A CSR head I spoke with in Pune signed off on a two crore rupee NGO partnership in March 2025. He never once asked to see a CSR-1 certificate.
Eight months later, the statutory auditor flagged the entire spend as non-compliant, and his committee wanted to know why nobody caught it before the money left the account.
This is the checklist that would have caught it in under ten minutes. It’s also the one most CSR desks quietly skip.
Why NGO Due Diligence Looks Different in 2026
For years, vetting an NGO partner meant a site visit, a reference check, and a gut feeling. That’s not enough anymore, and it hasn’t been enough since April 1, 2021, when Form CSR-1 registration became mandatory for any entity that wants to receive corporate CSR money. No CSR-1 number, no legal ability to accept the funds. Full stop.
I run Marpu Foundation. We work with 250+ corporate partners across 23+ states, and every one of those relationships opens with the same paperwork conversation before it opens with a programme conversation. It’s not glamorous. But I’ve watched too many well-meaning CSR teams get this wrong, sign a partner on warmth and a good pitch deck, and then spend a stressful March scrambling to fix a compliance gap that a checklist would have caught in the first meeting.
Section 135 of the Companies Act, 2013 applies to companies with a net worth of Rs 500 crore or more, a turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more in the preceding financial year. If your company meets any one of those thresholds, you’re required to spend at least 2% of your average net profit from the preceding three financial years on CSR. That spend has to go somewhere legitimate, and that’s where the checklist below earns its keep.
The Six Checks Before You Sign
Run these six checks on any NGO before a single rupee moves. None of them take long. All of them get skipped anyway, usually because someone assumed a colleague already did it.
1. Does the NGO Actually Hold CSR-1 Registration?
Ask for the CSR Registration Number, not just a promise that “the registration is in process.” Form CSR-1 is filed electronically with the Registrar of Companies through the MCA portal, and once it’s approved, the NGO gets a unique CSR Registration Number. You can verify this number independently on the MCA21 portal. Don’t take a screenshot as proof. Pull the number and check it yourself.
2. Is the 80G and 12A Status Current, Not Just Filed?
An eligible NGO needs to be a registered Section 8 company, trust, or society holding valid 12A and 80G registration under the Income Tax Act, and it generally needs at least three years of demonstrated activity in the relevant field. Registrations lapse, get renewed, and sometimes sit in provisional status longer than they should. Ask for the registration certificate and the validity dates. If the NGO can’t produce both without digging, that’s your answer.
3. Does the Project Actually Map to Schedule VII?
Schedule VII lists what counts as CSR: hunger and malnutrition, health care and sanitation, education and vocational skills, gender equality and women’s empowerment, environmental sustainability, disaster relief, rural development, and a handful of other named categories. What doesn’t count is just as important. Activities carried out purely in the normal course of business, projects benefiting only your own employees, anything outside India (with a narrow exception for training Indian sports personnel), political contributions, and marketing sponsorships dressed up as social work all fall outside CSR eligibility. Get the NGO to show you, in writing, which Schedule VII category the project sits under. If they can’t answer quickly, the project probably wasn’t designed with compliance in mind.
4. Who’s Responsible If the Money Sits Unspent?
This is the rule that trips up more finance teams than any other, and it’s worth understanding cold. If CSR money isn’t spent by the end of the financial year and it doesn’t relate to an ongoing project, the company must transfer it to a fund named in Schedule VII, such as the PM National Relief Fund or PM CARES, within six months of the financial year ending. If it does relate to an ongoing project, the company has to move it into a separate “Unspent CSR Account” at a scheduled bank within 30 days of the financial year ending, and then actually spend it within three financial years of that transfer. Miss that three-year window, and the leftover has to go to a Schedule VII fund within 30 days after the third year closes. A good NGO partner tracks its own disbursement pace against your project timeline and flags slippage early, instead of leaving you to discover it in March.
5. Will This Project Trigger a Mandatory Impact Assessment?
Under Rule 8(3) of the CSR Rules, an independent impact assessment becomes mandatory when a company’s average CSR obligation over the preceding three financial years is Rs 10 crore or more, and the specific project has an outlay of Rs 1 crore or more and was completed at least a year before the assessment. If your project sits above both thresholds, budget for it now. The cost of the impact assessment can be booked as CSR expenditure, but it’s capped at 5% of your total CSR spend for that financial year or Rs 50 lakh, whichever is less. Ask the NGO whether they’ve supported an independent impact assessment before. Most haven’t, and that’s fine to know upfront rather than in year three.
6. Does the NGO Have Three Years of Audited Trail, Not Just Promises?
Ask for the last three years of audited financials, utilisation certificates from previous corporate partners, and board meeting minutes that show real governance, not a rubber stamp. An NGO that hands these over in a single email, organised and dated, is telling you something about how it runs. One that needs two weeks and three reminders is telling you something too.
The Six Checks at a Glance
| Requirement | What It Confirms | Where to Verify | Red Flag |
|---|---|---|---|
| CSR-1 Registration | NGO is legally allowed to receive CSR funds | MCA21 portal, CSR Registration Number | “In process” with no number |
| 12A / 80G Status | Tax-exempt status is active, not lapsed | Income Tax Department registration certificate | Expired or provisional status quoted as final |
| Schedule VII Mapping | Project spend will count as valid CSR | Written project note citing the exact category | Vague description, no category named |
| Unspent Fund Discipline | NGO won’t leave you exposed to penalty at year end | Disbursement schedule tied to project milestones | No clear spend-down timeline |
| Impact Assessment Readiness | Large project can meet Rule 8(3) obligations | Track record with independent evaluators | No prior experience, no plan to budget for it |
| Three-Year Audited Trail | Governance is real, not just paperwork | Audited financials, past utilisation certificates | Reluctance or delay in sharing records |
A Rainy Afternoon in Vizianagaram
I remember a field visit a few years back, sitting across a plastic table in a small NGO office in Vizianagaram district while the monsoon hammered the tin roof so hard we had to raise our voices. The founder was earnest, the work was real, kids were genuinely being fed and taught. But when I asked for the 12A certificate, he rifled through a cardboard box of loose papers for nearly ten minutes before finding a photocopy so faded I couldn’t read the registration date. That box told me more than the pitch had.
We didn’t walk away. We helped them get organised instead, because the intent was good and the gap was fixable. But not every corporate partner has the time or patience to do that, and they shouldn’t have to. That’s exactly why the checklist exists before the relationship, not after the first tranche has already left the account.
What Happens If You Skip This
The penalties aren’t symbolic. If a company fails to transfer unspent CSR amounts as required, it’s liable for a penalty equal to twice the amount that should have been transferred, or Rs 1 crore, whichever is less. Every officer in default faces a personal penalty of one-tenth of that amount, or Rs 2 lakh, whichever is less. That’s not a fine that gets buried in a footnote. It’s a number your board will ask about by name, and it’s the kind of finding that follows a CSR head’s name around a company for longer than the project itself lasted.
Building This Into Your CSR Governance Calendar
Don’t treat this checklist as a one-time gate at the start of a partnership. Build it into your annual CSR calendar: verify CSR-1 status at onboarding, re-check 12A/80G validity every financial year, track unspent balances quarterly rather than in a March scramble, and flag any project crossing the Rs 1 crore outlay mark for impact assessment budgeting a year in advance. A checklist run once is a formality. A checklist run on a schedule is governance, and it’s the difference between a CSR head who looks prepared in front of the board and one who’s explaining a gap after the fact.
Frequently Asked Questions
What is CSR-1 registration and why does it matter?
CSR-1 is a mandatory electronic form filed with the Registrar of Companies through the MCA portal. Since April 1, 2021, any NGO, trust, or Section 8 company must hold an approved CSR-1 registration and a unique CSR Registration Number before it can legally receive CSR funds from a company.
Can a company give CSR funds to an NGO without CSR-1 registration?
No. Since April 2021, CSR-1 registration is a hard legal requirement. Funds transferred to an NGO without an approved CSR-1 number don’t count as valid CSR spend under Section 135.
What is the difference between 80G and 12A registration?
12A registration exempts the NGO’s own income from tax. 80G registration allows donors, including corporate CSR contributors, to claim tax benefits on the amount given. An eligible CSR partner typically needs both, current and unexpired.
How long must an NGO exist before it can receive CSR funding?
An NGO generally needs at least three years of demonstrated activity in the relevant field, alongside valid CSR-1, 12A, and 80G registration, to be considered an eligible implementation partner for CSR funds.
What happens to unspent CSR money for an ongoing project?
It must be transferred to a separate “Unspent CSR Account” at a scheduled bank within 30 days of the financial year ending, then spent within three financial years. Any amount still unspent after three years must go to a Schedule VII fund within 30 days of that third year closing.
What is the deadline to transfer unspent CSR funds for a non-ongoing project?
If the unspent amount doesn’t relate to an ongoing project, it must be transferred to a fund specified in Schedule VII, such as the PM National Relief Fund or PM CARES, within six months of the end of the financial year.
When is a CSR impact assessment mandatory?
Under Rule 8(3), an independent impact assessment is mandatory when a company’s average CSR obligation over the preceding three financial years is Rs 10 crore or more, and a specific project has an outlay of Rs 1 crore or more and was completed at least one year before the assessment.
What is the penalty for CSR non-compliance under Section 135?
A company that fails to transfer unspent CSR funds as required faces a penalty equal to twice the amount due, or Rs 1 crore, whichever is less. Officers in default face a personal penalty of one-tenth of that amount, or Rs 2 lakh, whichever is less.
Can CSR funds be spent outside India?
No, with a narrow exception for training of Indian sports personnel representing a state or the country. Activities carried out outside India generally don’t qualify as eligible CSR spend under Schedule VII.
Who verifies whether an NGO’s Schedule VII mapping is legitimate?
Ultimately the company’s CSR committee and board are accountable for this, which is why it belongs on the due-diligence checklist rather than being taken on faith from the NGO’s own pitch materials.
If you’re a CSR head building out your partner due-diligence process, or an NGO founder getting ready for your first corporate CSR conversation, I’m glad to share more from what we’ve built at Marpu Foundation. Write to me at raghu@marpu.org.
Kadiri Raghu Vamsi 
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