CSR for rural development, slums and disaster relief

Yes: CSR can fund rural development, the development of slum areas and disaster management, from relief in the first days after a flood to rebuilding schools and preparing villages for the next cyclone. Items (x), (xi) and (xii) of Schedule VII cover all three. They are broad, but each has limits worth knowing before money moves.

Schedule VII, the list in the Companies Act, 2013 of activities CSR money can be spent on, has thirteen items in all (Schedule VII at a glance). This guide, for CSR teams and for NGOs working in villages, cities and disaster response, explains what items (x) to (xii) say, what qualifies, how to work with panchayats and municipalities, and how to act quickly in a disaster within the rules.

What the three items say

For items as short as these, the Ministry of Corporate Affairs’ (MCA) frequently asked questions on CSR (General Circular 14/2021, 25 August 2021) matter: FAQ 3.13 says Schedule VII “must be interpreted liberally to capture the essence of the subjects”. The FAQs, cited here as “FAQ” and a number, are the Ministry’s reading of the law rather than law, but companies and auditors rely on them.

How much CSR goes to these items

Rural development was 6.9% of the ₹34,908.75 crore companies spent on CSR in 2023-24 (PIB, 25 March 2026). The government’s sector figures have no separate line for disaster management, so they can’t show how much went to relief. CSR spending in the aspirational districts, the 112 districts that NITI Aayog’s programme has targeted since January 2018 because they lagged on key indicators, rose from ₹651.43 crore in 2020-21 to ₹1,046.43 crore in 2021-22 and ₹1,402.89 crore in 2022-23 (PIB, 16 December 2024).

Rural development: item (x)

“Rural development projects” is one of the widest phrases in Schedule VII. It covers integrated village programmes that combine water, sanitation, schooling, health, farming and livelihoods, as well as single projects such as community buildings, village roads and drains, irrigation, solar lighting, and support for farmers and their producer groups. Many of these also fit other items, such as item (i) for drinking water or item (ii) for livelihoods; tag each project with the item that best describes its main purpose.

Working with panchayats

The gram panchayat is the most important partner in rural CSR. Each panchayat prepares a Gram Panchayat Development Plan, and work that fits it is less likely to duplicate public spending or be abandoned. Agree projects at the gram sabha (the village assembly) or by panchayat resolution, in writing. A panchayat is also a public authority, so it can hold assets created with CSR money under Rule 7(4) of the CSR Rules: see capital assets in CSR.

Two cautions apply. FAQ 3.17 says CSR “should not be interpreted as a source of financing the resource gaps in Government Schemes”, so design your own project alongside government programmes rather than paying their bills. And Section 135(5) asks companies to prefer the areas where they operate, but FAQ 3.9 says this preference is “only directory and not mandatory”, so a company can choose aspirational districts or blocks far from its plants. See CSR and government schemes.

What doesn’t count in rural development

• Infrastructure for the company’s own operations, such as a road to its own quarry or a bridge its trucks need. That is its normal course of business, excluded by Rule 2(1)(d)(i).
• Obligations under other laws, such as resettlement and rehabilitation the land acquisition law requires for a project, or a mining company’s statutory payments to the district mineral foundation. Rule 2(1)(d)(vi) excludes activities carried out to meet any other statutory obligation.
• Benefits mainly for the company’s workforce, such as a township’s facilities (Rule 2(1)(d)(iv)).

Slum area development: item (xi)

The Explanation to item (xi) ties it to a legal declaration. Many state laws provide for areas to be declared slums, and a municipal corporation or state slum board can confirm whether a settlement has been declared. Projects that fit include upgrading water supply, drains, toilets, street lighting and community spaces in declared slums, usually with the municipality, and housing improvements agreed with the authority that manages the area.

Many informal settlements have never been declared. Work there can’t be booked as “slum area development”, but it can still count under other items: a clinic under item (i), a learning centre under item (ii), women’s livelihoods under item (iii). Record which item each project uses and why.

Assets in slums, from toilet blocks to community centres, need a holder that Rule 7(4) permits: usually the municipality, which is a public authority, or the residents themselves as a self-help group, collective or other entity.

Disaster management: item (xii)

Item (xii) covers “disaster management, including relief, rehabilitation and reconstruction activities”. The Disaster Management Act, 2005 treats disaster management as a continuous process, running from prevention, mitigation and preparedness through response and relief to rehabilitation and reconstruction, and the FAQs ask for a liberal reading of Schedule VII. So preparedness, such as early warning systems that reach fishers, cyclone shelters, flood drills with the panchayat and heat action plans, fits alongside relief and rebuilding.

The 2021 FAQs have no separate question on disaster relief. The clearest guidance came during COVID-19. General Circular 10/2020 (23 March 2020) made COVID-19 spending eligible under items (i) and (xii). General Circular 15/2020 (10 April 2020) added that:

• contributions to a State Disaster Management Authority to fight COVID-19 qualified under item (xii);
• contributions to a chief minister’s or state relief fund didn’t, because those funds aren’t in Schedule VII;
• wages paid to the company’s own employees and workers during the lockdown didn’t count;
• ex-gratia payments to casual and daily-wage workers, over and above wages and specifically for fighting COVID-19, were allowed “as a one-time exception”, with a board declaration certified by the statutory auditor.

Those answers were given for the pandemic. For any other disaster, check the position before paying a state authority, and don’t rely on the one-time exception.

Acting quickly within the rules

1. Change the plan. The proviso to Rule 5(2) lets the board alter the annual action plan at any time during the year, on the CSR committee’s recommendation and with reasonable justification. Minute the reasons.
2. Choose the route. The company can act directly, which needs no CSR-1 registration (FAQ 5.8); work through an implementing agency with a CSR registration number; or contribute to the PM CARES Fund or the PM’s National Relief Fund under item (viii). See CSR for veterans, sports and government funds.
3. Buy, don’t give from stock. The company’s own products can’t be valued and counted (FAQ 3.12), and neither can employees’ volunteering hours (FAQ 3.18).
4. Coordinate with the district administration and the District Disaster Management Authority, so that aid reaches the places that need it and isn’t duplicated.
5. Plan the year-end. Relief spent in a few weeks is usually not an ongoing project, so money left unspent at the year’s end must go to a Schedule VII fund within six months. Reconstruction over two or three years can be an ongoing project, with unspent money moved to the Unspent CSR Account within 30 days. See unspent CSR money.
6. Settle who holds what you rebuild. Schools and health centres go to the relevant department; community assets to the panchayat. Homes rebuilt for individual families raise a question the Rules don’t answer, explained in our guide to capital assets in CSR.

Good practice: what to measure

See choosing indicators and needs assessment for setting baselines with communities.

For NGOs

• Bring the panchayat or municipality with you: a resolution or letter supporting the project, and agreement on who will maintain what is built.
• For slum work, check the declaration, and tell the company which item a project fits if the settlement isn’t declared.
• Be ready before disasters strike: a CSR registration number on Form CSR-1, the right income-tax registrations, procurement rules, and relationships with the district administration. Companies move fastest with partners they already know. See how NGOs can get CSR funding.
• Report quickly and honestly: what reached whom, what is still needed, and what the company’s money did.

The Academy’s CSR Essentials course covers Schedule VII, the annual action plan and unspent money.