CSR and Social Governance · Impact of CSR

Impact Assessment under CSR Rules (Rule 8(3))

Updated 11 October 2026 · Fact-checked

Under Rule 8(3) of the Companies (CSR Policy) Rules, a company with an average CSR obligation of ₹10 crore or more over the three preceding years must get an independent agency to assess each CSR project with an outlay of ₹1 crore or more that finished at least one year earlier. Reports go to the Board and the annual CSR report.

Understand Impact Assessment under CSR Rules

Spending CSR money is not enough. The law also asks whether the spending changed anything for the beneficiaries. Impact assessment is a structured, evidence-based study of the outcomes of a CSR project, such as changes in learning levels, income or health.

The Companies (CSR Policy) Rules make this mandatory only for larger companies and larger projects. Rule 8(3) was brought in by the 2021 amendment to the Rules. The aim is to focus on projects big enough and old enough to show real results.

There are three tests. First, the company test: average CSR obligation of ₹10 crore or more in the three immediately preceding financial years. This is the obligation under section 135(5), that is the amount the company was required to spend, not what it actually spent. Second, the project test: outlay of ₹1 crore or more. Third, the time test: the project must have been completed at least one year before the study begins.

The study must be done through an independent agency, meaning someone outside the company's CSR team and outside the implementing agency of that project. The reports are placed before the Board and annexed to the annual report on CSR. The cost of the study can be counted as CSR expenditure, but only up to a cap.

For a company that is not covered, impact assessment is not compulsory. It is still good practice and the Board may choose to do it.

Key rules to remember

Company applicability: Average CSR obligation of the 3 immediately preceding financial years ≥ ₹10 crore; Use the obligation under section 135(5) (2% of average net profit), not actual spending. If the obligation is at 2%, this broadly means average net profit of about ₹500 crore.
Project applicability: Outlay ≥ ₹1 crore AND completed at least 1 year before the impact study; All conditions must be met. Ongoing or recently completed projects are not yet covered.
Who conducts it: Independent agency; The agency must be independent of the company's CSR implementation.
Reporting: Report placed before the Board + annexed to the annual report on CSR; The prescribed format of the annual CSR report has a place for details of impact assessments done under Rule 8(3).
Expenditure cap: Bookable cost = lower of (5% of total CSR expenditure of that financial year) and ₹50 lakh; Cost above the cap cannot be counted as CSR spending. It is borne by the company outside CSR.

How to solve Impact Assessment under CSR Rules questions

For any question on impact assessment, test the facts against Rule 8(3) in a fixed order and then state the compliance consequence.

1Identify the company's CSR obligation for each of the three immediately preceding financial years and take the average. Use the obligation, not the actual spend.
2Check whether the average is ₹10 crore or more. If not, state that assessment is not mandatory (it may still be done voluntarily) and stop.
3List the projects. Keep only those with an outlay of ₹1 crore or more.
4From these, keep only projects completed at least one year before the study starts. Exclude ongoing and recently completed ones.
5State that an independent agency must conduct the study and that the Board should approve the engagement.
6Compute the bookable cost: the lower of 5% of that year's total CSR expenditure and ₹50 lakh. Compare it with the actual fee.
7State reporting: place the report before the Board and annex it to the annual report on CSR.
8Conclude clearly: which projects are covered, how much can be booked as CSR, and what is to be reported.

Quickest way: Three tests, one cap, one report

When to use it: Use for short applicability or numerical questions where time is tight.

Write 10 cr / 1 cr / 1 year on the margin: company, project, time.
Tick each test against the facts. One miss means not covered.
For cost, write 5% of CSR spend and ₹50 lakh, then pick the lower.
Close with one line: independent agency, report to Board, annex to annual CSR report.

Common mistakes in Impact Assessment under CSR Rules

Using actual CSR spend instead of the CSR obligation to test the ₹10 crore threshold.
Students remember the figure but not that Rule 8(3) refers to the obligation under section 135(5).
Fix: Always compute 2% of average net profit for each of the three years and average those amounts.
Applying impact assessment to every project of a covered company.
The company test is learned and the project tests are forgotten.
Fix: Check outlay of ₹1 crore or more and completion at least one year earlier for every project.
Stating the cap as only 5% of CSR expenditure.
The 5% figure is searched most often, so the ₹50 lakh limit gets dropped.
Fix: Write the cap as the lower of 5% of total CSR expenditure for that year and ₹50 lakh.
Treating the study as an in-house review by the CSR committee or the implementing agency.
Students confuse monitoring with impact assessment.
Fix: Remember that monitoring is internal and ongoing. Impact assessment is done by an independent agency after completion.
Saying the report only needs to be filed internally.
Reporting steps are skipped when answering applicability questions.
Fix: State that the report is placed before the Board and annexed to the annual report on CSR.
Saying smaller companies are prohibited from impact assessment.
Mandatory is mistaken for the only permitted case.
Fix: Say it is not mandatory below the threshold, but a company may choose to do it as good practice.

Worked examples

Example 1

Meridian Textiles Ltd had a CSR obligation of ₹9 crore, ₹10 crore and ₹11 crore in the three preceding financial years. It completed three projects: P1, outlay ₹1.5 crore, completed 18 months ago; P2, outlay ₹80 lakh, completed 2 years ago; P3, outlay ₹2 crore, completed 6 months ago. Which projects must undergo impact assessment?

Show the solution

Average CSR obligation = (9 + 10 + 11) ÷ 3 = ₹10 crore.
The average is ₹10 crore or more, so the company is covered by Rule 8(3).
P1: outlay ₹1.5 crore is at least ₹1 crore, and it was completed 18 months ago, which is more than one year. Covered.
P2: outlay ₹80 lakh is below ₹1 crore. Not covered, even though it is old.
P3: outlay ₹2 crore qualifies, but it was completed only 6 months ago, less than one year. Not yet covered.
P1 must be assessed through an independent agency. The report goes to the Board and is annexed to the annual report on CSR.

Answer: Only P1 must undergo impact assessment now. P3 will become eligible once a year has passed since completion. P2 is not covered.

Example 2

Kaveri Foods Ltd is covered by Rule 8(3). Case A: total CSR expenditure for the year is ₹12 crore and the assessment fee is ₹45 lakh. Case B: total CSR expenditure is ₹8 crore and the fee is ₹48 lakh. How much can be booked as CSR expenditure in each case?

Show the solution

Cap = lower of 5% of total CSR expenditure and ₹50 lakh.
Case A: 5% of ₹12 crore = ₹60 lakh. Lower of ₹60 lakh and ₹50 lakh = ₹50 lakh.
Fee ₹45 lakh is below the cap of ₹50 lakh, so the whole ₹45 lakh can be booked.
Case B: 5% of ₹8 crore = ₹40 lakh. Lower of ₹40 lakh and ₹50 lakh = ₹40 lakh.
Fee ₹48 lakh exceeds the cap of ₹40 lakh. Bookable amount is ₹40 lakh.
Excess = ₹48 lakh − ₹40 lakh = ₹8 lakh, which cannot be counted as CSR expenditure.

Answer: Case A: ₹45 lakh can be booked as CSR expenditure. Case B: ₹40 lakh can be booked and the remaining ₹8 lakh is borne by the company outside CSR.

Exam tips

Open applicability answers with the three tests: ₹10 crore average obligation, ₹1 crore outlay, one year since completion. Examiners look for all three.
Cite Rule 8(3) of the Companies (CSR Policy) Rules, 2014 as amended in 2021. Do not give a section number for the rule itself.
In numerical questions, show the 5% calculation and the ₹50 lakh comparison separately before stating the bookable amount.
Always close with reporting: Board placement and annexure to the annual report on CSR. This is an easy mark that students miss.
Use the case facts. Name the company and the project and apply each test in turn instead of writing a general note.

Practice questions from Impact of CSR

Impact Assessment under CSR Rules in other exams

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

Impact Assessment under CSR Rules: frequently asked questions

Who must conduct CSR impact assessment under Rule 8(3)?

Companies with an average CSR obligation of ₹10 crore or more in the three immediately preceding financial years must do it. They must cover projects with an outlay of ₹1 crore or more that were completed at least one year before the study. The study is done through an independent agency.

What is the expenditure limit for impact assessment under CSR?

The company may book the cost as CSR expenditure up to the lower of 5% of the total CSR expenditure for that financial year and ₹50 lakh. Any cost above this limit cannot be counted as CSR.

Is the ₹10 crore test based on actual CSR spending?

No. It is based on the average CSR obligation under section 135(5) for the three immediately preceding financial years. A company that spent less than required is still tested on its obligation.

How is the impact assessment reported?

The impact assessment report is placed before the Board and annexed to the annual report on CSR. The prescribed format of that report also carries details of impact assessments carried out under Rule 8(3).