Rule 8(3), thresholds, cost limits, report format and filing
CSR impact assessment is mandatory for a company whose average CSR obligation over the three preceding financial years is ₹10 crore or more, for each CSR project with an outlay of ₹1 crore or more that finished at least a year before the study. This guide is for CSR heads, company secretaries and foundation teams planning that assessment.
Section 135 applies to a company that, in the immediately preceding financial year, had net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more. Such a company must spend at least 2% of its average net profit of the three preceding years on CSR.
Being covered by Section 135 does not by itself make an impact assessment compulsory. The assessment duty sits one level higher, with companies whose average CSR obligation is large. A company spending ₹3 crore a year on CSR must comply with Section 135 but is not required by Rule 8(3) to commission an independent impact study, although many choose to for internal learning.
The test is the average CSR obligation under Section 135(5) in the three immediately preceding financial years, not the amount actually spent. A company whose obligation was ₹9 crore, ₹10 crore and ₹12 crore averages ₹10.33 crore and is covered. Compute this every year; companies move in and out of the class as profits change.
Only projects with an outlay of ₹1 crore or more qualify, and only once they were completed at least one year before the study begins. The one-year gap exists so the assessment measures outcomes that lasted, not just outputs on the day of handover. Smaller projects can be assessed voluntarily and bundled in the same study.
The Companies (CSR Policy) Amendment Rules, 2021, notified by the Ministry of Corporate Affairs in January 2021, made impact assessment a legal requirement for the largest CSR spenders for the first time. Before that, assessment was good practice. A 2022 amendment then revised how much of its cost can be counted as CSR spend.
The 2021 amendment also tightened CSR governance more broadly: registration of implementing agencies on Form CSR-1, an annual action plan approved by the Board, and rules on unspent amounts for ongoing projects. Impact assessment fits into that shift from counting rupees spent to showing what the spending achieved.
Under Rule 8(3)(c) as amended in September 2022, a company may book impact assessment expenditure towards CSR for that financial year up to 5% of its total CSR expenditure or ₹50 lakh, whichever is less. Anything above that must be paid from the company's own non-CSR budget. This is a separate limit from the 5% ceiling on administrative overheads under Rule 7.
For large spenders the ₹50 lakh figure is usually the binding cap. A company with ₹40 crore of CSR spend could otherwise book ₹2 crore at 5%, but the rule stops it at ₹50 lakh. A company with ₹8 crore of spend is capped at ₹40 lakh, because 5% is the lower number. Plan assessment scope with this arithmetic in front of you.
A defensible CSR impact assessment compares outcomes for project participants against a baseline or a comparison group, uses a sample large enough for the estimates it reports, verifies fieldwork independently and separates evidence from recommendations. The steps below follow that logic.
Pull outlay and completion dates from CSR records, then write down what each project was meant to change: incomes, learning, health access, water availability.
Use a baseline if one exists, a matched comparison village or school if not, and say plainly when only before-after or recall data is possible.
Set sample size per project, translate and pilot the questionnaire, and add consent text participants can understand.
Interview households and facilities with GPS-tagged, time-stamped records and back-check a fixed share of them with an independent supervisor.
Write findings on relevance, effectiveness, efficiency, impact and sustainability, with denominators, then give the Board a short summary.
The rules do not prescribe a report template, so use a structure that a Board and an auditor can both follow. Start with a two-page executive summary, then method, findings per project, limitations and annexures holding the tools and data description.
| Section | What it contains | Typical length |
|---|---|---|
| Executive summary | Projects covered, key outcomes, main limits, top recommendations | 2 pages |
| Project profile | Outlay, location, implementing agency, completion date, intended outcomes | 1 page per project |
| Methodology | Design, comparison group, sample size, tools, field dates, quality checks | 3–5 pages |
| Findings | Outcome indicators with denominators, by project and sub-group | Main body |
| Sustainability | Whether assets and services still function a year or more after closure | 1–2 pages |
| Limitations | Data gaps, recall bias, access problems and their likely effect | 1 page |
| Recommendations | Kept separate from findings, linked to evidence | 1–2 pages |
| Annexures | Questionnaires, sampling list, back-check summary, independence declaration | As needed |
Outline based on common evaluation practice; the MCA does not mandate a format.
Form CSR-2 is the MCA e-form in which companies covered by Section 135 report CSR details for the financial year, filed as an addendum to Form AOC-4. Because it mirrors the annual report on CSR, the impact assessment details should be final before the form is prepared.
Rule 8(3)(b) requires assessment reports to be placed before the Board and annexed to the annual report on CSR. In practice, the annual report on CSR carries an executive summary of each assessment along with a web link to the full report. Write that summary so it stands alone: projects, method, what changed and the main limitations.
Report outcome numbers with their base, for example '412 of 600 sampled households reported year-round drinking water', rather than percentages alone. Keep the same indicators year to year where possible so the annual report shows a trend, not a new set of claims each time.
Use these lists in the quarter before the Board meeting that approves the annual report.
Independent field studies for qualifying CSR projects.
Learn moreEvaluation design and verified fieldwork for schemes and programmes.
Learn moreSet up the starting point your future assessment will compare against.
Learn moreResearch and field data collection for companies and foundations.
Learn moreStraight answers to the questions people ask most about this topic.
No. It is mandatory only for companies whose average CSR obligation over the three preceding financial years is ₹10 crore or more, and only for projects with outlay of ₹1 crore or more completed at least one year before the study. Other companies may commission assessments voluntarily.
Rule 8(3) requires assessment through an independent agency. An implementing agency assessing its own project is not independent. Many companies also avoid agencies that helped design the project, and ask for a written independence declaration in the annexures.
Yes, within a limit. The company may book it as CSR spend for that year up to 5% of total CSR expenditure or ₹50 lakh, whichever is less. Costs above the cap are borne outside the CSR budget.
Not earlier than one year after the project was completed, so that lasting outcomes can be measured. Time the fieldwork so the report is ready for the Board before the annual report on CSR and Form CSR-2 are finalised.
Send the project list with outlays and completion dates. We will reply with a scope, sample plan and timeline that fits the cost cap.
