Corporate Social Responsibility Spending in India

How India became the first country to require large companies to spend on social causes, how the rule works and what it has funded.

In 2013, India became one of the first countries in the world to make corporate social responsibility spending mandatory for large companies. The rule has made companies a major source of funding for Indian nonprofits.

The rule

Under Section 135 of the Companies Act, 2013, companies meeting certain thresholds must spend at least 2 percent of their average net profits from the previous three years on CSR activities. The thresholds are:

Net worth of 500 crore rupees or more, or
Turnover of 1,000 crore rupees or more, or
Net profit of 5 crore rupees or more.

The rule took effect from April 2014.

What counts as CSR

Schedule VII of the Act lists eligible activities, including:

Eradicating hunger and poverty, and promoting health care.
Education and skills.
Gender equality and empowerment.
Environmental sustainability.
Protecting heritage and promoting sports.
Rural development.
Contributions to certain government relief funds.

Scale

CSR spending has grown to tens of thousands of crore rupees a year. Education and health have received the largest shares.

How nonprofits access CSR funds

Companies often implement CSR through implementing agencies: registered nonprofits or their own foundations. From 2021, implementing agencies must register with the Ministry of Corporate Affairs using a CSR-1 form. Rules also require unspent CSR funds to be transferred to specified funds, strengthening compliance.

Debates

Supporters say CSR mobilised large resources for social causes and professionalised the sector.
Critics note that spending concentrates in wealthier industrial states near company operations, and that mandated giving may crowd out voluntary philanthropy or become a compliance exercise.

Funding an accessibility project

A large company's CSR committee decides to support education for visually impaired students. It partners with a registered nonprofit to provide accessible laptops, screen reader training and audio textbooks. The company meets its CSR obligation, and the nonprofit scales its programme to new schools. Both must report on spending and outcomes.

Thinking CSR is charity companies choose freely

In India, CSR spending is a legal requirement for companies above the thresholds. Companies choose causes and partners, but the minimum spending is mandated and must be reported.

Key takeaways

India's Companies Act, 2013, requires large companies to spend 2 percent of average net profits on CSR.
The rule applies to companies meeting net worth, turnover or profit thresholds.
Education and health receive the largest shares of CSR spending.
Nonprofits must register as implementing agencies to receive CSR funds.