Corporate Social Responsibility (CSR) refers to the responsibility of companies to contribute to sustainable economic development by working for the welfare of society, beyond the interests of the company and legal requirements. In India, CSR is a statutory obligation under the Companies Act, 2013 (Section 135).

Who is Liable to Comply with CSR Provisions?
As per Section 135(1) of the Companies Act, CSR is mandatory for every company that satisfies any of the following criteria during the immediately preceding financial year:
👉 Net Worth ≥ ₹500 Crore
👉Turnover ≥ ₹1,000 Crore
👉Net Profit ≥ ₹5 Crore
✅ Applicable to: Private companies, public companies, foreign companies with Indian operations

When is CSR Applicable?
CSR becomes applicable from the next financial year once a company meets any of the above thresholds. It must then:
✅Form a CSR Committee (in some cases exempted)
✅Spend at least 2% of average net profits (last 3 years)
✅File required disclosures with the ROC (Registrar of Companies)

Constitution of CSR Committee
If CSR provisions apply:
👉 CSR Committee must be formed with:
🔷 Minimum 3 directors, including 1 independent director
🔷For Private Companies (without independent directors), 2 directors are enough
🔷For Foreign Companies, 1 person authorized in India is sufficient

CSR Expenditure Requirement
The company must spend at least 2% of the average net profits of the last three financial years on CSR activities in the current year.
If it fails to spend, it must:
✅ Specify reasons in the Board’s Report
✅Transfer the unspent amount:
👉 To a Schedule VII fund (if not linked to any ongoing project) within 6 months
👉To a CSR Unspent Account (if linked to ongoing project) within 30 days, and then spend within 3 years

How Can CSR Be Implemented?
CSR can be executed in the following ways:
✅ Directly by the company
✅ Through:
👉 Registered Section 8 Company
👉Registered Trusts or Societies
👉Partnerships with Government initiatives
⚠️ All implementing agencies must be registered with MCA and have CSR Registration Number (CSR-1).

Documentation Required for CSR Compliance
Companies must maintain:
1. CSR Policy
2. Minutes of CSR Committee meetings
3. Details of approved projects
4. Amount spent, mode of spending
5. Impact assessment reports (if applicable)
6. Disclosure in Board Report (as per Rule 8 of CSR Rules)
7. Form CSR-2 – Annual CSR return filed with ROC

Penal Provisions for Non-Compliance
As per Companies (Amendment) Act, 2020 (still applicable in 2025):
If the company fails to spend the CSR amount:
➡️ Penalty on company: Twice the unspent amount or ₹1 crore, whichever is less
➡️ Penalty on officers in default: 1/10th of unspent amount or ₹2 lakh, whichever is less

CSR Audit & Assessment
➡️Companies with CSR obligations exceeding ₹10 crore annually must undergo Impact Assessment by an independent agency.
➡️Results must be disclosed publicly and kept on record for at least 8 years.