The layers of CSR law

Section 135, Schedule VII, the CSR Rules and the MCA’s FAQs: what each layer does and how much weight it carries.

10 minThe legal architecture

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CSR law in India isn’t one document. It is a stack of layers, each made under the authority of the one above it. Most real questions, such as whether a cost counts or when unspent money must move, need two or three layers read together. This lesson maps the stack so you know where to look, and how much weight each answer carries.

Layer 1: Section 135 of the Companies Act, 2013

Section 135 is the parent provision. Its nine sub-sections decide who must comply, require a CSR committee, set the board’s duties and the 2% spending rule, deal with unspent money and fix the penalties for default. Because it sits in an Act of Parliament, only Parliament can change it. The Companies (Amendment) Acts of 2017, 2019 and 2020 each rewrote parts of it.

Layer 2: Schedule VII

Schedule VII lists the activities a CSR policy may include, from health and education to disaster management, along with a short list of government funds. It is part of the Act, but Section 467 lets the central government alter any Schedule by notification. That is how new items get added: the latest, item (xiii) on the Social Stock Exchange, arrived in May 2026 (Module 5).

Layer 3: the CSR Rules

The Companies (Corporate Social Responsibility Policy) Rules, 2014, which this course calls the CSR Rules, supply the detail Section 135 leaves to be “prescribed”: definitions, eligible implementing agencies, overheads, surplus, set-off, capital assets, reporting and impact assessment. The government makes and amends them by notification under Sections 135 and 469. The major rewrites came on 22 January 2021 and 20 September 2022, with further changes in 2025 and 2026.

Layer 4: circulars and FAQs

The Ministry of Corporate Affairs (MCA) explains how it reads the law through general circulars. The key one is General Circular 14/2021 of 25 August 2021, a set of FAQs that replaced the Ministry’s earlier CSR FAQs and clarifications issued between 2014 and 2018. In this course, “FAQ 7.4” means question 7.4 in that circular.

FAQs aren’t law. Where one conflicts with the Act or the Rules, the Act and the Rules prevail, and a later amendment can overtake an FAQ answer. But the FAQs tell you how the Ministry that enforces Section 135 reads it, so depart from them only on considered legal advice.

Neighbouring laws you will meet

Other provisions that shape CSR practice
Provision	Why it matters for CSR
Section 134(3)(o), Companies Act	The board’s report must cover the CSR policy and initiatives; the annual report on CSR is attached to it.
Section 198, Companies Act	The method for computing net profit, which drives the ₹5 crore test and the 2% amount.
Rule 12(1B), Companies (Accounts) Rules, 2014	Requires the annual Form CSR-2 filing with the Registrar.
Schedule III, Companies Act	The notes to the accounts must disclose CSR spending, shortfalls and related-party contributions.
Income-tax law	Most implementing agencies need registrations for tax exemption and for donors’ deductions.
SEBI Listing Regulations, 2015	India’s top 1,000 listed companies report CSR details in their Business Responsibility and Sustainability Report (BRSR).
Foreign Contribution (Regulation) Act, 2010	Can apply when CSR money comes from a company that counts as a “foreign source”.

Knowing the layer tells you how stable a rule is. A threshold in Section 135 needs an Act of Parliament to change. A cap in the Rules can change overnight by notification. An FAQ answer can be revised by the next circular.

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