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CSR and Social Governance · Corporate Social Responsibility

CSR Policy and Annual Action Plan: Contents, Approval and Modification

Updated 11 October 2026 · Fact-checked

A CSR policy is the Board-approved document stating the company's CSR activities under Schedule VII, its expenditure and its monitoring. The annual action plan is the year's detailed project list, recommended by the CSR Committee and approved by the Board. In answers, state who recommends, who approves, what it contains and how it can be modified.

Understand CSR Policy and Annual Action Plan

A company covered by Section 135 of the Companies Act, 2013 must spend on CSR. Two documents guide that spending: the CSR policy and the annual action plan. Think of the policy as the long-term rulebook and the plan as this year's budget and project list.

The CSR policy is formulated and recommended by the CSR Committee, and the Board approves it. It must indicate the activities the company will undertake, which must fall within Schedule VII. It also covers the recommended amount of expenditure and the way the company will monitor CSR. After approval, the Board discloses the contents of the policy in its report and places the policy on the company's website.

The annual action plan is prepared for each financial year. The CSR Committee formulates it and recommends it to the Board, which approves it. It is a working document. It should list the projects chosen from the Schedule VII activities and show how each will be carried out.

The annual action plan should include:

  • the list of CSR projects or programmes approved under Schedule VII, and the manner of executing them
  • the modalities of utilising funds and the implementation schedules
  • the monitoring and reporting mechanism for the projects
  • details of any need assessment or impact assessment, if undertaken

The Board can change the plan during the year. It may do so only on the recommendation of the CSR Committee, and it must record the reasons. This matters because the plan is the base for judging unspent amounts and ongoing projects later.

Under Section 135(9), a company whose CSR obligation for the year does not exceed ₹50 lakh need not constitute a CSR Committee. In that case, the Board performs the committee's functions. Check the amount in the facts before you write the answer.

Key rules to remember

CSR spending obligation
Minimum CSR spend = 2% × average net profit of the immediately preceding three financial years
Net profit is computed as prescribed under the CSR rules. Use it to size the plan and the policy's recommended expenditure.
Policy: who does what
CSR Committee formulates and recommends → Board approves → policy disclosed in Board's report and placed on website
State all three links in this order in your answer.
Annual action plan: who does what
CSR Committee formulates and recommends → Board approves
The Board may later alter the plan on the Committee's recommendation, recording reasons.
Contents of annual action plan
(a) List of CSR projects approved under Schedule VII and the manner of execution + (b) modalities of fund utilisation and implementation schedules + (c) monitoring and reporting mechanism + (d) details of need and impact assessment, if any
Four items under Rule 5(2) of the CSR Rules. Quote them as a list.
Committee threshold
CSR obligation not exceeding ₹50 lakh → no Committee needed; Board discharges its functions (Section 135(9))
Where the obligation exceeds ₹50 lakh, a CSR Committee is required.

How to solve CSR Policy and Annual Action Plan questions

Most questions give you a company and ask you to prepare, review or modify its CSR policy or plan. Use the same sequence each time so that you cover provision, facts and conclusion.

  1. 1Read the facts and note the company's size, its average net profit and the CSR obligation. Decide whether a CSR Committee is required.
  2. 2State the rule: the Committee formulates and recommends, and the Board approves. Name the document, whether policy or annual action plan.
  3. 3List the required contents of that document. For the policy, give activities under Schedule VII, expenditure and monitoring. For the plan, give its four items.
  4. 4Apply the contents to the facts. Check that each proposed project fits a Schedule VII activity and that the amount is at least the required spend.
  5. 5Address the process points: Board approval, website disclosure and disclosure in the Board's report for the policy.
  6. 6If the question involves a change, state that the Board may alter the plan on the Committee's recommendation and must record reasons.
  7. 7Give a clear conclusion, and add a practical drafting or compliance point such as a Board resolution or the minutes.

Quickest way: Who, what, how: a three-line answer frame

When to use it: Use it for short-answer questions or when you have under ten minutes for a question on this topic.

  1. Who: the CSR Committee recommends and the Board approves. If the CSR obligation does not exceed ₹50 lakh, Section 135(9) lets the Board act without a Committee.
  2. What: for the policy, Schedule VII activities, expenditure and monitoring. For the plan, projects, manner of execution, fund utilisation and schedules, monitoring, and impact assessment details.
  3. How: the policy goes on the website and into the Board's report. The plan is reviewed during the year and altered only on the Committee's recommendation with recorded reasons.

Common mistakes in CSR Policy and Annual Action Plan

  • Saying the Board prepares the policy and the plan on its own.

    Students focus on the Board's final approval and forget the Committee's first step.

    Fix: Always write the sequence: the Committee formulates and recommends, then the Board approves.

  • Treating the policy and the annual action plan as the same document.

    Both deal with Schedule VII projects, so they seem alike.

    Fix: The policy is general and continuing. The plan is yearly and lists specific projects, schedules and monitoring. Keep their contents separate.

  • Forgetting website disclosure and disclosure in the Board's report for the policy.

    Students stop at approval and ignore the transparency steps.

    Fix: End every policy answer with disclosure of its contents in the Board's report and placement on the company's website.

  • Allowing the Board to modify the plan freely without the Committee's recommendation or reasons.

    Students assume Board power is unlimited.

    Fix: State that alteration is allowed during the financial year, but only on the Committee's recommendation and with reasons recorded.

  • Always insisting on a CSR Committee.

    Students learn the Committee rule without its exemption.

    Fix: Check the CSR obligation amount. If it does not exceed ₹50 lakh, Section 135(9) applies and the Board discharges the Committee's functions.

  • Including activities outside Schedule VII in the policy or the plan.

    Students treat any social good activity as eligible.

    Fix: Test each activity against Schedule VII before you include it, and say so in your answer.

Worked examples

Example 1

Kaveri Textiles Ltd. had net profits of ₹120 crore, ₹150 crore and ₹90 crore in the three preceding financial years. Compute its minimum CSR spend for the current year and state who prepares and approves the annual action plan.

Show the solution
  1. Average net profit = (120 + 150 + 90) ÷ 3 = 360 ÷ 3 = ₹120 crore.
  2. Minimum CSR spend = 2% × ₹120 crore = ₹2.4 crore.
  3. The obligation of ₹2.4 crore exceeds ₹50 lakh, so the Section 135(9) exemption does not apply and the company must have a CSR Committee.
  4. The CSR Committee formulates the annual action plan and recommends it to the Board.
  5. The Board approves the plan. The plan has four items: the list of Schedule VII projects and the manner of execution; the modalities of fund utilisation and implementation schedules; the monitoring and reporting mechanism; and details of need and impact assessment, if any.

Answer: The minimum CSR spend is ₹2.4 crore. The CSR Committee formulates and recommends the annual action plan, and the Board approves it.

Example 2

Midway through the year, the CSR Committee of Narmada Foods Ltd. finds that a rural water project approved in the annual action plan cannot start because of a local dispute. It proposes shifting the funds to a school sanitation project under Schedule VII. Can the Board do this?

Show the solution
  1. The Board may alter the annual action plan at any time during the financial year.
  2. The alteration must be based on the recommendation of the CSR Committee. Here, the Committee has made the recommendation.
  3. The new project, school sanitation, must fall within Schedule VII. It does, as it relates to sanitation and education.
  4. The Board must record the reasons for the change, such as the dispute that blocked the water project.
  5. The revised plan should show the updated project, execution manner, schedule and monitoring mechanism. The CSR policy need not change if the new project is within the activities it covers.

Answer: Yes. The Board may modify the plan on the Committee's recommendation, with reasons recorded, provided the new project is a Schedule VII activity.

Exam tips

  • Write the process chain first: Committee formulates and recommends, Board approves. This earns marks in almost any answer on the topic.
  • Learn the four items of the annual action plan as a list. Examiners often ask you to state its contents.
  • In case questions, check the CSR obligation amount for the Committee exemption under Section 135(9): an obligation not exceeding ₹50 lakh.
  • Add a drafting point where it fits, such as a Board resolution approving the plan or modifying it with the reasons minuted.
  • Test every project in the facts against Schedule VII and say whether it qualifies.

Practice questions from Corporate Social Responsibility

CSR Policy and Annual Action Plan in other exams

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

CSR Policy and Annual Action Plan: frequently asked questions

What must a CSR policy contain?

It must indicate the activities to be undertaken, which must fall within Schedule VII. It also covers the recommended expenditure and the monitoring of CSR activities. The Board approves it, and its contents are disclosed in the Board's report and on the company's website.

Who approves the CSR annual action plan?

The CSR Committee formulates and recommends it, and the Board approves it. If the company needs no Committee because its CSR obligation does not exceed ₹50 lakh (Section 135(9)), the Board performs both functions.

Can the Board change the annual action plan during the year?

Yes. The Board may alter the plan at any time during the financial year. It must act on the CSR Committee's recommendation and record the reasons.

What is the difference between a CSR policy and an annual action plan?

The policy is the standing framework of activities, spending and monitoring. The annual action plan is the year-specific list of projects with execution methods, fund utilisation, schedules and monitoring. The plan follows the policy.