Top 10 Key Provisions of CSR Rules in India Every Business Should Know

Corporate Social Responsibility (CSR) has become an essential part of modern businesses, not just in terms of compliance but also in building trust and creating long-term impact. The CSR Rules in India, framed under the CSR Act 2013, ensure that companies actively contribute to social and environmental development. These rules define the applicability of CSR, the way companies should use their CSR fund, and the procedures for CSR spending in India.

In this blog, we will break down the top 10 key provisions of CSR Rules in India that every business must know.

1. Applicability of CSR

The first important provision relates to the applicability of CSR. According to the CSR Act 2013, CSR becomes mandatory for companies that meet any of these criteria:

• Net worth of ₹500 crore or more,
  
• Annual turnover of ₹1,000 crore or more, or
  
• Net profit of ₹5 crore or more during a financial year.

If a company falls under these conditions, it must follow the CSR Rules in India and allocate funds accordingly.

2. Mandatory CSR Spending

The law requires eligible companies to spend at least 2% of their average net profits of the last three financial years on CSR activities. This ensures that businesses consistently contribute to society, aligning with the broader objective of corporate social responsibility of business.

3. CSR Fund Allocation

Companies need to set aside a specific CSR fund for their activities. This fund cannot be used for regular business expenses or profit-making initiatives. Instead, it must be strictly used for approved CSR activities such as education, healthcare, rural development, and environmental protection.

4. Board Responsibility

The Board of Directors plays a crucial role in ensuring compliance with CSR Rules in India. They are responsible for:

• Approving the CSR policy,
  
• Ensuring proper utilization of the CSR fund, and
  
• Monitoring progress of CSR projects.

The Board must also disclose CSR spending in the annual report.

5. Formation of CSR Committee

Eligible companies must form a CSR Committee consisting of at least three directors, including an independent director. This committee recommends CSR projects, prepares policies, and ensures proper implementation. In the case of smaller companies (those without mandatory independent directors), a simplified version of the committee is acceptable.

6. Areas of CSR Spending in India

The Ministry of Corporate Affairs has specified approved areas for CSR spending in India, which include:

• Eradicating hunger and poverty,
  
• Promoting education,
  
• Gender equality and women empowerment,
  
• Environmental sustainability,
  
• Protection of national heritage,
  
• Contributions to the Prime Minister’s National Relief Fund, and more.

This ensures that CSR in India contributes meaningfully to sustainable growth.

7. Carry Forward and Set-Off Rules

Earlier, unspent CSR funds were simply reported. However, as per the amended CSR Rules in India, unspent amounts related to ongoing projects must be transferred to a special account called the Unspent CSR Account within 30 days. These funds must then be spent within the next three financial years.

8. Penalties for Non-Compliance

Failure to comply with CSR Rules in India can result in penalties. If a company does not spend the required amount, the unspent sum must be transferred to government-approved funds. Penalties may include fines on both the company and defaulting officers. This makes CSR compliance a serious business responsibility.

9. Reporting and Disclosure Requirements

Transparency is a key element of the corporate social responsibility of business. Companies must include detailed CSR reports in their annual filings. The report should cover:

• CSR policy,
  
• Details of CSR projects,
  
• Amount spent and unspent, and
  
• Impact assessment of activities.

This ensures stakeholders know how the CSR fund is being utilized.

10. Impact Assessment of CSR Activities

For companies with a CSR obligation of ₹10 crore or more in a given financial year, it is mandatory to conduct impact assessments of projects. This ensures that CSR activities are not just formalities but bring measurable benefits to society.

Conclusion

The CSR Rules in India are designed to make businesses more responsible and socially conscious. From the applicability of CSR to CSR spending in India, these provisions emphasize that the corporate social responsibility of business goes beyond profits—it is about creating sustainable growth for communities and the nation.

By understanding and following these top 10 provisions, companies can not only comply with the CSR Act 2013 but also build a strong reputation as socially responsible organizations.