Economic and Business Environment · Elements of Corporate Governance

Schedule VII CSR Activities: Eligible and Excluded Items

Updated 11 October 2026 · Fact-checked

Schedule VII lists the areas in which a company's CSR money can be spent, such as hunger and poverty, health, education, gender equality, environment, heritage, sports and rural development. Section 135 says the CSR Policy must indicate activities in areas specified in Schedule VII. To answer, identify the area, match it to the list, then check the exclusions.

Understand CSR Activities and Schedule VII

Corporate Social Responsibility (CSR) means a company spends part of its profit on social causes. Under Section 135 of the Companies Act, 2013, a company meeting the size tests must frame a CSR Policy. That policy must indicate the activities the company will undertake in areas or subjects specified in Schedule VII.

Think of Schedule VII as the menu. A company cannot spend its CSR budget on anything it likes. The spend counts only if it falls under an area on the menu. The text you are given in Section 135 tells you this link. The detailed list sits in Schedule VII itself.

The main areas, in plain words, are:
- Eradicating hunger, poverty and malnutrition; promoting health care, sanitation and safe drinking water.
- Promoting education, including special education and vocational skills; promoting gender equality and women empowerment; setting up homes and hostels for women and orphans, and old age homes.
- Environmental sustainability, ecological balance, animal welfare, and conservation of natural resources.
- Protection of national heritage, art and culture.
- Measures for armed forces veterans, war widows and their dependants.
- Training to promote rural sports, nationally recognised sports and Paralympic and Olympic sports.
- Contribution to funds set up by the Central Government for socio-economic development and relief, such as the Prime Minister's National Relief Fund.
- Funding research and development projects in science, technology, engineering and medicine, and technology incubators, as the Schedule allows.
- Rural development projects, slum area development and disaster management, including relief and rehabilitation.

The Schedule is updated from time to time, so learn the areas and not the exact serial numbers.

Some spending does not count as CSR. These exclusions come from the Companies (CSR Policy) Rules, 2014 (Rule 2(1)(d)), not from the Section 135 text. In plain words, the following are excluded:
- Activities done in the normal course of the company's business.
- Activities carried out outside India, except training of Indian sports persons.
- Contributions to political parties.
- Activities that benefit only the company's own employees and their families.
- One-off events such as sponsorships of TV programmes, marketing or advertising, where the benefit is the company's own.

Section 135(5) also says the company must give preference to the local area and areas around where it operates.

Key rules to remember

Who must have CSR (Section 135(1)): Net worth ≥ ₹500 crore OR turnover ≥ ₹1,000 crore OR net profit ≥ ₹5 crore, in the immediately preceding financial year; Meeting any one test is enough.
Minimum CSR spend (Section 135(5)): CSR spend ≥ 2% × average net profit of the three immediately preceding financial years; If the company is less than three years old, use the preceding years it has completed. Net profit is calculated under Section 198.
CSR Committee (Section 135(1)): At least 3 directors, including at least 1 independent director; If the company need not appoint an independent director, two or more directors are enough.
No Committee needed (Section 135(9)): CSR amount ≤ ₹50 lakh → Board performs the Committee's functions; The amount to be spent must not exceed fifty lakh rupees.
Role of the Committee (Section 135(3)): Formulate and recommend policy → recommend expenditure → monitor policy; The Board then approves the policy and ensures the activities are undertaken.
Unspent amount (Section 135(5) and (6)): Ongoing project: transfer to Unspent CSR Account within 30 days from the end of the financial year, spend within 3 financial years of the transfer. Other unspent amount: transfer to a Fund specified in Schedule VII within six months of the expiry of the financial year; In both cases the Board must state the reasons for not spending in its report. If the ongoing-project amount is still unspent after three financial years, it goes to a Schedule VII Fund within 30 days of the completion of the third financial year.
Penalty (Section 135(7)): On default in complying with sub-section (5) or (6). Company: lower of 2 × the amount required to be transferred or ₹1 crore. Officer in default: lower of 1/10 of the amount required to be transferred or ₹2 lakh; The amount is the one required to be transferred to the Schedule VII Fund or the Unspent CSR Account, as the case may be. Learn it as 'whichever is less'.

How to solve CSR Activities and Schedule VII questions

Use this method for any question on eligible or excluded CSR activities, whether it is a short note or a case.

1Read the activity and name its purpose in one phrase, such as 'building a school toilet' or 'advertising our brand'.
2Match that purpose to a Schedule VII area, such as health, sanitation, education or environment.
3Check the exclusions: normal course of business, outside India, political party, employees only, marketing or one-off event.
4Check the link to the Act: the activity must be in the CSR Policy approved by the Board on the Committee's recommendation.
5Check the amount rule: at least 2% of the average net profit of the three preceding years, with preference to the local area.
6State your conclusion clearly: eligible or not eligible, with the reason in one line.
7For long answers, add the unspent-amount rule and the penalty only if the question is about compliance.

Quickest way: Area match, then exclusion check

When to use it: Use it for one-line or short-answer questions where you must say if an activity qualifies.

Ask: does this help society in one of the Schedule VII areas? If no, it is not CSR.
Ask: is it just normal business, for employees only, political or abroad? If yes, it is excluded.
If both checks pass, write 'eligible under Schedule VII' and name the area.

Common mistakes in CSR Activities and Schedule VII

Treating any donation or charity as CSR.
Students think CSR just means doing good.
Fix: Only spending that falls in a Schedule VII area counts. Always name the area.
Counting a contribution to a political party as CSR.
It looks like a donation for public benefit.
Fix: Remember that contributions to political parties are excluded.
Counting advertising or a sponsored event as CSR.
The company's brand name appears next to a social message.
Fix: Marketing and normal business activities are not CSR. Look for a real social purpose.
Applying the 2% to the current year's profit.
Students ignore the word 'average'.
Fix: Use the average net profit of the three immediately preceding financial years.
Saying a CSR Committee is always compulsory.
Section 135(9) is missed.
Fix: If the amount to be spent is ₹50 lakh or less, the Board does the Committee's work.
Mixing up the two unspent-money routes.
Both involve transfers with different time limits.
Fix: Ongoing project: Unspent CSR Account within 30 days from the end of the financial year, to be spent within three financial years. Other unspent money: a Schedule VII Fund within six months of the expiry of the financial year. In both cases the Board gives the reasons in its report.

Worked examples

Example 1

Sunrise Foods Ltd has net profits of ₹10,00,00,000, ₹14,00,00,000 and ₹12,00,00,000 in its last three financial years. Its turnover is above ₹1,000 crore. Find the minimum CSR spend and say whether a CSR Committee is required.

Show the solution

Turnover of ₹1,000 crore or more meets a Section 135(1) test, so CSR applies.
Average net profit = (10,00,00,000 + 14,00,00,000 + 12,00,00,000) ÷ 3 = 36,00,00,000 ÷ 3 = ₹12,00,00,000.
Minimum spend = 2% × ₹12,00,00,000 = ₹24,00,000.
₹24,00,000 does not exceed ₹50 lakh, so under Section 135(9) the Committee is not required.
The Board discharges the Committee's functions.

Answer: The minimum CSR spend is ₹24,00,000. A CSR Committee is not required because the amount is within ₹50 lakh, and the Board performs its functions.

Example 2

A company in Pune plans four activities: (a) a school building for children in nearby villages, (b) a donation to a political party, (c) a TV advertising campaign for its own products, (d) a tree plantation drive near its plant. Which count as CSR under Schedule VII?

Show the solution

(a) School building is education, a Schedule VII area, and local. Eligible.
(b) A donation to a political party is excluded. Not eligible.
(c) An advertising campaign is normal business and marketing. Not eligible.
(d) Tree plantation is environmental sustainability and ecological balance, a Schedule VII area, and local. Eligible.

Answer: Activities (a) and (d) qualify as CSR. Activities (b) and (c) are excluded.

Exam tips

Learn the Schedule VII areas as a short list of keywords: hunger, health, education, women, environment, heritage, armed forces, sports, relief funds, research, rural, slum, disaster.
In a case question, name the Schedule VII area first and the exclusion second. Examiners give marks for both.
Write the 2% calculation with the average of three years and show each step.
Do not quote Schedule VII serial numbers. Quote Section 135 only where you are sure, such as 135(5) for spend and 135(9) for the ₹50 lakh rule.
For a list question in a written paper, give 6 to 8 areas with a one-line example each.

Practice questions from Elements of Corporate Governance

CSR Activities and Schedule VII in other exams

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

CSR Activities and Schedule VII: frequently asked questions

What is Schedule VII in the Companies Act, 2013?

It is the schedule listing the areas in which a company's CSR activities can be carried out. Section 135(3)(a) requires the CSR Policy to indicate activities in areas specified in Schedule VII.

Can a company spend CSR money outside India?

Under the Companies (CSR Policy) Rules, activities outside India are generally excluded, apart from training of Indian sports persons. Section 135(5) also asks the company to prefer its local area and areas around it.

Is a donation to a political party allowed as CSR?

No. Contributions to political parties are excluded from CSR spending under the Companies (CSR Policy) Rules.

What happens if a company does not spend its CSR amount?

The Board must give the reasons in its report. For an ongoing project, the unspent amount goes to the Unspent CSR Account within 30 days from the end of the financial year and must be spent within three financial years of the transfer. If it is still unspent, it goes to a Schedule VII Fund within 30 days of the completion of the third financial year. For other unspent amounts, the transfer to a Schedule VII Fund is due within six months of the expiry of the financial year. Default under Section 135(5) or (6) attracts a penalty under Section 135(7).