Corporate Social Responsibility in India 2026: A Complete Compliance Guide

Corporate Social Responsibility (CSR) is no longer just a goodwill gesture for Indian companies — it is a legal obligation backed by the Companies Act, 2013. If your company meets the eligibility threshold, spending on CSR is mandatory, and failing to comply attracts penalties. Yet many companies still get the rules wrong. This guide explains everything you need to know about CSR in India for 2026 — who must comply, what qualifies, how to spend the money, and what happens if you don't.

Which Companies Must Do CSR in India?

Under Section 135 of the Companies Act, 2013, CSR is mandatory for any company that meets ANY ONE of the following criteria in the immediately preceding financial year: Net worth of Rs 500 crore or more, OR Turnover of Rs 1,000 crore or more, OR Net profit of Rs 5 crore or more. This applies to all companies — public, private, listed, and unlisted. Foreign companies with branches or project offices in India are also covered if they meet these thresholds.

Once your company qualifies, you must spend at least 2% of your average net profit of the three immediately preceding financial years on CSR activities. If your company has not completed three years, the average is calculated over the years you have been in existence.

What Activities Qualify as CSR Under Schedule VII?

Not every charitable or social activity qualifies as CSR. The Companies Act has a specific Schedule VII that lists permitted CSR activities. The key categories in 2026 include: eradicating hunger, poverty, and malnutrition; promoting education including skill development; promoting gender equality and empowering women; ensuring environmental sustainability and clean energy; contributing to the Prime Minister's National Relief Fund or other government-approved funds; protecting national heritage, art, and culture; rural development projects; slum area development; and disaster management including relief and rehabilitation work.

Activities that do NOT qualify as CSR include activities that benefit only the employees of the company or their families, activities undertaken to comply with any other law, and donations to political parties.

CSR Committee: Who Must Form One?

Every company required to do CSR must constitute a CSR Committee of the Board with at least 3 directors, including at least 1 independent director. The CSR Committee is responsible for formulating and recommending the CSR policy, the amount to be spent, and monitoring CSR activities. The Board of Directors must approve the CSR policy, disclose it on the company's website, and include a CSR report in the Annual Report every year.

How to Spend CSR Funds: Key Rules

Companies can spend CSR funds by directly implementing CSR projects, implementing through a registered trust, society, or Section 8 company that has been in existence for at least 3 years, or contributing to government funds listed in Schedule VII. Unspent CSR amounts for ongoing projects must be transferred to a special Unspent CSR Account within 30 days of the end of the financial year, and must be spent within 3 years. Unspent amounts not for ongoing projects must be transferred to specified government funds within 6 months of the year end.

CSR Reporting Requirements in 2026

Every qualifying company must include an Annual Report on CSR activities in its Board's Report. This report must contain the CSR policy and web link, composition of the CSR Committee, average net profit of the preceding 3 years, prescribed CSR expenditure, details of amounts spent or unspent, reason for any unspent amount, and a signed responsibility statement. Companies with CSR obligation of Rs 10 crore or more must get their CSR activities audited by a statutory auditor annually.

Penalties for Non-Compliance

Non-compliance with CSR obligations carries serious penalties. If a company fails to spend the required CSR amount and does not transfer the unspent amount properly, the company faces a fine of twice the amount required to be transferred or Rs 1 crore, whichever is less. Every officer in default is liable to imprisonment up to 3 years or a fine, or both. This means company directors can be personally liable for CSR non-compliance.

How Gadhia Associate Can Help

At Gadhia Associate, we assist companies in identifying CSR obligations, forming the CSR Committee, drafting the CSR Policy, selecting eligible implementing agencies, preparing the Annual CSR Report, and ensuring all unspent CSR funds are handled correctly. We also advise on the interaction between CSR spending and Section 80G deductions. Contact us at careandcomply@gmail.com or visit gadhiaassociate.com to ensure your company's CSR compliance is airtight.