# CSR-1 Verification and Schedule VII Classification

Published: 15 Sep 2026
Author: Treelife
Practice area: Legal
Tags: CSR implementing agency, CSR-1 registration, CSR-2 compliance, Schedule VII, Section 135, Social Stock Exchange, Zero Coupon Zero Principal
Source: https://treelife.in/legal/csr-1-verification-and-schedule-vii-classification/

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Blog Content Overview

- [0.1 What must a company verify before it releases CSR funds to an implementing agency](#What_must_a_company_verify_before_it_releases_CSR_funds_to_an_implementing_agency)

- [1 Verifying CSR-1: what changed and what a company should check](#Verifying_CSR-1_what_changed_and_what_a_company_should_check)
- [2 Classifying spend against Schedule VII: the full list and where companies misclassify](#Classifying_spend_against_Schedule_VII_the_full_list_and_where_companies_misclassify)
- [3 The Social Stock Exchange route: Schedule VII item (xiii) in practice](#The_Social_Stock_Exchange_route_Schedule_VII_item_xiii_in_practice)
- [4 Frequently asked questions](#Frequently_asked_questions)

Once a company has confirmed it is covered under Section 135 and has a CSR budget to deploy, two checks decide whether that spend actually counts. First, does the implementing agency hold a CSR Registration Number under Form CSR-1 that remains valid under the tightened eligibility test introduced in July 2025. Second, does the specific project map to a named head in Schedule VII, including the thirteenth head MCA added in May 2026 for Social Stock Exchange instruments. Get either wrong and the spend does not count toward the 2% obligation, however well-intentioned the project. This article works through both checks from the company’s side of the transaction.

### What must a company verify before it releases CSR funds to an implementing agency

Before releasing funds, a company must confirm the implementing agency holds a live CSR Registration Number issued under Form CSR-1, that the registration remains valid under the entity’s current 12A or 10(23C) and 80G status, and that the specific project being funded maps to a named clause in Schedule VII. A registration valid at the time it was granted does not stay valid automatically if the underlying tax approvals lapse.

## Verifying CSR-1: what changed and what a company should check

Form CSR-1 is filed by the implementing agency, not the company, so a company’s exposure is verification, not filing. The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2025, effective 14 July 2025, replaced the earlier CSR-1 e-form and narrowed who qualifies to hold a valid registration. An agency now qualifies only if it fits one of these categories:

- A Section 8 company, registered public trust, or registered society exempt under clause (iv), (v), (vi), or (via) of Section 10(23C) of the Income-tax Act, 1961, and approved under Section 80G.

- A Section 8 company, registered public trust, or registered society registered under Section 12A, now cross-referenced as a Registered Non-Profit Organisation under Section 332 of the Income Tax Act, 2025, and approved under Section 80G.

- A Section 8 company, trust, or society established by the Central or State Government.

- An entity established under an Act of Parliament or a State Legislature.

- For entities in categories 1 and 2 not established by the funding company itself, a minimum three-year track record of undertaking similar activities.

The tightening that matters for a company’s due diligence: an agency can no longer rely on a 12A registration alone. Current 80G approval, which is time-bound and subject to periodic renewal independent of the CSR-1 filing date, must also be in place. Agencies holding a CSR registration number issued before 14 July 2025 are not required to re-register, so a company should first establish whether it is dealing with a legacy registration or a fresh post-July-2025 filing before deciding what to check.

**A company’s verification checklist for each implementing agency**

CheckWhere to verifyWhy it mattersLive CSR Registration NumberMCA21 CSR implementing agency databaseConfirms the entity was validly registered, pre- or post-July 2025Current Section 80G approvalIncome Tax Department records, not the agency’s own certificateA lapsed 80G breaks eligibility even where 12A remains validSection 12A or 10(23C) statusIncome Tax Department recordsEstablishes which eligibility limb the agency relies onThree-year track recordAgency’s activity history, unless company-establishedNot required if the company itself set up the entityProfessional certification on the CSR-1 filingMCA21 filing recordThe filing must carry a practising CA, CS, or CMA’s digital signatureProject-level Schedule VII mappingAgency’s disclosed activities against the proposalConfirms the specific project, not just the entity, is CSR-eligible

The single most useful habit here: pull the agency’s 80G approval directly from the Income Tax Department’s own records rather than accepting the certificate the agency supplies. A document in hand may already predate a lapse the agency has not disclosed, and 80G approval expires on its own renewal cycle regardless of when CSR-1 was filed.

## Classifying spend against Schedule VII: the full list and where companies misclassify

Schedule VII of the Companies Act, 2013 is the exhaustive list of activities a company may treat as CSR expenditure. MCA has clarified that entries should be read liberally to capture the essence of each subject, but a company’s classification still has to trace back to a specific clause, not a general sense that the activity is worthwhile.

As it stands after the May 2026 amendment, Schedule VII covers thirteen heads:

- **(i)** Eradicating hunger, poverty, and malnutrition, promoting healthcare including preventive healthcare and sanitation, contribution to the Swachh Bharat Kosh, and making drinking water available.

- **(ii)** Promoting education, including special education, employment-enhancing vocational skills, and livelihood enhancement projects.

- **(iii)** Promoting gender equality, women’s empowerment, homes and hostels for women and orphans, old age homes, and reducing inequalities faced by socially and economically backward groups.

- **(iv)** Ensuring environmental sustainability, ecological balance, conservation of natural resources, and contribution to the Clean Ganga Fund.

- **(v)** Protecting national heritage, art, and culture, including restoration of buildings of historical importance and public libraries.

- **(vi)** Measures for the benefit of armed forces veterans, war widows, and their dependants.

- **(vii)** Training to promote rural sports, nationally recognised sports, Paralympic sports, and Olympic sports.

- **(viii)** Contribution to the Prime Minister’s National Relief Fund, PM CARES Fund, or any other fund set up by the Central Government for socio-economic development and relief.

- **(ix)** Contribution to Central or State Government-funded incubators, and to public-funded universities and research organisations engaged in approved science, technology, engineering, and medical research.

- **(x)** Rural development projects.

- **(xi)** Slum area development.

- **(xii)** Disaster management, including relief, rehabilitation, and reconstruction.

- **(xiii)** Subscription to zero coupon zero principal instruments issued by a Not for Profit Organisation and listed on the Social Stock Exchange, inserted by MCA notifications G.S.R. 415(E) and G.S.R. 416(E) dated 27 May 2026.

**Where classification most often goes wrong**

A livelihood or vocational skilling project is frequently booked under item (ii), education, when it more precisely sits under the livelihood enhancement language of the same clause or overlaps with rural development under item (x). The distinction matters less for eligibility, since both clauses are legitimate, and more for consistency: the classification the company records in its CSR policy and annual report should match the classification the implementing agency’s own CSR-1 disclosure reflects. A mismatch between the two is what a CSR-2 auditor flags first, not the underlying activity itself.

A women’s skilling or micro-enterprise programme sits at the intersection of item (ii), livelihood enhancement, and item (iii), women’s empowerment. Companies should pick the clause the project’s primary objective serves and document the reasoning at approval stage, rather than leaving the classification to be reconstructed at audit.

Environmental projects involving tree plantation or water conservation fall under item (iv), but a company should confirm the activity is not simply compliance with an existing environmental clearance condition, since Rule 2(1)(d) excludes spend that discharges any other statutory obligation already in force. The Treelife guide to [Corporate Social Responsibility in India](https://treelife.in/compliance/corporate-social-responsibility-csr-in-india/) sets out the full Rule 2(1)(d) exclusion list and the accounting and reporting consequences of a misclassified spend.

Schedule VII has been amended repeatedly since 2014, most recently to add item (xiii), and no item has ever been removed. A company’s board-approved CSR policy should reference the Schedule by number rather than transcribe the text, since a transcribed list goes stale on an amendment schedule the company does not control.

## The Social Stock Exchange route: Schedule VII item (xiii) in practice

The May 2026 amendment is the newest addition to Schedule VII and the one most companies have not yet built into their CSR planning. It lets a company subscribe to zero coupon zero principal (ZCZP) instruments issued by an eligible Not for Profit Organisation listed on the Social Stock Exchange and count that subscription as CSR expenditure. Rule 4A of the Companies (Corporate Social Responsibility Policy) Rules, 2014 governs the route, and a CSR committee evaluating it should work through these conditions before approving spend:

- Expenditure through ZCZP subscription cannot exceed 10% of the company’s total CSR expenditure for that financial year, so the route supplements rather than replaces direct grants or implementing-agency partnerships.

- Companies using this route are exempt from the standard impact assessment requirement under Rule 8(3) for projects such funds finance, since execution and evaluation responsibility sits with the issuing NPO rather than the funding company.

- The issuing NPO’s project cannot run beyond three financial years from the date of issuance, giving the route a defined execution window that a traditional multi-year grant may not have.

- If the instrument’s listing is terminated with funds still unspent, the NPO must transfer the balance to a fund specified elsewhere in Schedule VII and report the compliance position to SEBI, which keeps the capital inside the statutory CSR loop even if the specific listing does not run its course.

The practical planning point for a company’s treasury team: because the instrument carries no coupon and no principal return, the full subscription amount is, in substance, committed CSR spend from the date of subscription. Companies evaluating this route for the first time should size the 10% cap into the annual CSR budget at the planning stage, alongside the company’s existing implementing-agency commitments, rather than treating it as a late addition once other allocations are already locked.

For a company weighing whether the route fits, the comparison against a traditional grant is straightforward on one dimension and less so on another. The impact assessment exemption reduces the company’s own monitoring burden, since evaluation shifts to the NPO under SEBI’s disclosure framework. But the company gives up the direct project oversight a bilateral grant agreement typically carries, since the NPO, not the company, controls execution once the instrument is subscribed.

An agency’s registration filed in 2022 or 2023 remains technically live on MCA21, but its 80G approval has lapsed in the interim without the company’s CSR team noticing, because the company checked the registration number once at onboarding and never returned to it. We recommend building 80G expiry tracking into the same calendar a company already uses for its own statutory filings, rather than treating implementing-agency verification as a one-time exercise.

The second pattern sits on the Schedule VII side. Companies frequently approve a project against a general sense that it fits Schedule VII without recording which specific clause the CSR committee relied on. When a CSR-2 auditor later asks for the classification, the company reconstructs the reasoning after the fact, which reads very differently to an auditor than a classification decided and minuted at approval stage.

On the ZCZP route specifically, the practical question companies bring to us is less about eligibility and more about how much of the annual budget to commit to an instrument that offers no financial return and shifts monitoring control to the issuing NPO. 

## Frequently asked questions

**Q: Does a company need to re-verify an implementing agency’s CSR-1 status every financial year?** 
A: The Rules do not prescribe an annual re-verification cycle for the registration number itself, but a company should confirm at each disbursement that the agency’s underlying 12A, 10(23C), and 80G approvals remain current, since a lapse in any of these breaks the eligibility the CSR-1 registration was originally granted on.

**Q: Does an implementing agency need to re-file CSR-1 if it registered before July 2025?** 
A: No. Agencies holding a CSR registration number issued before 14 July 2025 are not required to re-register under the revised form. A company asking an already-eligible legacy partner to re-file creates delay without any compliance benefit.

**Q: Can one project be mapped to more than one Schedule VII clause?** 
A: A project can genuinely touch more than one clause, such as a women’s livelihood programme sitting across items (ii) and (iii), but a company should pick the clause its primary objective serves and record that decision at approval stage rather than leaving the classification ambiguous until audit.

**Q: How does the Income Tax Act, 2025 affect how a company reads an agency’s CSR-1 filing?** 
A: Entities holding a valid 12A or 12AB registration are now recognised as a Registered Non-Profit Organisation under Section 332 of the Income Tax Act, 2025. This relabels the underlying registration rather than creating a new eligibility requirement, but a company should confirm its agency’s RNPO status is reflected correctly wherever the CSR-1 filing references Section 12A.

**Q: Is the ZCZP route under Schedule VII item (xiii) available to every Section 135 company?** 
A: Yes, any company covered under Section 135 may subscribe to eligible ZCZP instruments, subject to the 10% cap on total annual CSR expenditure. There is no separate eligibility threshold for the company beyond its existing CSR applicability.

**Q: What happens if the Social Stock Exchange listing of a ZCZP instrument a company has subscribed to is terminated?** 
A: Under Rule 4A(3)(b), if funds remain unspent with the issuing NPO when the listing terminates, the NPO must transfer the unspent balance to a fund specified elsewhere in Schedule VII and submit a compliance report to SEBI. The company’s own CSR expenditure record is not disturbed by this event, since the subscription itself already counted as spend.

**Q: Should a company still perform impact assessment on projects funded through the ZCZP route?** 
A: No. Rule 4A specifically exempts ZCZP-funded projects from the impact assessment requirement under Rule 8(3), since execution and evaluation responsibility rests with the issuing NPO rather than the funding company.

**Q: What documentation should a company retain to support its Schedule VII classification at CSR-2 audit?** 
A: The specific clause each project maps to, the CSR committee’s minuted reasoning for that classification, the implementing agency’s CSR-1 registration number and current 80G status as of the disbursement date, and the project agreement describing the funded activity in terms that trace back to the chosen clause.

**Q: Can a company change its Schedule VII classification of a project after it has started?** 
A: The Rules do not prohibit reclassification, but a company should document why the original classification changed, since an unexplained shift between the board report and CSR-2 filing for the same project is a common trigger for auditor queries.

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