CSR in India: Meaning, Rules and Key Areas Covered Under Schedule VII

India was the first country to make corporate social responsibility a legal duty for large companies. Since the rule came into force on 1 April 2014, CSR in India has become a steady source of support for schools, hospitals and villages across the country. In FY25, companies spent Rs 40,794 crore on CSR, a rise of 17% over the previous year.

That money was spread across 72,233 CSR projects, covering education, skill development, health, sanitation and environmental conservation. Each one follows a clear legal framework that decides which companies must spend, how much they must set aside and which causes qualify. For companies planning their budgets, and for NGOs and communities hoping to receive support, these rules shape how CSR projects in India are chosen and carried out.

What Is CSR in India?

CSR, or corporate social responsibility, is a legal duty for larger companies in India to spend part of their profits on activities that benefit society. Companies that cross certain size limits must spend at least 2% of their average net profit on approved causes such as education, healthcare, rural development and the environment.

In many countries, CSR is left to each company’s choice. India decided to write it into law. The Ministry of Corporate Affairs describes CSR as a way of bringing social, environmental and human development concerns into the way companies run their business.

In practice, corporate social responsibility in India means three things for a company. It must check whether the law applies to it, set aside the required amount every year, and spend that amount only on activities the law allows.

Which Law Governs CSR in India?

CSR in India is governed by three pieces of law that work together, each covering a different part of the process:

• Section 135 of the Companies Act 2013 sets out which companies must spend on CSR and how much.
• Schedule VII of the same Act lists the activities that count as CSR.
• The Companies (Corporate Social Responsibility Policy) Rules, 2014 explain how companies plan, spend, report and track their CSR money.

These rules have been updated several times since 2014, most recently in 2026, when a new activity was added to Schedule VII. Every company covered by the law files its CSR details with the Ministry of Corporate Affairs each year. This data is then published on the National CSR Portal, where anyone can check how much a company spent and on what.

Which Companies Must Spend on CSR?

A company must spend on CSR if it meets any one of three conditions in the immediately preceding financial year. These apply to private and public companies alike, as well as Indian branches of foreign companies.

Meeting just one of these is enough. A mid-sized company with a net profit of Rs 6 crore, for example, falls under the law even if its turnover is far below Rs 1,000 crore. This is why the rules for CSR in India cover thousands of companies each year, not only the country’s largest businesses.

How Much Do Companies Have to Spend on CSR?

Companies covered by the law must spend at least 2% of their average net profit from the three immediately preceding financial years. A newer company that has not completed three years uses the average of the years it has completed. This 2% figure is what people usually mean by the CSR percentage in India.

Here is how it works. Say a company earned net profits of Rs 90 crore, Rs 100 crore and Rs 110 crore over the last three years. Its average profit is Rs 100 crore, so it must spend at least Rs 2 crore on CSR in the current year.

Spending more than 2% is allowed, and the extra amount can be adjusted against the company’s CSR duty over the next three financial years. Spending less comes with clear rules:

• For ongoing projects, the unspent amount must be moved to a separate Unspent CSR Account within 30 days of the financial year’s end and used within the next three financial years.
• Any other unspent amount must be transferred to a fund listed in Schedule VII, such as the PM CARES Fund, within six months of the financial year’s end.

What Areas Does CSR Cover Under Schedule VII of the Companies Act, 2013?

Schedule VII of the Companies Act, 2013 currently lists 13 areas where companies can spend their CSR money, including a new option added in May 2026. Any spending outside this list does not count towards a company’s 2% duty. The areas range from health and education to heritage, sports, disaster relief and the Social Stock Exchange.

Each item below is explained in simple words, based on the official text of Schedule VII. Many CSR activities under Schedule VII overlap, so a single project, such as a rural school with a health clinic, can fall under more than one item.

1. Eradicating Hunger, Poverty and Promoting Healthcare and Sanitation

This item covers ending hunger, poverty and malnutrition, along with preventive healthcare, sanitation and safe drinking water. Typical projects include nutrition programmes, free medical camps, school toilets and clean water units in villages. Contributions to the Swachh Bharat Kosh, set up by the Central Government for sanitation, also count.

2. Promoting Education and Vocational Skills

This item covers education, including special education, and vocational skills that improve employment, especially among children, women, the elderly and the differently abled. Companies use it to build or upgrade schools, fund scholarships, train teachers and run skill centres. It is the largest area of CSR spending in the country.

3. Gender Equality, Women Empowerment and Support for Senior Citizens

This item supports gender equality and women’s empowerment, including homes and hostels for women and orphans. It also covers old age homes and day care centres for senior citizens, along with measures to reduce inequalities faced by socially and economically backward groups.

4. Environmental Sustainability and Animal Welfare

Projects that protect the environment fall here, including ecological balance, protection of flora and fauna, animal welfare, agroforestry and conservation of natural resources. The item also covers keeping soil, air and water clean, and contributions to the Clean Ganga Fund set up for the river Ganga.

5. Protecting National Heritage, Art and Culture

Companies can fund the restoration of buildings and sites of historical importance, as well as works of art. This item also supports setting up public libraries and promoting traditional art and handicrafts.

6. Support for Armed Forces Veterans and Their Families

This item covers measures for armed forces veterans, war widows and their dependents. It also includes veterans of the Central Armed Police Forces and Central Para Military Forces, along with their dependents and widows.

7. Promoting Rural and National Sports

Companies can fund training to promote rural sports, nationally recognised sports, Paralympic sports and Olympic sports. This gives young athletes from smaller towns and villages access to coaching and facilities.

8. Contributions to Government Relief Funds

Contributions to the Prime Minister’s National Relief Fund, the PM CARES Fund or other Central Government funds for relief and socio-economic development come under this item. It also covers funds for the welfare of Scheduled Castes, Scheduled Tribes, other backward classes, minorities and women.

9. Support for Research, Incubators and Public Universities

This item allows contributions to incubators and research projects in science, technology, engineering and medicine that are funded by the Central or State Government or public sector bodies. Companies can also support publicly funded universities, IITs, national laboratories and autonomous research bodies working towards the Sustainable Development Goals.

10. Rural Development Projects

Rural development is one of the broadest items on the list. It covers projects that improve life in villages, such as water supply, roads, livelihoods and community facilities, and often overlaps with education and health work in rural areas.

11. Slum Area Development

This item supports development work in areas officially declared as slums by the Central Government, a State Government or another competent authority. Projects can include housing, sanitation, health and education support for slum communities.

12. Disaster Management, Relief and Rehabilitation

Added in May 2019, this item covers disaster management, including relief, rehabilitation and reconstruction. It allows companies to support communities quickly after floods, earthquakes and other disasters, and to help them rebuild over the following months.

13. Investing Through the Social Stock Exchange

The newest item, added in May 2026, allows companies to subscribe to zero coupon zero principal instruments on the Social Stock Exchange. Put simply, registered non-profit organisations can raise money for public welfare projects on this regulated exchange, and companies can count their support as CSR. As per the Ministry of Corporate Affairs, this spending cannot exceed 10% of a company’s total CSR expenditure for the year.

Which CSR Area Receives the Most Funding?

Education receives more CSR money than any other area. In FY 2024-25, it received Rs 13,877 crore, or 34% of all CSR spending, according to the Fulcrum CSR Performance Report 2026. Together, the top five areas accounted for about three-quarters of total spending.

The same report shows education spending grew 14% over the previous year, while environmental projects saw the sharpest rise at 40%. The steady growth of CSR funding for education in India shows that many companies see schools, scholarships and skill training as long-term investments in the communities around them.

How Do Companies Carry Out CSR Projects?

Companies follow a set process, from planning at board level to reporting results every year:

1. Form a CSR committee. The board sets up a committee to plan and oversee CSR work. If a company’s yearly CSR amount is Rs 50 lakh or less, the board itself can handle this role.
2. Approve a CSR policy and annual action plan. The board approves which projects to fund, where they will run and how much each will receive.
3. Choose how to implement. A company can run projects on its own, through its own foundation, or through an implementing agency such as a registered NGO.
4. Report and review. CSR spending is disclosed in the board’s report each year and filed with the Ministry of Corporate Affairs.

When a company works with an NGO, the law sets clear checks. The NGO must be a registered trust, society or Section 8 company, hold 12A and 80G registrations under the Income Tax Act, have at least three years of experience in similar work, and be registered with the Ministry through Form CSR-1. Each registered agency receives a unique CSR registration number, which companies use to confirm it is eligible.

Larger companies have one more duty. Those with an average CSR obligation of Rs 10 crore or more over the past three years must get an independent impact assessment of bigger projects, those costing Rs 1 crore or more. This helps make sure money spent on CSR in India produces results that can be measured and reported.

How NGOs Turn CSR Funds Into Lasting Impact: The Work of The Kalgidhar Society, Baru Sahib

Schedule VII becomes meaningful when CSR funds are put to work in communities. The Kalgidhar Society, Baru Sahib is a community-first organisation known for quality rural education in North India, and its work over more than four decades spans several Schedule VII areas at once.

It runs 130 Akal Academies and 2 universities, educating more than 75,000 students in rural parts of Punjab, Haryana, Himachal Pradesh, Rajasthan and Uttar Pradesh. Here is how its wider work lines up with the law:

For companies choosing a partner for CSR projects in India, these credentials matter. The Society is registered on the National CSR Portal (CSR00004523), holds 12A and 80G registrations, and is registered on the BSE Social Stock Exchange. Companies can explore partnership options through CSR for CHANGE, an initiative supporting the noble cause of The Kalgidhar Society, Baru Sahib.

Conclusion

Corporate social responsibility in India works within a clear legal structure. Section 135 decides which companies must spend, the 2% formula sets how much, and the 13 areas in Schedule VII guide where the money goes. With spending at a record level and education receiving the largest share, the reach of CSR in India keeps growing each year.

For companies, the next step is choosing projects and partners that deliver lasting results. Organisations such as The Kalgidhar Society, Baru Sahib show how CSR funds placed with experienced, fully registered partners can support thousands of children, women and families across rural India.

Frequently Asked Questions

Is CSR mandatory in India?

CSR is mandatory only for companies that meet at least one of three conditions in the previous financial year: net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more. Other companies can take up CSR voluntarily.

What is the CSR percentage in India?

Companies covered by the law must spend at least 2% of their average net profit from the three immediately preceding financial years on CSR activities.

When was CSR made mandatory in India?

CSR became mandatory under the Companies Act, 2013. The rules came into force on 1 April 2014, making India the first country to set a legal CSR spending requirement.

Why is CSR mandatory in India?

The law directs a fixed share of large companies’ profits towards national priorities such as education, healthcare, rural development and the environment. It also brings transparency, since companies must report their CSR spending publicly every year.

How can NGOs apply for CSR funds in India?

An NGO must be a registered trust, society or Section 8 company with 12A and 80G registrations and at least three years of experience in similar work. It must then register with the Ministry of Corporate Affairs by filing Form CSR-1 and receive a CSR registration number before companies can fund it.

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

The unspent amount must be moved to an Unspent CSR Account for ongoing projects, or to a fund listed in Schedule VII for other cases. A company that fails to do this faces a penalty of twice the amount it should have transferred or ₹1 crore, whichever is less. Its officers in default can also be fined.

How many activities are there in Schedule VII?

Schedule VII of the Companies Act, 2013 currently lists 13 activities. The 13th, subscription to zero coupon zero principal instruments on the Social Stock Exchange, was added in May 2026.

How can companies fund The Kalgidhar Society’s CSR projects?

Companies can choose a cause on the CSR for CHANGE proposals page, such as rural education, women empowerment, healthcare, environment or disaster relief, and receive a proposal matched to their CSR budget. The Kalgidhar Society, Baru Sahib is registered on the National CSR Portal and holds 12A and 80G registrations, so it is eligible to receive CSR funds as an implementing agency.