of the average net profit of the three immediately preceding financial years.
  • Net profit is calculated as per Section 198, excluding sums that are prescribed.
  • Give preference to the local area and areas around where the company operates.
  • Unspent amount for an ongoing project goes to the Unspent CSR Account within thirty days of the end of the financial year and must be spent within three financial years.
  • Other unspent amount goes to a Schedule VII Fund within six months of the end of the financial year, and the Board's report must give reasons.
  • If the amount to be spent is ₹50 lakh or less, no CSR Committee is needed and the Board performs its functions.
  • Penalty on the company is twice the amount not transferred or ₹1 crore, whichever is less; for each officer in default it is one-tenth of that amount or ₹2 lakh, whichever is less.

Corporate Social Responsibility practice questions

Corporate Social Responsibility in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Corporate Social Responsibility: frequently asked questions

Who must spend on CSR under Section 135?

A company with net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more in the immediately preceding financial year. Such a company must spend at least two per cent of its average net profit of the three preceding financial years.

Does every covered company need a CSR Committee?

No. If the amount the company must spend does not exceed ₹50 lakh, the committee is not required and the Board performs its functions. Otherwise the committee needs three or more directors, including at least one independent director.

What happens to unspent CSR money?

For an ongoing project it is moved to the Unspent CSR Account within thirty days of year end and spent within three financial years. For other cases it is transferred to a Fund under Schedule VII within six months, and the Board's report explains the reasons.

How should I study the CSR chapter for the exam?

Learn Section 135 line by line, then the rules and Schedule VII from the ICSI material. Practise small cases that ask you to test applicability, compute the spend and decide on unspent amounts, and write answers as provision, analysis and conclusion.