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Environmental, Social and Governance (ESG) - Principles and Practice · Corporate Social Responsibility (CSR)

CSR Policy and Annual Action Plan: Committee and Board Roles

Updated 11 October 2026 · Fact-checked

The CSR Committee formulates the CSR Policy, recommends the amount to be spent and monitors the policy. The Board then approves the policy after considering those recommendations, discloses its contents in its report, places it on the website, and ensures the planned activities are undertaken. The annual action plan comes from the CSR Rules.

Understand CSR Policy and Annual Action Plan

A company covered by section 135 cannot spend on CSR in an ad hoc way. The law wants a written plan first. That plan is the CSR Policy. It tells everyone what the company will do, in which areas, and how much it will spend.

The work is split between two bodies. The CSR Committee proposes. The Board decides. Under section 135(3), the Committee must formulate and recommend a CSR Policy that indicates the activities to be undertaken in areas or subjects specified in Schedule VII. It must also recommend the amount of expenditure on those activities. It must monitor the policy from time to time.

Under section 135(4), the Board takes the Committee's recommendations into account and approves the policy. It must disclose the contents of the policy in its report and place it on the company's website, if any, in the prescribed manner. The Board must also ensure the activities in the policy are actually undertaken.

The annual action plan is the year-wise working of the policy. It is not in the text of section 135 supplied here, so it is covered by the CSR Rules made under the section. In practice, the Committee prepares it and recommends it to the Board. It lists the projects for the year, how they will be carried out, the budget, and the monitoring and reporting arrangements. The Board approves it, and it may be modified during the year on the Committee's recommendation. Check the exact contents list in the Rules before the exam.

Where the amount to be spent does not exceed fifty lakh rupees, section 135(9) says the Committee need not be formed. The Board then discharges the Committee's functions, including the policy and plan.

Key rules to remember

Committee's duties (s. 135(3))
Formulate and recommend CSR Policy + recommend expenditure amount + monitor the policy
Policy must indicate activities in areas or subjects specified in Schedule VII.
Board's duties (s. 135(4))
Approve policy after considering Committee's recommendations + disclose contents in Board's report + place on website, if any + ensure activities are undertaken
The Board approves; the Committee only recommends.
Minimum CSR spend (s. 135(5))
At least 2% of average net profit of the three immediately preceding financial years
Net profit is calculated under section 198, excluding prescribed sums. For a company under three years old, use the immediately preceding years completed.
Committee composition (s. 135(1))
3 or more directors, at least 1 independent director
If the company need not appoint an independent director under s. 149(4), 2 or more directors suffice.
Small-spend exemption (s. 135(9))
Amount to be spent ≤ ₹50 lakh → no Committee; Board performs its functions
Test is on the amount to be spent, not on profit.
Disclosure of Committee (s. 135(2))
Board's report under s. 134(3) discloses composition of the CSR Committee
Policy contents are also disclosed under s. 135(4)(a).

How to solve CSR Policy and Annual Action Plan questions

Most questions give a company's facts and ask who must do what about the policy or plan. Answer in the order of provision, facts, conclusion.

  1. 1Check applicability first: net worth ₹500 crore or more, turnover ₹1,000 crore or more, or net profit ₹5 crore or more in the immediately preceding financial year.
  2. 2Decide who acts: a Committee (3 or more directors, one independent) or the Board itself if the spend is ₹50 lakh or less.
  3. 3State the Committee's role: formulate and recommend the policy, recommend the amount, monitor the policy.
  4. 4State the Board's role: approve the policy after considering recommendations, disclose contents in its report, put it on the website, and ensure activities are carried out.
  5. 5Link the policy to Schedule VII and the local-area preference in section 135(5).
  6. 6Add the annual action plan from the CSR Rules, saying the Committee prepares it and the Board approves it. Do not quote a rule number unless sure.
  7. 7Apply the facts to the question and give a clear conclusion, with a drafting or compliance point such as a Board resolution or website upload.

Quickest way: Who proposes, who approves, what is disclosed

When to use it: Use when a short question asks for the process of policy adoption or the Board's duties.

  1. Write the chain: Committee recommends, Board approves, Board discloses, Board ensures.
  2. Name three Committee tasks: policy, amount, monitoring.
  3. Name three Board outputs: approval, disclosure in report and on website, implementation.
  4. Add the action plan in one line: year-wise projects and budget, recommended by Committee, approved by Board, under the CSR Rules.
  5. Close with the ₹50 lakh rule if the facts show a small spender.

Common mistakes in CSR Policy and Annual Action Plan

  • Saying the CSR Committee approves the policy.

    The Committee does most of the drafting, so students assume it also finalises.

    Fix: Write that the Committee formulates and recommends, and the Board approves under section 135(4)(a).

  • Forgetting to mention website placement and Board's report disclosure.

    Students stop at approval and treat disclosure as a separate topic.

    Fix: Always add that the contents are disclosed in the Board's report and the policy is placed on the website, if any, in the prescribed manner.

  • Applying the ₹50 lakh exemption to profit or turnover.

    Other thresholds in the section are on net worth, turnover and profit, so the numbers blur.

    Fix: Section 135(9) tests the amount required to be spent under section 135(5). If it is ₹50 lakh or less, the Board performs the Committee's functions.

  • Quoting a section number for the annual action plan.

    Students assume everything on CSR is in section 135.

    Fix: Say the annual action plan is required under the CSR Rules. Section 135 as supplied does not mention it.

  • Confusing the policy with the spending target.

    Both are discussed together in the Committee's functions.

    Fix: The policy lists activities. The Committee separately recommends the amount. The 2% floor is a Board duty under section 135(5).

Worked examples

Example 1

Sunrise Textiles Ltd, a company with net profit of ₹7 crore in the immediately preceding financial year, wants to start CSR spending. The managing director drafts a CSR Policy and asks the Board to adopt it directly. Advise whether the procedure is correct.

Show the solution
  1. Applicability: net profit of ₹7 crore is ₹5 crore or more, so section 135(1) applies.
  2. Procedure: the Committee must formulate and recommend the policy under section 135(3)(a). It must also recommend the expenditure amount.
  3. The Board must approve the policy after taking into account the Committee's recommendations under section 135(4)(a).
  4. Here the managing director bypassed the Committee, unless the spend is ₹50 lakh or less. Two per cent of average net profit of ₹7 crore would be about ₹14 lakh if that were the average, but the average is not given, so check the actual figure.
  5. If the amount to be spent is above ₹50 lakh, the Committee must be constituted. If it is ₹50 lakh or less, section 135(9) lets the Board do the Committee's work.

Answer: The procedure is not correct if the Committee is required. The Committee must formulate and recommend the policy and amount, and the Board then approves it, discloses its contents in the Board's report and on the website, and ensures the activities are undertaken. If the amount to be spent is ₹50 lakh or less, the Board itself may discharge the Committee's functions.

Example 2

Explain the roles of the CSR Committee and the Board in the CSR Policy and annual action plan of a company covered by section 135.

Show the solution
  1. Committee under section 135(3): formulate and recommend a policy indicating Schedule VII activities, recommend the expenditure amount, and monitor the policy from time to time.
  2. Board under section 135(4): approve the policy after considering the recommendations, disclose its contents in the Board's report, place it on the website, if any, and ensure the policy's activities are undertaken.
  3. Composition: Committee has three or more directors with at least one independent director. The Board's report discloses the composition under section 135(2).
  4. Annual action plan: under the CSR Rules, the Committee prepares a year-wise plan of projects and budget and recommends it. The Board approves it.
  5. Spending duty: the Board must ensure at least 2% of the average net profit of the three immediately preceding financial years is spent under section 135(5), with preference to local areas.

Answer: The Committee proposes and monitors: policy, amount and action plan. The Board approves, discloses in its report and on the website, and ensures implementation and the 2% spend. Where the spend is ₹50 lakh or less, the Board performs the Committee's functions under section 135(9).

Exam tips

  • Write in the order provision, facts, conclusion. Cite section 135(3) for the Committee and section 135(4) for the Board.
  • Always show the split: Committee recommends, Board approves. Examiners look for this.
  • For the annual action plan, name the CSR Rules as the source and avoid inventing rule numbers.
  • In case questions, check the ₹50 lakh amount first. It decides whether a Committee is needed.
  • End with a practical step such as a Board resolution, minutes of the Committee meeting, or uploading the policy to the website.

Practice questions from Corporate Social Responsibility (CSR)

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 under the Companies Act, 2013?

Section 135(3)(a) says the policy must indicate the activities to be undertaken by the company in areas or subjects specified in Schedule VII. The Committee separately recommends the expenditure amount. Further contents, such as implementation and monitoring details, come from the CSR Rules.

Who approves the CSR Policy and annual action plan?

The Board approves the policy after taking into account the Committee's recommendations. The Committee prepares and recommends the annual action plan under the CSR Rules, and the Board approves it.

Where must the CSR Policy be disclosed?

The Board must disclose the contents of the policy in its report and place it on the company's website, if any, in the prescribed manner. The Board's report must also disclose the composition of the CSR Committee.

Does a small company need a CSR Committee?

If the amount to be spent under section 135(5) does not exceed ₹50 lakh, the Committee requirement does not apply. The Board then discharges the Committee's functions.