Home » What Doesn’t Count as CSR: Common Mistakes and Misconceptions

What Doesn’t Count as CSR: Common Mistakes and Misconceptions

Chrysalis Services

We know that Corporate Social Responsibility (CSR) is no longer a “nice-to-have”—it’s a legal and strategic priority for companies operating in India. Yet, despite the growing maturity of the CSR ecosystem, we see one issue crop up repeatedly: confusion over what actually counts as CSR.

At Chrysalis Services, we often get asked:

  • What activities are not allowed under CSR?
  • Can employee salaries or marketing costs be claimed under CSR?
  • What CSR mistakes should companies avoid?

This blog unpacks these questions and more—so you don’t just stay compliant, but create meaningful, measurable impact.

CSR Is Not a Branding Exercise (Even if It Helps Your Brand)

One of the biggest misconceptions we see is companies assuming that CSR is simply an extension of brand marketing.

Here’s the truth: While good CSR can enhance your brand reputation, activities done primarily for marketing or PR do not qualify as CSR under India’s Companies Act, 2013.

  • Example that doesn’t count: Sponsoring a cricket tournament where your logo is prominently featured, but no genuine social development work is done.
  • What works instead: Supporting grassroots sports training in underserved areas, without a brand-heavy agenda.

Philanthropy ≠ CSR

CSR is not charity. It’s not a one-time donation. It’s not about writing cheques to any random NGO. CSR is strategic, targeted, and outcome-oriented.

  • What doesn’t count: Donating to a trust or temple without a clear social development purpose.
  • What works: Funding a structured education program with measurable learning outcomes in a backward district.

What the Law Says: Activities Not Permitted as CSR

Section 135 of the Companies Act, along with Schedule VII and subsequent amendments, lays out specific exclusions. Here’s what is explicitly disallowed as CSR in India:

  1. Activities undertaken in the normal course of business

For example, if you’re a pharma company and you donate your own medicines as CSR, that doesn’t count—unless it’s part of a special COVID-related exemption (as was allowed temporarily).

  1. Activities benefiting only employees or their families

CSR must serve the broader community. An in-house scholarship program for employees’ kids? Not eligible.

  1. One-off events

Annual day celebrations, marathons, or employee picnics—even with a “social” spin—don’t make the cut unless part of a larger social initiative.

  1. Political contributions

Direct or indirect donations to political parties, or funding political campaigns, is a clear no-go.

  1. Expenses for fulfilling legal obligations

Anything that is part of your regular compliance—like waste management if you’re legally required to do it—cannot be double-counted as CSR.

Common Grey Areas That Trip Up Companies

  • Counting administrative overheads as CSR

You’re allowed to spend up to 5% of your total CSR spend on admin-related costs—but many companies wrongly try to include salaries of CSR staff, travel expenses, or consulting fees in their project costs. The Ministry of Corporate Affairs (MCA) has made it clear: only certain direct costs count.

  • Spending the full CSR budget but without real impact

Some companies disperse funds just to meet the 2% requirement, without asking: What changed? Who benefited? Remember, ticking the box ≠ good CSR. Boards and auditors are increasingly scrutinising this.

The Risks of Getting It Wrong

  • Legal risk: You may be penalised for non-compliance or forced to restate your CSR spend.
  • Reputational risk: Media and stakeholders today are savvy. “Window-dressing” CSR can backfire.
  • Missed opportunity: Bad CSR is wasted money. Good CSR builds community trust, stakeholder goodwill, and long-term value.

How to Do It Right (And How Chrysalis Can Help)

  • Choose the right implementing partners—those with a proven track record and community presence.
  • Define clear goals and metrics—What are you solving for? Who is your target group?
  • Go beyond cheque writing—Co-create, collaborate, and invest in long-term change.
  • Align CSR with your business strengths—Without turning it into a business activity.

At Chrysalis Services, we help companies plan, execute, and evaluate high-impact CSR strategies from end to end. Whether you’re just starting out or looking to refresh your approach, we’ll guide you through what counts, what doesn’t, and what actually drives transformation.

Final Thoughts: CSR Is an Investment, Not an Obligation

Too often, we see CSR treated like a compliance burden—something to tick off before financial year-end. But the truth is, CSR is one of the most powerful tools at a company’s disposal to build community trust, enhance long-term sustainability, and show leadership in nation-building.

But only if it’s done right.

Ready to take the guesswork out of CSR?

Get in touch with us today to explore how your company can design a compliant, effective, and inspiring CSR strategy.
Let Chrysalis Services be your trusted partner in driving real impact—not just reporting it.