Rules explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The CSR Rules put section 135 of the Companies Act, 2013 into operation. Rule 2 is the foundation: it says what counts as Corporate Social Responsibility (CSR), what does not, and how terms such as administrative overheads, ongoing project and net profit are to be read. This article is as amended up to G.S.R. 415(E) dated 27 May 2026 per the MCA e-book. Later amendments should be checked before you rely on it. For help with CSR compliance, see our compliance advisory service.
CSR means activities undertaken in pursuance of the statutory obligation under section 135 in accordance with the rules, and it excludes normal-course business activity, activity outside India (with one sports exception), political contributions, activity benefitting employees, sponsorship for marketing benefits and activities for other statutory obligations. An ongoing project is a multi-year project with timelines not exceeding three years excluding the year it started. Net profit excludes overseas branch profit and dividends from Indian companies covered by section 135.
Rule 1: short title and commencement
The rules may be called the Companies (Corporate Social Responsibility Policy) Rules, 2014. They were notified on 27 February 2014 as G.S.R. 129(E) under section 135 and section 469, and came into force on 1 April 2014. The definitions in rule 2 were substituted in 2021 and carry later insertions; the older definitions are not the rule now.
Rule 2(1): the definitions
| Clause | Term | Meaning as printed |
|---|---|---|
| (a) | "Act" | The Companies Act, 2013 |
| (b) | "Administrative overheads" | Expenses incurred by the company for "general management and administration" of CSR functions, not including expenses directly incurred for the designing, implementation, monitoring and evaluation of a particular CSR project or programme |
| (e) | "CSR Committee" | The Corporate Social Responsibility Committee of the Board referred to in section 135 |
| (f) | "CSR Policy" | A statement of the approach and direction given by the Board, taking into account the recommendations of its CSR Committee, including guiding principles for selection, implementation and monitoring of activities and for formulation of the annual action plan |
| (g) | "International Organisation" | An organisation notified by the Central Government as an international organisation under section 3 of the United Nations (Privileges and Immunities) Act, 1947, to which the Schedule to that Act applies |
| (ha) | "Not for Profit Organization" | Has the meaning in clause (e) of regulation 292A of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 |
| (j) | "Public Authority" | As defined in section 2(h) of the Right to Information Act, 2005 |
| (l) | "zero coupon zero principal instrument" | An instrument declared as a security issued by a Not for Profit Organization registered with the Social Stock Exchange segment of a recognised Stock Exchange under SEBI regulations |
Clauses (ha) and (l) were inserted by the 2026 amendment of 27 May 2026 (G.S.R. 415(E)), which also brought in the new rule 4A; see our article on rules 4A and 5. The references to the SEBI regulations and to other statutes are as printed, and the reader should check the current version of each.
Rule 2(1)(d): what is, and is not, CSR
"Corporate Social Responsibility (CSR)" means the activities undertaken by a company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the rules, but shall not include:
| Excluded item | What the text says |
|---|---|
| (i) Normal course of business | Activities undertaken in the normal course of business of the company. A proviso lets a company engaged in research and development of new vaccine, drugs and medical devices undertake such R&D related to COVID-19 for the financial years 2020-21, 2021-22 and 2022-23, if done in collaboration with the institutes or organisations in item (ix) of Schedule VII and disclosed separately in the Annual report on CSR |
| (ii) Outside India | Any activity outside India, except training of Indian sports personnel representing any State or Union territory at national level or India at international level |
| (iii) Political contributions | Contribution of any amount directly or indirectly to any political party under section 182 of the Act |
| (iv) Employees | Activities benefitting employees as defined in clause (k) of section 2 of the Code on Wages, 2019 |
| (v) Sponsorship | Activities supported on a sponsorship basis for deriving marketing benefits for products or services |
| (vi) Other statutory obligations | Activities carried out for fulfilment of any other statutory obligations under any law in force in India |
The COVID-19 proviso is limited to the three years it names, which have passed; it is of historical interest only for current planning. The Schedule VII activities themselves are in the Act: see section 135 of the Companies Act, 2013 and our complete CSR guide.
Rule 2(1)(h): net profit
"Net profit" is the net profit as per the company's financial statement prepared in accordance with the applicable provisions of the Act, but does not include: (i) any profit arising from any overseas branch or branches, whether operated as a separate company or otherwise; and (ii) any dividend received from other companies in India which are covered under and complying with section 135. A proviso says that for a foreign company covered by the rules, net profit means the net profit per the profit and loss account prepared under section 381(1)(a), read with section 198 of the Act.
Rule 2(1)(i): ongoing project
An "Ongoing Project" is a multi-year project undertaken in fulfilment of the CSR obligation with timelines not exceeding three years excluding the financial year in which it was commenced. It includes a project that was initially not approved as multi-year but whose duration the Board has extended beyond one year on reasonable justification. For the unspent amount and the three-year rule, see our article on ongoing CSR projects and the unspent CSR account.
Administrative overheads: what is in and out
| In administrative overheads | Not in administrative overheads |
|---|---|
| Expenses for general management and administration of CSR functions | Expenses directly incurred for designing, implementing, monitoring and evaluating a particular project or programme |
The cap on overheads is in rule 7; see our article on administrative overheads and the five per cent cap.
A worked example
Maple Engineering Limited has net profit as per its financial statements which includes profit from an overseas branch and a dividend from an Indian company that itself complies with section 135. For CSR purposes both are removed from net profit. The company funds a three-year skill-training project in India, started in the current financial year: it is an ongoing project, with timelines not exceeding three years excluding the year of commencement. It also considers sponsoring a sports event for brand visibility and an employee health camp. Neither counts as CSR: the first is sponsorship for marketing benefits and the second benefits employees, both excluded under rule 2(1)(d).
Need help with CSR compliance?
Whether an activity counts as CSR, and which profit figure applies, decides the size of the obligation and the audit trail. Our compliance advisory team can review your projects against rule 2, the Schedule VII list and the reporting requirements.
Key takeaways
- CSR is activity in pursuance of the section 135 obligation; the printed exclusions cover business, overseas, political, employee, sponsorship and other statutory activities.
- The only overseas exception is training of Indian sports personnel at the printed levels.
- An ongoing project runs not more than three years excluding the starting year.
- Net profit excludes overseas branch profit and dividends from Indian companies covered by section 135.
- Administrative overheads exclude project-level design, implementation, monitoring and evaluation costs.
Read next
- Rules 3 and 4: CSR obligations and implementing agencies
- Rules 4A and 5: zero coupon zero principal instruments, committee and action plan
- Rules 7 and 9: CSR expenditure, set-off and website display
- Section 135 of the Companies Act, 2013: CSR
Disclaimer: Based on the Companies Act, 2013 rules (and the Companies (Auditor's Report) Order, 2020) named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.