“The best way to find yourself is to lose yourself in the service of others.” — Mahatma Gandhi
That quote was said decades before India codified CSR into law, capturing something the Companies Act eventually formalized, where it was considered that the businesses owe something back to the society that sustains them. What used to be discretionary philanthropy is now a compliance requirement, and a recent Supreme Court ruling has pushed that requirement even further.
India occupies a unique position globally as it was among the first nations to convert corporate social spending from a voluntary gesture into a binding legal duty. That shift happened through Section 135 of the Companies Act, 2013, which came into force in April 2014. More than ten years on, the rules still confused people up: who exactly must comply, how much they must spend, and what actually counts as CSR.
Which Companies Fall Under Section 135?
CSR compliance isn’t universal it kicks in once a company crosses specific financial markers in the prior financial year. A company qualifies if:
- it has a net worth of INR 500 crore or above,
- turnover of INR 1,000 crore or above,
- or net profit of INR 5 crore or above, and this includes fully-owned Indian arms of foreign corporations.
The obligation isn’t reserved for private players either. Because Section 135(1) opens with the phrase “Every company,” even Section 8 non-profit companies fall within its reach.
How Much Must Be Spent, and by Whom
Once a company meets the threshold, its first step is forming a CSR Committee at least three board members, one of whom must be an independent director tasked with drafting policy and overseeing execution. The financial obligation itself is straightforward on paper: eligible companies must direct 2% of their average net profit from the previous three years toward CSR activity, with “net profit” calculated per Section 198 of the Act. That section allows companies to factor in government subsidies or grants when arriving at the figure. There’s also a geographic preference built into the law. Companies are expected to prioritize areas near their own operations, though this becomes murky for digital-first businesses outsourcing firms, e-commerce platforms, aggregators that don’t operate from a single fixed location.
What Qualifies as CSR and What Doesn’t
Not everything a company spends on employees or communities counts toward its CSR obligation. Regular business operations, overseas activity, political donations, employee welfare programs, marketing-driven sponsorships, and spending meant to satisfy other legal requirements are all specifically excluded.
Oversight has also grown stricter for high-value projects. Once a company’s CSR obligation crosses ₹10 crore, it must bring in an independent agency to assess the impact of any project worth ₹1 crore or more though the cost of that assessment is capped at 5% of the total CSR outlay or ₹50 lakh, whichever is lower. Money that goes unspent doesn’t simply disappear from the books, either. It must be moved into a designated account within 30 days of the financial year closing, and companies are required to report their CSR activity and results in the annual board report.
The scale of this obligation has become substantial. Since the law took effect in 2014, India has led the world in mandating CSR by statute, and current figures show more than 23,000 companies together contributing upwards of ₹30,000 crore every year. reaching close to 18.4 lakh people through programs spanning girl-child welfare, sanitation, education, healthcare, and environmental work.
The Great Indian Bustard Judgment (2025)
No recent ruling has reshaped CSR’s legal meaning quite like the Supreme Court’s December 2025 decision involving the Great Indian Bustard, a case that began as a wildlife matter but ended up redrawing the boundaries of corporate environmental duty.
In this case M.K. Ranjitsinh v. Union of India 1 (Great Indian Bustard case), the real significance lies beyond wildlife protection. The bench reasoned that a company’s profits aren’t purely private wealth belonging to shareholders they’re partly a return owed to the society that made those profits possible and treated CSR funds as the practical expression of the constitutional environmental duty under Article 51A(g). In other words, spending on the environment is no longer framed as charitable discretion but as constitutional compliance. The Court tied this reasoning to Section 166 of the Companies Act, which already obligates directors to act in the interest of employees, shareholders, the community, and the environment collectively.
Going Forward
Environmental CSR spending can no longer sit at the bottom of a company’s priority list as one option among many. For businesses operating in or near ecologically sensitive zones, environmental protection under Schedule VII effectively becomes non-negotiable, and directors now face heightened exposure if their CSR planning ignores environmental consequences.
Compliance Checklist
- Reassess applicability thresholds (net worth, turnover, net profit) each financial year
- Set up a properly composed CSR Committee
- Calculate the 2% spend accurately using Section 198’s net profit method
- Build environmental considerations into the CSR policy, especially post-Bustard judgment
- Route unspent funds to the required account within 30 days
- Arrange third-party impact assessments for large projects where mandated
- Keep CSR disclosures transparent and complete in the annual report.
1 Writ Petition No. 838 of 2019
Conclusion
Section 135 turned CSR from a matter of corporate goodwill into a matter of legal accountability. The Supreme Court’s 2025 ruling has now stretched that accountability further that is environmental responsibility isn’t a CSR sub-category anymore; it’s arguably central to what “social responsibility” is meant to mean. Companies and their boards would do well to treat CSR planning as a legal function, not just a public relations one.