The CSR policy and the annual action plan

A company that must spend on corporate social responsibility (CSR) under Section 135 of the Companies Act, 2013 needs two governing documents. The CSR policy sets its standing approach: what it funds, where, how and under what rules. The annual action plan turns that into a list of projects for one financial year, with budgets, delivery routes and monitoring.

The law sets a short list of must-haves for each. Most of what makes them useful is left to the company. This guide explains both, for CSR heads and company secretaries drafting or reviewing them, with an outline of each you can adapt. It reflects the law as in force on 3 October 2026.

The policy and the plan side by side

Where a company’s CSR obligation is ₹50 lakh or less and it has no money in an Unspent CSR Account, it needn’t have a CSR committee, and the board does the committee’s work on both documents. Our guide to the CSR committee explains when a committee is required.

What the CSR policy must contain

So the legal minimum is short: the activities, tied to Schedule VII, and the guiding principles for choosing, running and monitoring them and for making the plan.

The policy used to be more prescriptive. Until January 2021, Rule 6 of the CSR Rules required it to list the projects the company planned, how and when they would be carried out, and how they would be monitored, and to say that surplus from CSR projects wouldn’t become business profit. Rule 6 was omitted in the 2021 rewrite, and the project-level detail moved into the annual action plan. A policy that still lists this year’s projects, or cites Rule 6, probably predates 2021. Our guide to the CSR Rules has the history.

What a good policy adds

The law leaves the rest to the company. A policy that will guide real decisions usually covers:

• Focus areas and why. Two to four themes, each mapped to its Schedule VII item, with the reasons for choosing them. A CSR strategy is where those reasons come from.
• Geography. How the company weighs the local areas where it operates against national priorities. Section 135(5) asks for preference to local areas, but the MCA reads that as “directory and not mandatory” (FAQ 3.9).
• How it will deliver. Directly, through its own foundation, through implementing agencies registered on Form CSR-1, with other companies, or through the Social Stock Exchange route for up to 10% of the year’s spending. See ways to implement CSR.
• How partners are chosen. Eligibility checks, due diligence and the approval steps. See choosing an NGO partner.
• The spending rules. The 5% cap on administrative overheads; how surplus, set-off, ongoing projects and unspent money will be handled; who will hold any capital assets; and the things that don’t count, such as corpus contributions, gifts in kind and the value of employees’ volunteering time.
• Monitoring and evidence. Who monitors, how often, what is measured, and how impact assessment will be done where Rule 8(3) requires it.
• People and ethics. Safeguarding, consent for photographs and stories, data protection, and a branding rule that keeps visibility incidental to the work.
• Review. When the policy will next be reviewed, and who owns it.

A CSR policy outline

1. Purpose and legal basis: Section 135, Schedule VII and the CSR Rules, with the version date.
2. Our approach: the company’s reasons for its CSR, in a paragraph.
3. Focus areas: each theme, its Schedule VII item and the outcomes sought.
4. Geography: local areas and national priorities.
5. Implementation routes: direct, foundation, agencies, collaboration, Social Stock Exchange.
6. Choosing projects and partners: needs assessment, eligibility, due diligence.
7. Governance: the committee’s and the board’s roles, the annual action plan process, and who can approve what between meetings.
8. Money: the obligation, overheads, surplus, set-off, ongoing projects, unspent money and capital assets.
9. Monitoring, evaluation and impact assessment.
10. Reporting and disclosure: the board’s report, the website and Form CSR-2.
11. Safeguarding, consent, data and branding.
12. Review and approval: date approved, next review date.

What the annual action plan must contain

In plain words, for each project the plan should answer: what is it, and which Schedule VII item does it fall under; who will carry it out, and under which route in Rule 4(1); how much will be spent, in what instalments and over what period; how the company will know it is on track; and whether a needs assessment was done and an impact assessment will be needed.

The Rules don’t set a date by which the plan must be approved. Most companies approve it in the first quarter of the financial year, or just before it starts, using the obligation worked out from the previous years’ figures. If the accounts for the year just ended aren’t yet audited, plan on provisional figures and revise the plan formally once the final net profit is known. How CSR works in India sets out the whole annual cycle.

An annual action plan outline

The plan is usually a short covering note and one table. The covering note records the obligation (2% of average net profit, plus any surplus brought in, minus any set-off the board uses), the budget for administrative overheads and any impact assessment, and any money still in an Unspent CSR Account.

The table has one row per project, with these columns:

Changing the plan during the year

Plans change for good reasons: a flood, a partner that can’t deliver, a project that turns out cheaper than budgeted. The proviso allows it, with three conditions in practice:

• The committee recommends and the board approves. A change agreed by email between the CSR team and an NGO isn’t a change to the plan.
• Record the reason. The minutes are the evidence of “reasonable justification”.
• Reconcile the budget. The MCA’s FAQs allow a budget made for one project to be used for another, provided the change is recorded (FAQ 6.7).

Ongoing projects have their own rules. The board monitors each against its approved timeline and yearly budget (Rule 4(6)), and in exceptional circumstances may modify or abandon it on the committee’s recommendation (FAQ 6.6). An ongoing project can never run longer than its year of commencement plus three financial years (FAQ 6.3).

Publishing the policy and the plan

• The board’s report must disclose the contents of the CSR policy (Section 135(4)(a)), and the annual report on CSR attached to it gives a brief outline of the policy with web links. See the annual report on CSR.
• The website, if the company has one, must show the committee’s composition, the CSR policy and the projects the board has approved (Rule 9). The MCA’s FAQs say this means every approved project, whatever its size (FAQ 10.4).

Update the website when the board approves a change to the plan, and keep the project names identical across the website, the board’s report and Form CSR-2. Mismatched figures are the easiest discrepancy for an auditor or a journalist to spot.

Common mistakes

• A policy that is really last year’s plan, listing projects instead of principles, so it goes out of date in twelve months.
• A plan with only a total budget, missing the manner of execution, schedules or monitoring that Rule 5(2) requires.
• Ongoing projects without dates or yearly budgets, which makes it hard to justify moving unspent money to the Unspent CSR Account.
• Changes made outside the board, or without minuted reasons.
• A stale website, showing an old policy or projects the board has since changed.

The CSR Law in Depth course covers the policy and the plan with scenarios, and Running a CSR Foundation shows how a company foundation drafts plans for its parent’s board.