Five CSR-Related Sections of Companies Act, 2013
The Companies Act, 2013 brought a landmark change in India’s corporate governance by making Corporate Social Responsibility (CSR) a mandatory legal responsibility for certain companies. It not only defined CSR clearly but also laid down a framework for planning, implementing, and disclosing CSR activities. Below are five important sections related to CSR in the Act:
1. Section 135 – Corporate Social Responsibility
This is the most crucial section related to CSR. It provides the eligibility criteria, constitution of CSR committee, and expenditure requirements.
Key points under Section 135:
- CSR is mandatory for companies that meet any one of the following criteria:
- Net worth of ₹500 crore or more,
- Turnover of ₹1,000 crore or more,
- Net profit of ₹5 crore or more during any financial year.
- Such companies must:
- Form a CSR Committee of the Board.
- Spend at least 2% of average net profits of the last 3 financial years on CSR activities.
- Give preference to local areas in selecting CSR projects.
2. Schedule VII – Activities Permitted Under CSR
Though not a section, Schedule VII is legally part of the Companies Act and lists the approved areas where CSR funds can be used.
Some key areas include:
- Eradicating hunger, poverty, and malnutrition
- Promoting education and vocational skills
- Gender equality and women empowerment
- Ensuring environmental sustainability
- Rural development and slum area development
- Swachh Bharat initiatives and COVID-19 relief efforts
Note: Any activity outside the Schedule VII list does not qualify as CSR under the Act.
3. Section 134 – Board’s Report and CSR Disclosure
This section mandates the Board of Directors to disclose details of CSR activities in the Board’s Report.
Key CSR requirements under Section 134:
- A detailed report must be included showing:
- CSR policy and its implementation
- CSR expenditure
- Reasons for not spending the full 2% (if applicable)
- It must be signed by a director and filed with the Registrar of Companies.
This ensures transparency and accountability in CSR practices.
4. Rule 8 of Companies (CSR Policy) Rules, 2014 – CSR Reporting
This rule elaborates on the format and content of the annual CSR report that must be included in the company’s annual report.
Highlights include:
- Overview of projects undertaken
- Amount spent on each project
- Details of implementing agency (if used)
- Monitoring and impact assessment details (for large projects)
This rule supports Section 134 and makes the CSR disclosure uniform and verifiable.
5. Rule 4 – CSR Implementation
This rule provides guidance on how CSR can be implemented, either directly by the company or through:
- A Section 8 Company
- A Registered Public Trust
- A Registered Society
Key points:
- The implementing agency must be registered under 12A and 80G of Income Tax Act.
- CSR projects should be ongoing, not one-time donations or charity.
- Impact assessment is mandatory for CSR projects above ₹1 crore.
This rule ensures that CSR funds are used in a planned and professional manner.
Conclusion
The Companies Act, 2013 has made CSR a structured, legally monitored, and socially relevant activity. Sections like 135, 134, and Schedule VII provide the legal framework, while rules like Rule 4 and Rule 8 ensure proper implementation and reporting.
This has transformed CSR in India from mere charity to strategic, accountable, and sustainable development in areas such as health, education, environment, and rural upliftment.
These provisions reflect India’s unique approach where economic growth and social responsibility go hand in hand.