Corporate Social Responsibility (CSR) – Section 135

What it means?

Section 135 is the “legislative heartbeat” of corporate giving in India. In 2026, it has shifted from being a mere line item in the annual report to a complex, multi-layered governance framework.

1. The Statutory Requirement:

Every qualifying company must spend 2% of its average net profit (calculated as per Section 198 of the Act) of the preceding three financial years.

2. The 2025-26 Regulatory Shift:

The landscape has been significantly altered by the Companies (Amendment) Bill, 2025 and the revised CSR Policy Amendment Rules, 2025. These updates have introduced two massive changes:

• The “Net” Just Got Bigger: Lowered thresholds mean that mid-sized firms (Net profit $\ge$ ₹3 crore) are now entering the mandatory CSR pool, bringing thousands of new players into the impact ecosystem.
• The “Expertise” Mandate: For the first time, the law proposes that the CSR Committee must include at least one director with demonstrable experience in planning and implementing social projects, moving away from “Generalist Boards.”

What is its importance?

Section 135 serves as the bridge between private wealth and public need. Its importance in 2026 is defined by three high-stakes pillars:

1. Strategic Resource Allocation (Schedule VII):

The importance lies in directing capital toward Schedule VII priorities, which in 2026 heavily emphasize:

• Climate & Environment: Rejuvenation of natural resources, disaster management, and renewable energy.
• Technology & Innovation: Funding incubators and R&D for vaccines/medical devices (especially in collaboration with public institutes).
• Viksit Bharat Goals: Aligning corporate spend with national missions like Digital Literacy and Skill India.

2. Compliance & The CFO’s Certification:

As of 2025, the CFO (Chief Financial Officer) must personally certify that CSR funds have been utilized as approved by the Board. This elevates CSR from “charity” to “auditable financial data,” ensuring that every rupee is tracked and leakages are eliminated.

3. Impact over Expenditure:

The mandate for Impact Assessment (for companies with $\ge$ ₹10 Cr obligation) has forced a cultural shift. Companies now value “outcomes” (e.g., number of girls completing school) over “outputs” (e.g., number of bags distributed). This has professionalized the NGO sector, making data-driven reporting the only currency of trust.

Conclusion

In 2026, Section 135 is no longer just about “doing good”; it is about “doing good correctly.” The framework has successfully mainstreamed social responsibility into the boardrooms of India.

For the professional, it offers a dual challenge: you must be as comfortable with financial compliance and MCA (Ministry of Corporate Affairs) filings as you are with field-level social dynamics. As the thresholds lower and the expertise requirements rise, Section 135 will continue to be the primary engine driving India’s “Just Transition”—ensuring that the nation’s economic rise is inclusive, transparent, and deeply rooted in the well-being of its most vulnerable citizens.