CSR and Social Governance · Corporate Social Responsibility

Concept and Evolution of CSR in India for CS Professional

Updated 11 October 2026 · Fact-checked

Corporate social responsibility (CSR) is a company's commitment to act responsibly towards society, the environment and its stakeholders, beyond pure profit. In India it moved from voluntary philanthropy to a legal duty under Section 135 of the Companies Act, 2013. Answer by defining CSR, tracing the phases, then citing the law.

Understand Concept and Evolution of CSR in India

Corporate social responsibility means a business takes responsibility for the effect of its operations on society, the environment and its stakeholders. It goes beyond making profit and obeying the law. The idea is that a company exists inside a community and owes something back to it.

CSR is not the same as philanthropy. Philanthropy is a voluntary gift, often driven by the owner's personal values, and is usually one-off. CSR is meant to be planned, linked to a policy, tied to the company's business context, and monitored. In India, CSR has also become a statutory obligation for companies that cross the thresholds in Section 135.

The Indian story is usually told in phases. First came philanthropy and charity, where traders and industrial families built temples, schools, hospitals and trusts. Next came the freedom movement phase, where industrialists linked social giving to nation building and the trusteeship idea. After independence came the mixed economy phase, with a strong state role and public sector companies. Later came the liberalisation phase, where companies began to treat CSR as part of strategy and stakeholder relations. The latest phase is the statutory phase, with Section 135 of the Companies Act, 2013 and the rules under it.

Section 135 applies to a company with net worth of ₹500 crore or more, or 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 form a CSR Committee. The Board must ensure the company spends, in every financial year, at least two per cent of the average net profits of the three immediately preceding financial years on its CSR Policy. Net profit is calculated as per section 198.

Global ideas shaped this path. These include the stakeholder approach, the triple bottom line (people, planet, profit), the UN Global Compact, the UN Sustainable Development Goals and the OECD and ISO 26000 guidance. In India, the voluntary guidelines issued by the government before 2013 also fed into the law. For models, know the classical view (business of business is profit), the stakeholder view and the corporate citizenship view. Check the exact list in your ICSI study material and use it to frame your answer.

Key rules to remember

CSR spending requirement: Minimum annual CSR spend = 2% × average net profit of the three immediately preceding financial years; Section 135(5). Net profit is worked out under section 198. A company that has not completed three years since incorporation uses the immediately preceding financial years it has.
Applicability thresholds: Net worth ≥ ₹500 crore OR turnover ≥ ₹1,000 crore OR net profit ≥ ₹5 crore, in the immediately preceding financial year; Section 135(1). Meeting any one limit is enough.
CSR Committee size: At least 3 directors, including at least 1 independent director; Where a company need not appoint an independent director under section 149(4), it needs 2 or more directors in the Committee.
Small CSR obligation: If amount to be spent ≤ ₹50 lakh, no CSR Committee is needed; the Board performs its functions; Section 135(9).
Penalty for default: Company: lower of 2 × amount to be transferred or ₹1 crore. Officer in default: lower of 1/10 of that amount or ₹2 lakh; Section 135(7). Applies to default under sub-sections (5) or (6).

How to solve Concept and Evolution of CSR in India questions

Use this order for any theory or case question on the concept and evolution of CSR.

1Read the verb. 'Define' needs meaning, 'trace' needs phases, 'distinguish' needs a comparison, and 'advise' needs a conclusion.
2Open with a one-line definition of CSR in your own words, stressing responsibility to society, environment and stakeholders beyond profit.
3If asked about evolution, list the phases in time order and give one feature of each: philanthropy, freedom movement, mixed economy, liberalisation, statutory.
4Bring in the law: name Section 135 of the Companies Act, 2013, the three thresholds, the Committee and the two per cent spend.
5Add the global link where relevant, such as the stakeholder approach, triple bottom line, UN Global Compact, SDGs.
6For case facts, apply each threshold to the numbers given, check the preceding financial year, then compute the spend.
7Close with a clear conclusion that answers the exact question asked.

Quickest way: Define, Phase, Provide the Law

When to use it: Use when you have about 8 to 10 minutes for a short note or a 'trace the evolution' question.

Write a two-line definition.
Write the five phases as short bullet points with one feature each.
Write two lines on Section 135: thresholds, Committee, two per cent.
Write one line on global frameworks.
End with a one-line conclusion that CSR has moved from voluntary to mandatory.

Common mistakes in Concept and Evolution of CSR in India

Treating CSR and philanthropy as the same thing.
Both involve giving to society, so they look alike.
Fix: State that philanthropy is voluntary and often ad hoc, while CSR is policy-based, linked to the business and, for covered companies, a legal duty.
Saying the two per cent is on current year profit.
Students recall the percentage but not the base.
Fix: Write 'average net profit of the three immediately preceding financial years', computed as per section 198.
Requiring all three thresholds to be met.
The word 'or' is overlooked in a hurry.
Fix: Remember that any one of net worth, turnover or net profit is enough. Test each one separately.
Giving the evolution as a list of dates without explaining the shift.
Students memorise years instead of the logic.
Fix: Describe each phase by who drove CSR and why: family trusts, nation building, the state, strategy, and then law. Use dates only if you are sure of them.
Assuming every covered company must form a CSR Committee.
Section 135(1) is remembered without sub-section (9).
Fix: Add that where the amount to be spent is ₹50 lakh or less, the Committee is not needed and the Board performs its functions.
Stating the penalty as a fixed fine.
Students confuse it with older provisions.
Fix: Quote the 'whichever is less' formula for the company and for each officer in default under section 135(7).

Worked examples

Example 1

Sunrise Foods Ltd has net worth of ₹320 crore and turnover of ₹850 crore in the immediately preceding financial year. Its net profit (as per section 198) for the three immediately preceding years was ₹6 crore, ₹9 crore and ₹12 crore, the latest being ₹12 crore. Is Section 135 applicable, and what is the minimum CSR spend?

Show the solution

Test net worth: ₹320 crore is below ₹500 crore, so this limit is not met.
Test turnover: ₹850 crore is below ₹1,000 crore, so this limit is not met.
Test net profit: the immediately preceding year's net profit is ₹12 crore, which is at least ₹5 crore, so this limit is met. Only one limit is needed.
Section 135 therefore applies.
Average net profit = (6 + 9 + 12) ÷ 3 = 27 ÷ 3 = ₹9 crore.
Minimum spend = 2% × ₹9 crore = ₹0.18 crore = ₹18 lakh.
Since ₹18 lakh does not exceed ₹50 lakh, the CSR Committee is not required and the Board performs its functions under section 135(9).

Answer: Section 135 applies because net profit is ₹12 crore, which meets the ₹5 crore limit. Minimum CSR spend is ₹18 lakh, and the Board can discharge the Committee's functions.

Exam tips

Start every answer with a crisp definition. Examiners reward a clear opening and structured phases.
For evolution questions, use headed phases with one feature each, not a long paragraph.
In numerical cases, show the threshold tests and the average net profit working. Marks go to the steps.
Quote Section 135 sub-sections where you are sure, such as (1) for thresholds, (5) for spending and (7) for penalty.
Link global frameworks to the Indian law in a line. It shows you understand why the law exists.

Practice questions from Corporate Social Responsibility

Concept and Evolution of CSR in India in other exams

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

Concept and Evolution of CSR in India: frequently asked questions

What is corporate social responsibility in simple words?

It is a company's duty to look after the society, environment and stakeholders it affects, not just its shareholders. In India, covered companies must also follow Section 135 of the Companies Act, 2013.

What is the difference between CSR and philanthropy?

Philanthropy is voluntary giving, often one-off and personal. CSR is planned under a Board-approved policy, linked to the business and monitored. For companies meeting the thresholds, CSR is legally required.

Which companies must comply with Section 135?

A company with net worth of ₹500 crore or more, or turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more in the immediately preceding financial year. Meeting any one limit is enough.

How much must a company spend on CSR?

At least two per cent of the average net profits made during the three immediately preceding financial years. Net profit is calculated as per section 198. A company that has not completed three years uses the immediately preceding financial years available.