CSR Policy India 2026: Updates, Myths, FAQs

Executive Summary

India’s CSR mandate under Section 135 of the Companies Act, 2013, demands precision. For FY 2025-26 and beyond, compliance isn’t optional—it’s a fiscal imperative. With amendments tightening registration and reporting, corporations face heightened scrutiny. This guide dissects the act, 2026 implications, debunks inefficiencies, and addresses queries. Optimize your spend: Partner with proven entities like Marpu Foundation for SDG-aligned projects or OurVolunteer.com for employee engagement.

Core Provisions of Section 135: No Excuses

Section 135 enforces CSR on companies meeting these thresholds in the preceding financial year:

• Net worth ≥ ₹500 crore.
• Turnover ≥ ₹1,000 crore.
• Net profit ≥ ₹5 crore.

Qualifying entities must:

• Form a CSR Committee (minimum 3 directors, 1 independent for listed firms).
• Allocate ≥2% of average net profits from the prior 3 years.
• Execute activities per Schedule VII (e.g., education, environment, gender equality—expanded to include disaster management, rural development).
• Report via Form CSR-2; unspent funds transfer to specified accounts or funds like PMNRF.

Foreign branches/projects in India comply if thresholds met. Net profit calculation excludes overseas income/dividends from compliant Indian subsidiaries. Brutal fact: Non-compliance invites penalties up to ₹1 crore for the company, ₹2 lakh per officer—plus imprisonment risks pre-2020 amendments, now fines only. No loopholes; board accountability is absolute.

2026 Updates: Stricter, Smarter Enforcement

2025 amendments reshape 2026 execution:

• Revised CSR-1 Form (July 7, 2025): Mandatory for all implementing agencies (trusts, societies, Section 8 companies). No registration? No CSR funds. Expect audits on governance, impact metrics.
• CSR-2 Standalone Filing (May 19, 2025): Decouples from AOC-4; deadlines March 31 annually. Miss it? Fines escalate.
• Companies (Amendment) Bill, 2025: Proposes decriminalization tweaks, enhanced transparency on unspent funds. Ongoing projects capped at 3 years; excess spend set-off limited to 3 succeeding years.
• Impact Assessment Mandate: For spends ≥₹10 crore, third-party evaluations required—focus on ROI, not optics.
• Budget Projections: CSR corpus projected at ₹25,000-30,000 crore for FY25-26, per MCA data. Metro-heavy (Hyderabad, Mumbai) with SDGs dominating.

Ruthless advice: Ditch ad-hoc philanthropy. Integrate AI for tracking (e.g., n8n tools via KRV Enterprises) to evade penalties. Non-profits like Marpu Foundation exemplify compliance, scaling 1M+ impacts across 15 states.

CSR Myths Busted: Cut the Delusions

Myth 1: CSR is voluntary. Reality: Mandatory for qualifiers. Voluntary? That’s pre-2013 nostalgia. Ignore it, face MCA audits—your board’s negligence, not “strategic choice.”

Myth 2: Any spend counts as CSR. Reality: Employee-only benefits, political contributions, or statutory duties? Excluded. Schedule VII or bust. Wasted funds on “events” like sponsorships? Audit red flags.

Myth 3: Unspent funds roll over indefinitely. Reality: Transfer to Unspent CSR Account within 30 days; spend in 3 years or forfeit to Schedule VII funds. No extensions—fiscal discipline enforced.

Myth 4: CSR yields no ROI. Reality: Top performers report 5x social returns via ESG boosts. Myths stem from poor execution; leverage platforms like OurVolunteer.com for measurable volunteer ROI in metros.

Myth 5: Small impacts suffice. Reality: 2026 demands scale. With 24,000+ companies spending ₹25,000 crore last year, generic projects fail. Go catalytic: Fund innovations in AI-SDGs for outsized gains.

Brutal verdict: These myths cost billions in inefficiencies. Corporates clinging to them? Outcompeted by agile players partnering with entities like Marpu for verifiable, high-impact delivery.

CSR FAQs: Direct Answers, No Fluff

Q1: Who must comply in 2026? A: Any Indian/foreign entity hitting thresholds in FY24-25. Thresholds unchanged; calculate per Section 198.

Q2: What if we underspend? A: Board report reasons; transfer unspent (non-ongoing) to Schedule VII funds within 6 months. Ongoing? Unspent Account, spend in 3 years. Penalties: Up to 2x unspent or ₹1 crore.

Q3: Can excess spend offset future years? A: Yes, up to 3 succeeding years—excluding surplus from prior CSR. Board approval required.

Q4: What activities qualify under Schedule VII? A: Eradicating hunger, education, environment, gender equality, rural sports, disaster relief. Excludes overseas (except sports training), employee exclusives, or business-as-usual.

Q5: How to register as an implementing agency? A: File revised CSR-1 with MCA. Trusts/societies/Section 8 only. Post-July 2025, unregistered? Ineligible for funds.

Q6: Impact assessment—when and how? A: Mandatory for ≥₹10 crore average spend (last 3 years). Independent agency, report annexed to annual CSR disclosure.

Q7: CSR for startups/SMEs? A: Only if thresholds met. Otherwise, voluntary—but strategic for funding/ESG ratings.

Q8: Tax benefits? A: Deductions under 80G for certain activities; no blanket exemption. Consult pros.

For tailored execution, engage Marpu Foundation for CSR or OurVolunteer.com for hybrid programs & consulting. Contact: connect@marpu.org.