Section 135 of Companies Act(2025) and Schedule VII of the same Act mandates that companies having a net worth of Rs 500 crores or more, or turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more in the previous financial year have a CSR committee and spend at least 2% of the average net profits earned during three immediately preceding financial years to CSR activities(provided in Schedule VII).
Section 135 of Companies Act(2025) and Schedule VII of the same Act mandates that companies having a net worth of Rs 500 crores or more, or turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more in the previous financial year have a CSR committee and spend at least 2% of the average net profits earned during three immediately preceding financial years to CSR activities(provided in Schedule VII).
The concept of CSR in India has only been around for about 6 years now but it has been one of the most modified of provisions. This is the third year in a row that we see changes to Section 135 read with Schedule VII of the Companies Act which of course deals with the thing that is Corporate Social Responsibility.
Some changes are inserted via Notifications while there are some provisions which probably will see the light of day via an Act of the Parliament itself vide Companies (Amendment) Bill, 2025 [Bill №88 of 2025]
Contents
- 0.1 CSR and COVID-19 Research
- 0.2 CSR Activities undertaken in the normal course of business
- 0.3 Amendments proposed in The Companies Bill, 2025(Bill No.88 of 2025)
- 0.4 📘 What is CSR?
- 1 ✅ Recent CSR Amendments (2025–2025) (still effective in 2025)
- 1.1 1. Mandatory CSR Spending & Penalties (w.e.f. Jan 22, 2025)
- 1.2 2. Ongoing Projects Defined
- 1.3 3. CSR Registration Number (CSR-1 Form)
- 1.4 4. CSR Implementation through Agencies
- 1.5 5. Impact Assessment (For large CSR spenders)
- 1.6 🆕 Proposed CSR Amendments (2025–2025)
- 1.7 1. Digital Reporting Integration
- 1.8 2. Inclusion of ESG and Climate Actions under CSR
- 1.9 3. Penalty Rationalization
- 1.10 4. Local Area Preference Relaxation
- 1.11 5. Mandatory Audit of CSR Spend
- 1.12 6. Grievance Redressal Mechanism
- 1.13 🧾 Forms You Should Know (CSR Compliance)
- 1.14 🧠 Best Practices in 2025
- 2 🧩 Summary Table
CSR and COVID-19 Research
For starters, an amendment via a notification in the Companies (Corporate Social Responsibility Policy) Rules, 2025 inserted a proviso in context of CSR policy which says that if any company is engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business, then that company may undertake such research related to COVID-19. It is significant to note that companies may undertake this only till the End of Financial Year 2025 (i.e. Until April 2025). There are two conditions to it:
- First, that such research has to be conducted in collaborations with Government Organisations like ICMR, IIT, DST, ICAR, National laboratories and other such bodies
- The second condition is that details of such activity shall be disclosed separately in the Annual Report on CSR included in the Board’s Report.
CSR Activities undertaken in the normal course of business
Earlier, activities which involved companies investing money in the company’s own ventures which constituted “normal course of business” did not count towards CSR. However, vide the Notification released by the Ministry of Corporate Affairs on 24th August 2025, the same has been struck down which provides relief to companies whose business involved works involving CSR. Therefore, now a company can perform its business works and simultaneously fulfil its CSR obligations.
Amendments proposed in The Companies Bill, 2025(Bill No.88 of 2025)
The Bill provides that Companies that have CSR spending obligation up to ₹50 lakh would not be required to constitute a CSR committee.
Also mentioned is that eligible companies under CSR will be allowed to set off any amount spent in excess of their CSR spending obligation in a particular financial year towards such obligation in successive financial years. Therefore if a company exceeds payments with respect to CSR, then that excess amount would automatically count for the subsequent years
There are also some lesser important changes with respect to liabilities and penalties
Here’s a clear, up-to-date overview of Recent and Proposed Amendments to CSR (Corporate Social Responsibility) under the Companies Act, 2025 and related rules as of 2025:
📘 What is CSR?
Corporate Social Responsibility (CSR) mandates certain companies to spend a portion of their profits on social development projects such as education, healthcare, environment, rural development, etc.
Applicable to Companies that meet any one of the following in the previous financial year:
- Net worth ≥ ₹500 crore
- Turnover ≥ ₹1000 crore
- Net profit ≥ ₹5 crore
Required to spend 2% of average net profits of last 3 years on CSR.
✅ Recent CSR Amendments (2025–2025) (still effective in 2025)
1. Mandatory CSR Spending & Penalties (w.e.f. Jan 22, 2025)
- Unspent CSR amount must be:
- Transferred to a Schedule VII fund within 6 months (if not related to ongoing projects)
- Transferred to a special account within 30 days (for ongoing projects), to be spent within 3 years
- Non-compliance = penalty:
- Company: up to ₹1 crore
- Officers: up to ₹2 lakh
2. Ongoing Projects Defined
- Projects with a multi-year implementation period (max 3 years), initiated in current FY
3. CSR Registration Number (CSR-1 Form)
- NGOs receiving CSR funds must be registered on MCA portal
- Effective from April 1, 2021
- Only registered entities (Section 8 companies, trusts, societies) can receive CSR funds
4. CSR Implementation through Agencies
- Only Section 8 companies or registered public trusts/societies with:
- Track record of 3 years
- Registration under CSR-1
5. Impact Assessment (For large CSR spenders)
- Companies with CSR obligation of ₹10 crore or more must conduct impact assessment through independent agencies
- Reports must be annexed with the Board’s report
🆕 Proposed CSR Amendments (2025–2025)
(Based on drafts, stakeholder meetings, and policy outlooks)
1. Digital Reporting Integration
- CSR disclosures may soon be mandated through MCA’s V3 portal and linked with ESG frameworks
- Aim: Real-time monitoring and transparency
2. Inclusion of ESG and Climate Actions under CSR
- Proposal to expand CSR scope under Schedule VII to include:
- Carbon neutrality projects
- Green startups
- ESG compliance and training
- Renewable energy contributions
3. Penalty Rationalization
- Proposals to ease penalties for first-time non-compliance
- Focus on self-correction before punitive actions
- Likely amendment to Section 135(7)
4. Local Area Preference Relaxation
- The current requirement to prefer “local area” for CSR projects may be eased to allow broader national initiatives
5. Mandatory Audit of CSR Spend
- Likely proposal: If CSR spend exceeds ₹5 crore, then it may become mandatory to:
- Have CSR fund usage audited by independent professionals
- Submit report with Form CSR-2
6. Grievance Redressal Mechanism
- A new platform for NGOs and beneficiaries to raise grievances regarding:
- Delayed fund disbursal
- Lack of transparency
- Misuse of funds
🧾 Forms You Should Know (CSR Compliance)
| Form | Purpose |
|---|---|
| CSR-1 | Registration of implementing agency (NGO) |
| CSR-2 | Detailed annual return on CSR activities |
| AOC-4 | Attach CSR policy, impact assessment |
| Board’s Report | Must disclose CSR spend, reasons for shortfall |
🧠 Best Practices in 2025
- Align CSR with UN SDGs, Net Zero goals, and national priorities
- Focus on impact, not just spend
- Document everything — minutes, approvals, MOU with NGOs, fund tracking
- Train the CSR committee in ESG and social governance
🧩 Summary Table
| Area | Amendment | Status |
|---|---|---|
| CSR Fund Utilization | Transfer to Fund/Ongoing Account | Enforced (2021) |
| NGO Registration | CSR-1 required | Enforced |
| Impact Assessment | Mandatory if CSR ≥ ₹10 Cr | Enforced |
| Climate/ESG Projects | Proposal to include in Schedule VII | Pending |
| Digital CSR Reporting | Under review | Proposed |
| Penalty Relaxation | Under stakeholder consultation | Proposed |
Would you like:
- A CSR compliance checklist PDF?
- Templates for CSR policy or Board report?
- Help registering an NGO under CSR-1?
Let me know—I’ll provide resources tailored to your use case (startup, Section 8, or corporate).