New CSR Rules and Compliance for Companies

Corporate Social Responsibility in 2025 What the Companies (CSR Policy) Amendment Rules mean for companies

A. Corporate Social Responsibility (CSR)means the voluntary contributions made by companies to a better society and a cleaner environment. It is a concept whereby companies integrate social and other useful concerns in their business operations for the betterment of their stakeholders and society in general. However, Section 135 of the Companies Act, 2013 (“Act”) provides that certain companies must mandatorily contribute a certain amount towards CSR activities. As per the Act, ‘Corporate Social Responsibility’ means and includes but is not limited to:

1.Projects or programmes relating to activities specified in Schedule VII to The Act,

2. Projects or programmes relating to those activities which are undertaken by the Board of Directors of a company in ensuring the recommendation of the CSR Committee of the Board as per declared CSR Policy along with the conditions that such policy will cover subjects specified in Schedule VII of the Act.

B. The provisions of CSR applies to every company fulfilng any of the following conditions in the preceding financial year:

1.Net worth of more than Rs. 500 crore

2. Turnover of more than Rs. 1000 crore

3. Net Profit of more than Rs. 5 crore

C. The Board of Directors of every company for which the CSR provisions apply must ensure that the company spends in every financial year at least 2% of its average net profits made during the immediately preceding three financial yearsas per its CSR policy. If the company has not completed three financial years since its incorporation, it must spend 2% of its average net profits made during the immediately preceding financial years as per its CSR policy.

D. The Ministry of Corporate Affairs (MCA) has enacted the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2025, which will take effect on 14 July 2025. These amendments enhance the eligibility criteria and documentation requirements for CSR implementing agencies, introduce a new web-based CSR-1 e-form to replace the previous CSR-1, and reinforce the reporting and registration obligations — all of which have significant implications for companies, directors, and CSR teams. This article outlines the modifications, practical measures, and recommended wording for board and annual reports to ensure compliance.

• The 2025 amendment is part of the government’s push to improve transparency, accountability and outcomes from corporate CSR spend. It (a) formalises registration and scrutiny of implementing agencies, (b) modernises CSR filings with a web-based CSR-1, and (c) tightens reporting obligations — all intended to reduce diversion of funds and improve program monitoring. The Rules came into force on 14 July 2025.
• New web-based CSR-1 e-form (substitution of old CSR-1)
• The old CSR-1 format has been substituted by a new web-based e-form CSR-1. This new form is required for companies to register CSR projects and the implementing entities they propose to engage. The e-form is online and requires more documentary proof from implementing agencies.
• The amendment prescribes tighter conditions and documentary requirements for NGOs/Section 8 companies/trusts/societies that implement CSR on behalf of for-profit companies — including registration details, audited accounts, and declaration of compliance. MCA’s stated objective is to ensure that only eligible and accountable entities receive CSR funds.
• Registration requirement for CSR implementing entities
• Implementing agencies will need to be registered/identified through the new process (CSR-1) before they can be engaged for projects. The government has also launched a formal registration/verification mechanism to improve transparency. Media coverage and MCA guidance specifically highlight a new registration route for CSR entities.
• Reporting & filing changes (Form CSR-2 / timelines) Rule changes around filing the CSR report (Form CSR-2) have been updated — including transitional provisions and extended/delimited timelines for FY 2023–24 filings in earlier amendments. Companies must check the current Rule text and the Registrar’s timelines to avoid late filing exposure.
• Continued emphasis on Schedule VII activities

Schedule VII remains the reference list of permissible CSR activities (health, education, sanitation, livelihoods, environment etc.). Companies should continue to map projects to Schedule VII while ensuring they meet the new registration/documentation thresholds.

• Onboarding implementing agencies — do not engage a trust/NGO unless it appears on the CSR-1 registry (or you have completed the new CSR-1 submission). Obtain and retain: registration documents, PAN, audited accounts for preceding 3 years, FCRA (if applicable), board resolution of the NGO, and an implementation agreement specifying activities, outputs, timelines
• Due diligence procedures — implement a standard DD checklist (legal status, governance, audited financials, past CSR project references, beneficiary verification process). The MCA’s tighter rules make company due diligence a front-line compliance step.
• Procedure for CSR-1 and CSR-2 filings — update internal calendar and ensure CSR-2 and other filings are prepared in the required format and submitted within the prescribed timeline. If transitional timelines apply to prior years — note the specific dates notified by MCA.
• Board & CSR Committee oversight — the board (or CSR Committee when required) should document reasoned approvals for selection of implementing agencies, monitoring arrangements, and how projects map to Schedule VII. For companies below ₹50 lakh CSR spend who are exempt from constituting a CSR committee, board minutes must nonetheless document relevant decisions.
• Record keeping & audit trail — keep contracts, progress reports, payments, receipts and third-party verification on file. Given increasing regulatory scrutiny and instances of penal action for non-compliance, a clear audit trail is crucial. (Recent press notes show enforcement activity against non-compliant companies.)
• The 2025 CSR Rule amendments raise the compliance bar, companies must now take a more structured, documented and verifiable approach to selecting implementing agencies and reporting CSR activity.