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Corporate Social Responsibility under section 135 of the Companies Act, 2013

By CAShorts DeskPublished Source: PIB (Ministry of Corporate Affairs); Companies Act, 2013 (India Code); CSR portal

Why in news: The Indian Institute of Corporate Affairs concluded the Third National Conference and Exhibition on CSR (NCCSR 2026) in New Delhi on 10 October 2026.

Corporate Social Responsibility under section 135 of the Companies Act, 2013
Illustration (AI-generated)

Section 135 of the Companies Act, 2013 requires companies above set net worth, turnover or profit thresholds to spend at least 2% of their average net profits of the three preceding years on Schedule VII activities, and fixes where unspent money goes. IICA's Third National Conference on CSR closed in New Delhi on 10 October 2026.

Syllabus: GS3 · Inclusive Growth; GS4 · Ethics in Public Administration; GS2 · NGOs, SHGs & Civil Society

Why this matters for UPSC

GS3 (inclusive growth) and GS4 (corporate governance) ask about CSR; Prelims can ask the section 135 thresholds, the 2% base, Schedule VII items and where unspent money must go.

In short

Corporate Social Responsibility (CSR) under section 135 of the Companies Act, 2013 makes profitable companies spend part of their profits on listed social activities, through a Board-driven, disclosure-based process.

How section 135 moneyflowsCSRCommitteeBoard's dutyOngoingprojectsUnspent CSRAccountSchedule VIIfund

Section 135 has made CSR dependable development money; its next test is measuring what that money changes and steering it to underserved districts.

Why it matters

CSR turns a slice of big companies' profits into money for schools, clinics, clean water, sports and disaster relief, much of it spent near factories and mines. Because the law sets a floor but leaves the choice of projects to each Board, results depend on how well Boards pick partners and check what changed on the ground. The rules on unspent money stop a company from quietly keeping what it did not spend, which protects the villages and towns a project was meant to reach. The open question is whether spending follows need: districts far from industry can be missed, and money counted is not the same as lives improved.

Prelims pointers

  • Under section 135(3), the CSR Committee recommends the CSR Policy and the amount; under section 135(4), the Board approves the policy.
  • Net profit for the 2% rule is calculated under section 198 of the Companies Act, 2013; the Board's report under section 134(3) names the committee's members.
  • A company that fails to spend must give its reasons in the Board's report under clause (o) of section 134(3).
  • Schedule VII item (viii) names the Prime Minister's National Relief Fund and the PM CARES Fund; the Clean Ganga Fund sits under item (iv), on environment.
  • Contributions to the Swachh Bharat Kosh fall under item (i), on hunger, poverty, health care and sanitation; disaster management is item (xii).
  • Rule 8 of the CSR Policy Rules, 2014: firms averaging ₹10 crore or more of CSR obligation get projects of ₹1 crore or more assessed independently.
  • The Companies (Auditor's Report) Order, 2020, applicable from FY 2021-22, makes auditors state details of any unspent CSR amount.
  • When the PM Internship Scheme was launched in 2024, ₹500 of the ₹5,000 monthly assistance to each intern was to be paid from company CSR funds.

Practise a UPSC-style question

With reference to the applicability of section 135 of the Companies Act, 2013, consider the following statements:

1. A company with a turnover of ₹500 crore or more in the immediately preceding financial year must comply with it.

2. A company with a net worth of ₹500 crore or more in the immediately preceding financial year must comply with it.

3. A company with a net profit of ₹5 crore or more in the immediately preceding financial year must comply with it.

Which of the statements given above is/are correct?

  1. (a) 1 and 2 only
  2. (b) 2 and 3 only
  3. (c) 1 and 3 only
  4. (d) 1, 2 and 3
Show the answer

Answer: (b) 2 and 3 only

Answer: (b) 2 and 3 only. Net worth and net profit thresholds are right; the turnover threshold is ₹1,000 crore.

Statement 1: incorrect. The turnover threshold in section 135(1) is ₹1,000 crore or more, not ₹500 crore; ₹500 crore is the net worth figure.

Statement 2: correct. Section 135(1) covers a company with net worth of ₹500 crore or more in the immediately preceding financial year.

Statement 3: correct. A net profit of ₹5 crore or more in the immediately preceding financial year also brings a company within section 135.

Eliminate: statement 1 swaps the net worth figure into the turnover test, so it is false. Out: (a), (c), (d).

Trap: Near-miss figure. The three thresholds are ₹500 crore, ₹1,000 crore and ₹5 crore; the question moves ₹500 crore from net worth to turnover.

Remember: CSR thresholds: net worth ₹500 crore, turnover ₹1,000 crore, net profit ₹5 crore.

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