Corporate Social Responsibility Law in India – Understanding the Legal Framework for CSR Compliance
Corporate Social Responsibility (CSR) Law in India plays a crucial role in ensuring that businesses contribute to the welfare of society while maintaining ethical and sustainable business practices. Introduced through the Companies Act, 2013, CSR in India is a legally mandated obligation for companies that meet specific financial criteria. Under Section 135 of the Companies Act, 2013, companies with a net worth of ₹500 crore or more, annual turnover of ₹1,000 crore or more, or a net profit of ₹5 crore or more are required to allocate at least 2% of their average net profit (from the last three financial years) towards CSR initiatives. This law aims to promote social welfare, environmental sustainability, and inclusive economic growth through corporate contributions.
CSR activities in India must align with Schedule VII of the Companies Act, 2013, which outlines eligible activities such as education and skill development, environmental sustainability, gender equality, poverty eradication, healthcare, rural development, and support for government welfare schemes like Swachh Bharat Abhiyan, PM CARES Fund, and Clean Ganga Mission. These contributions can be made through non-profit organizations, trusts, or direct company-led initiatives. Companies are also required to form a CSR committee, draft a CSR policy, and submit annual reports detailing their CSR spending and activities to ensure transparency and compliance.
Non-compliance with CSR law can lead to legal consequences, including monetary penalties and liability for company directors. The Companies (Amendment) Act, 2019, introduced stricter regulations, making non-compliance a punishable offense with penalties of up to ₹1 crore for companies and ₹2 lakh for responsible officers. However, businesses that fail to spend the required amount on CSR must provide valid reasons and transfer the unspent CSR funds to government-specified accounts.
The Corporate Social Responsibility Law in India has significantly influenced how businesses operate, pushing them toward sustainable development goals (SDGs) and ethical corporate governance. Companies like Tata Group, Infosys, Reliance Industries, and ITC are known for their robust CSR initiatives, setting benchmarks in corporate philanthropy, sustainability, and community development. With CSR now a legal requirement rather than a voluntary activity, businesses must strategically align their operations with social impact goals, ensuring compliance while making meaningful contributions to society.