Most CSR partnerships that go wrong do not go wrong at the money stage. They go wrong in the first meeting, when a company representative asks what the NGO does and gets forty minutes of stories, and nobody in the room asks to see a registration certificate, a set of audited accounts, or last year's project report.
Eighteen months later the company has an auditor's query, a project that cannot be evidenced, and an obligation it has technically spent but cannot defend in its Board's Report. The NGO, often perfectly genuine, has no idea what went wrong either.
This guide is written for the person inside a Noida company who has been handed CSR on top of an existing job, usually in HR, finance or company secretarial, and needs to get it right. It covers what the law actually requires, what to check before you sign, and how to structure a partnership that survives an audit.
First: does Section 135 apply to you?
Section 135 of the Companies Act, 2013 applies to a company that, during the immediately preceding financial year, meets any one of three thresholds:
- Net worth of ₹500 crore or more, or
- Turnover of ₹1,000 crore or more, or
- Net profit of ₹5 crore or more
Note the word any. A profitable mid-size company in Noida with modest turnover can be inside Section 135 purely on the ₹5 crore net profit test, and a great many are, often without realising it until their auditor raises it.
The obligation is to spend at least 2 percent of the average net profits of the three immediately preceding financial years, with net profit computed in the manner laid down in Section 198. If the company has been in existence for less than three financial years, the average is taken over the years it has completed.
A CSR Committee of the Board is required, though where the amount to be spent does not exceed ₹50 lakh the Board itself may discharge the Committee's functions. The Board must also disclose the CSR policy, the committee composition and the approved projects on the company website. We have set out the statutory framework in more detail on our Companies Act page, and a plainer explanation of the concept on what CSR means in practice.
Schedule VII: what the money can actually be spent on
Schedule VII is the exhaustive list of permitted activity areas. It is broad, but it is a list, and spending outside it does not count towards the obligation no matter how worthy the cause.
The areas most Noida companies use are education and employment-enhancing vocational skills, healthcare and sanitation, women's empowerment, livelihood enhancement, environmental sustainability, and support for persons with disabilities. Rural development, slum area development, heritage, sports, disaster management and contributions to specified government funds also appear.
What is excluded matters just as much, and this is where companies most often get caught:
- Activities undertaken in the normal course of business
- Activities that benefit only the company's own employees and their families
- Sponsorships undertaken for deriving marketing benefit — if the deliverable is brand visibility, it is marketing spend, not CSR
- Anything done to fulfil a separate statutory obligation under another Indian law
- Contributions to a political party under Section 182
- Activities outside India, other than training of Indian sports personnel
The sponsorship exclusion is the one that surprises people. A cheque that buys logo placement and a stall at an event is not CSR expenditure, and framing it as CSR in your annual report creates a problem you do not want.
The gate almost everyone forgets: Form CSR-1
Since 1 April 2021, any entity implementing a CSR project on behalf of a company must be registered with the Ministry of Corporate Affairs in Form CSR-1 and hold a CSR Registration Number. If your implementing partner does not have one, the spend does not qualify. Full stop.
Ask for the CSR Registration Number in the first meeting and verify it. It takes two minutes and it is the cheapest risk reduction available to you.
The CSR Rules also restrict which kinds of entity may implement. Broadly, an eligible partner is a Section 8 company, a registered public trust or a registered society that holds registration under Sections 12A and 80G of the Income-tax Act, 1961, and that has an established track record of at least three years in undertaking similar activities. Entities set up by the company itself, or by government, or under an Act of Parliament or a State legislature, sit under separate limbs of the same rule.
The three-year track record requirement is not a formality. It exists because a partner with no history in the activity you are funding has no systems for measuring it, and you will discover that at reporting time.
The due diligence pack: what to ask for before you sign
Ask for all of this in writing, at once, before any money moves. A well-run organisation will send it the same week. How long it takes is itself a signal.
Legal and registration
- Trust deed, society registration certificate or Section 8 incorporation certificate, with PAN
- Section 12A / 12AB registration order and current 80G approval order, with validity dates — both now run on renewal cycles, so check the expiry, not just the existence
- CSR Registration Number and the filed Form CSR-1 acknowledgement
- NITI Aayog NGO Darpan unique ID
- FCRA registration or prior permission, if any foreign funds are involved
Financial
- Audited financial statements for the last three financial years, with the auditor's report attached, not just the balance sheet page
- Income tax returns for the same three years
- Programme-wise expenditure breakdown, so you can see what proportion reaches the field
- Details of the largest three funders, and what share of total income they represent
Governance
- Board or trustee list with professional backgrounds and dates of appointment
- Minutes or attendance record showing the board actually meets
- Conflict of interest, child protection, POSH and financial delegation policies
- Annual report for the most recent year
You are entitled to ask for every one of these, and a partner that treats the request as an insult has told you something useful. Ours are published in full on our financials page, alongside the trustees' annual report and our FCRA account details. If you want a framework for reading the numbers once you have them, our companion piece on reading NGO financials walks through what the ratios actually tell you.
A note on FCRA and foreign shareholding
One nuance worth raising with your company secretary early. Under the Foreign Contribution (Regulation) Act, 2010, a company incorporated in India can itself fall within the definition of a foreign source where more than half the nominal value of its share capital is held by foreign governments, foreign citizens or foreign corporations.
If that describes your company, the treatment of your grant may differ from that of a wholly Indian-owned payer, and your partner will need appropriate FCRA standing to receive it. This is a question for counsel, not for a blog post, but it is far cheaper to ask before the first tranche than after.
Red flags
- No CSR Registration Number, or a promise to get one. Wait until it exists.
- Reluctance to share audited accounts. There is no acceptable version of this.
- A board composed entirely of one family. Not always fatal, but it means there is no independent check on spending.
- Impact claims with no denominator. "We have changed thousands of lives" is not a metric. Ask how many, over what period, measured how.
- An offer to route the money and return a portion. Walk out and document it.
- Willingness to accept your funds for an activity they have never run. Enthusiasm is not capability.
- Cash-heavy field expenditure with thin documentation. Some cash is unavoidable in field operations; an absence of vouchers is not.
Structuring the partnership
Put a written agreement in place covering scope, geography, beneficiary definition, budget line items, disbursement schedule linked to milestones, reporting format and frequency, audit and site-visit rights, branding and consent rules, data protection for beneficiary information, and exit terms. Name the individuals responsible on both sides.
Three practical points from experience on the receiving side. First, fund multi-year where the outcome is multi-year: a three-year education project reported annually will look weak at month twelve and strong at month thirty, and a one-year grant will be withdrawn just before the results appear. Second, allow a realistic overhead share; an organisation forced to claim 3 percent administrative cost is either subsidising you from elsewhere or is not doing the monitoring you are asking for. Third, agree the indicators at the start, not at reporting time.
On the compliance side, remember that the CSR Rules cap the company's own administrative overheads at 5 percent of total CSR expenditure for the financial year, and that any surplus arising out of CSR activities cannot be treated as business profit.
Reporting and impact measurement
Your Board's Report must carry an annual report on CSR in the prescribed format, and Form CSR-2 is filed as an addendum to AOC-4 within the timeline the MCA notifies.
Companies with an average CSR obligation of ₹10 crore or more in the three immediately preceding financial years must have an impact assessment carried out by an independent agency for projects with outlays of ₹1 crore or more that were completed not less than a year earlier. The cost of that assessment can itself be booked as CSR expenditure, subject to the cap in the Rules.
Even below that threshold, commission a light independent review in year two. It is the only way to find out whether the numbers in your partner's report describe reality, and it is much better to find out yourself than through an auditor.
Ask for output and outcome indicators separately. Number of girls enrolled is an output. Number still enrolled twenty-four months later, with measured gains in reading and arithmetic, is an outcome — the distinction we set out in our field account of what it takes to keep girls in school.
The compliance calendar
The Indian financial year runs 1 April to 31 March. Working backwards from that:
- Before or early in the financial year — CSR Committee or Board approves the annual action plan, project list and budgets
- Through the year — disbursements against milestones, utilisation certificates, site visits
- Within 30 days of year end — unspent amounts relating to ongoing projects transferred to a separate Unspent CSR Account, to be spent within three financial years
- Within six months of year end — unspent amounts not relating to ongoing projects transferred to a fund specified in Schedule VII
- By 31 May — your partner issues the donation certificate in Form 10BE, generated from its Form 10BD statement
- With the annual filings — CSR annexure in the Board's Report, and Form CSR-2 as an addendum to AOC-4
Failure to transfer unspent amounts attracts a monetary penalty on the company and on officers in default under Section 135(7). Confirm the current amounts and timelines with your company secretary before each cycle, as the Rules have been amended several times since 2021.
Starting the conversation
If you are shortlisting partners in Noida, ask each one for the due diligence pack above and see who responds fastest and most completely. Then visit a project site unannounced, or as close to unannounced as courtesy allows. Twenty minutes in a field location tells you more than any presentation.
The Setu Foundation has worked in Noida since 2007 across education, skilling, women's employability and support for persons with disabilities. Our approach to corporate partnerships, the current project portfolio and our existing corporate supporters are all set out on the CSR partnerships page.
To request the due diligence pack or discuss a project, contact the team. Our current CSR Registration Number and registration validity dates are here: [Setu to insert: CSR Registration Number, 12A/12AB and 80G validity dates].
This guide is general information on the statutory framework and is not legal advice. Confirm applicability, current thresholds and filing timelines with your company secretary or legal adviser before acting.
