CORPORATE SOCIAL RESPONSIBILITY IN INDIA: LAW, IMPACT, AND FUTURE

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Published on: 24th December 2025

Authored by: Sakshi Waskar
MIT WPU, Pune

ABSTRACT

This article explores the concept of Corporate Social Responsibility in India, under the Companies Act, 2013, particularly on section 135. Section 135 explains what is CSR, which companies needs to follow it, how much the company needs to spend and what happens if they don’t do so. It is mandatory in certain companies to spend some part of their profits to CSR activities. This article also looks on which companies do follow CSR Activities. It also discusses what are the future trends and challenges faced for CSR.

INTRODUCTION

CSR is a concept where, a company takes the responsibility of how it affects the society and the environment, going beyond its objective of profit and contributes to the social, economic and environmental development. The ECI defines CSR as “The responsibility of businesses/projects for their community of people/all good people in the world hit/effect”. To completely meet their social responsibility, businesses/projects “should have in place a process to combine different things together so they work as one unit social, related to surrounding conditions or the health of the Earth, honest and right human rights and person who uses a product or service concerns into their business operations and core success plans/ways of reaching goals in close partnership with their shareholders.” [1] The WBCSD defines CSR as “The continuing commitment by business to add/give to development of process of people making, selling, and buying things while improving the quality of life of the all the workers in a company or country and their families as well as of the community and community of people.”[2]

CSR in India has a unique environment. Businesses in India have a long history of giving back to the neighborhoods in which they operate, in addition to their primary interest in maximizing profits. This is demonstrated by the large number of family-run companies that undertake philanthropic endeavors as part of their corporate behaviour and have done so for centuries. For CSR in India, the implementation of the Companies Act 2013 signaled a crucial turning point. According to this Act, companies with a net worth of INR 500 crore or more, a revenue of INR 1000 crore or more, or a net profit of INR 5 crore or more are required to invest at least 2% of their annual average net profits in immediately preceding three financial years in CSR programs (Indian Ministry of Corporate Affairs, 2013). The nature, breadth, and size of CSR efforts carried out by businesses have all been significantly impacted by this rule, one of the first of its kind internationally.[3]

CSR IN INDIAN LAW: LEGAL FRAMEWORK AND COMPLIANCE

The Companies Act, 2013 introduced to the concept of Corporate Social Responsibility in section 135, which says, (1) Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during 1[the immediately preceding financial year] shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director:

2[Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors.]

(2) The Board’s report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.

(3) The Corporate Social Responsibility Committee shall,–

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company 3[in areas or subject, specified in Schedule VII];

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company from time to time.

(4) The Board of every company referred to in sub-section (1) shall,–

(a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company’s website, if any, in such manner as may be prescribed; and

(b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.

(5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, 4[or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years] in pursuance of its Corporate Social Responsibility Policy:

Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities:

Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount 5[and, unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial years].

6[Provided also that if the company spends an amount in excess of the requirements provided under this sub-section, such company may set off such excess amount against the requirement to spend under this sub-section for such number of succeeding financial years and in such manner, as may be prescribed.]

7[Explanation.–For the purposes of this section “net profit” shall not include such sums as may be prescribed, and shall be calculated in accordance with the provisions of section 198.]

8[(6) Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate Social Responsibility Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.

9[(7) If a company is in default in complying with the provisions of sub-section (5) or sub-section (6), the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case may be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less.]

(8) The Central Government may give such general or special directions to a company or class of companies as it considers necessary to ensure compliance of provisions of this section and such company or class of companies shall comply with such directions.]

10[(9) Where the amount to be spent by a company under sub-section (5) does not exceed fifty lakh rupees, the requirement under sub-section (1) for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee provided under this section shall, in such cases, be discharged by the Board of Directors of such company.][4]

This section explains that it is mandatory for all the companies with net worth of Rs.500 crore, turnover of over Rs.1000 crore and net profit of Rs.5 crore or more to form a CSR Committee, create CSR policy and spend atleast 2% of their profits on CSR activities. Within specified time limits, the unspent funds must be transferred to a apecial account or government fund. If not followed, it can lead to penalties to both the company and the officers.

CORPORATE PRACTICES AND CSR IMPLEMENTATION

TATA GROUP

  • For decades, Tata Group, under his leadership, set the benchmark for corporate philanthropy through Tata Trusts, which have been instrumental in driving social initiatives across India.
  • Approximately 66% of the equity share capital of Tata Sons, the principal investment holding company and promoter of Tata Companies, is held by philanthropic trusts that support initiatives in education, health, livelihood generation, and the arts and culture
  • Tata Trusts’ key initiatives include the Tata Medical Center in Kolkata, which offers affordable cancer care, and the Tata Scholarship Fund at Cornell University for Indian students. Their commitment to societal welfare also encompasses water conservation projects like the Sukhi Baliraja Initiative and disaster relief efforts during crises such as the 2001 Gujarat earthquake, highlighting their dedication to improving lives and community development.[5]

INFOSYS

  • The name Infosys resonates with Corporate Ethics in the Indian Corporate Arena. Infosys is the flagship company of India’s mighty ITES ( Information Technology Enabled Services) sector. Along with sustained financial performance, the company was an early adopter of Corporate Social Responsibility initiatives.
  • Infosys addresses some of India’s most pressing development challenges in the areas of Education, Rural Development, Gender Equality & Women Empowerment, Environment Sustainability, Preserving National Heritage & Culture, Hunger, Poverty, Malnutrition and Health. Infosys Foundation has been spending on development projects through its CSR initiatives before it became mandatory for companies in India to spend 2% of their net profits on Corporate Social Responsibility Activities.[6]

There are some more companies like Reliance, Wipro, Microsoft, Google, etc. which follows CSR Activities.

THE FUTURE OF CSR IN INDIA: TRENDS AND CHALLENGES AHEAD

Indian CSR law is evolving through trends that indicate an upward trend towards:

  • Sustainability and Climate Action: Corporations are now focusing much more on eco-friendly projects to address climate concerns.
  • Impact Measurement: Future CSR strategies might include standardized measurements of the actual impacts created in the communities.
  • Expanding the Scope of CSR: The government would look to extend the scope of CSR towards more vital sectors, including digital literacy and climate resilience.
  • Enhanced Compliance: The government would probably enforce strict compliance norms that would ensure CSR expenditure is appropriately utilized in bringing about the desired social impact.[7]

Challenges Ahead

  • Community participation: There is lack in community participation in the CSR activities as it has been seen that the communities that are going to benefit show less interest whenever the effort to begin doing something is being taken by any company or organization.
  • Own benefit: Generally related to big business part/area in India works for CSR only to save the taxes which are being charged and collected by government on them because it has been saw/heard/became aware of that the money that related to big business will raise for the CSR activity will be separated and labeled as tax free, so many related to big business work on this reason for doing or saying something.
  • Ability to hold or do something building: Many companies do not have skilled manpower and technical knowhow to develop effective CSR way of doing things. This is needed/demanded in terms to develop effective CSR policies and success plans/ways of reaching goals.
  • Issue of clearness/open honesty: There is no controlling/ruling body to check as to how much amount has been spent on CSR activities. Hence, no regulation, of any sort is available or lined.[8]

CONCLUSION

CSR law in India, therefore, is a blend of corporate responsibility and legal obligation. It forms a socially conscious business culture that contributes to the development goals of the nation. CSR provides companies with the opportunity to contribute to the welfare of society by making long-term social changes in areas that require urgent attention. CSR is an area that contributes towards poverty alleviation, enhancement of education, and promotion of sustainable development, bridging corporate profits and societal progress.

This trend will continue as CSR law matures in shaping the ideal sustainable, inclusive, and equitable society that drives India closer to its socio-economic goals. CSR does more than enhance a company’s image; it also forms one of the important contributors to holistic national development.[9]

[1] Neeraj Kumar Sharma, An Analysis Of Corporate Social Responsibility In India, Vol. IX Issue III, March 2018, Pg. no. 147.

[2] Neeraj Kumar Sharma, An Analysis Of Corporate Social Responsibility In India, Vol. IX Issue III, March 2018, Pg. no. 148.

[3] : Santosh Kumar Tripathi et al. (2024), Corporate Social Responsibility in India: A Review of Corporate Contributions to Sustainable Development Goals, Educational Administration: Theory and Practice, 30(4), 581-593.

[4] Companies Act, 2018, s 135.

[5] Taxmann. (2024, October 15). [Analysis] Ratan Tata – The Visionary Who Redefined Leadership and Corporate Responsibility. Taxmann Blog.

[6] The Ultimate Report on CSR of Infosys Limited – The CSR Journal. (n.d.).

[7] The Ultimate Report on CSR of Infosys Limited – The CSR Journal. (n.d.).

[8] Neeraj Kumar Sharma, An Analysis Of Corporate Social Responsibility In India, Vol. IX Issue III, March 2018, Pg. no. 149-150.

[9] CSR Law in India: Meaning, Benefits, Key Provisions, Case Laws & More, n.d.-b.