Key Takeaways

• Employee volunteer hours cannot be counted as CSR expenditure under Section 135 and the Companies (CSR Policy) Rules, 2014. Time is not spent.
• The MCA closed this loophole twice: General Circular No. 36/2014 withdrew a 2014 provision allowing it, and the 2021 amendment rules removed any ambiguity.
• Only one narrow exception exists: salaries of full-time, dedicated CSR staff, bookable as "administrative overheads" and capped at 5% of total CSR spend.
• India's CSR spend reached ₹34,908 crore in FY 2023-24 across 27,188 companies, with volunteering running alongside that spend, never included in it.
• Companies still invest heavily in volunteering because the payoff is engagement and retention, not compliance. TCS logged 9.4 million volunteer hours in FY 2025-26.
• The safe structure: fund the project through your 2% budget, then let employees volunteer on top as a value-add, not a line item.
• Misclassifying volunteer costs in Form CSR-2 is a real audit risk; clean separation of spend and engagement data is now a compliance requirement, not a nicety.

Twenty of your employees spend a Saturday setting up a water-purification unit in a village your company adopted. The unit itself was paid for out of the CSR budget. So does that Saturday count toward your 2% obligation?

No. And the reason it doesn't is the single most misunderstood rule in Indian CSR accounting.

Under Section 135 of the Companies Act, 2013, CSR is defined as expenditure money spent on approved projects, tracked and audited to the rupee. Employee time, however valuable, is not money that left the company's books, so it cannot be booked as CSR spend. The rupees you paid for the purification unit are CSR expenditure. The hours your team spent installing it are not.

This isn't a grey area anymore, though it briefly was. The Ministry of Corporate Affairs (MCA) opened this door for exactly three months in 2014, then shut it, and shut it again in 2021 to remove all doubt. What follows is the full picture: what the law actually says, why the government closed the loophole twice, the one narrow exception that does exist, and how companies like TCS and Salesforce run some of the largest volunteering programmes on earth without booking a single volunteer hour as spend.

What The Companies Act Actually Counts As CSR Spend

India did something in 2014 that no country had done before: it wrote corporate charity into company law. Under Section 135, every company crossing a defined threshold of net worth (₹500 crore), turnover (₹1,000 crore), or net profit (₹5 crore) must spend at least 2% of its average net profits from the preceding three financial years on CSR, and report that spend to the MCA every year. The mandate reaches private, public, foreign, and even Section 8 companies, a scope with no international parallel.

The critical word is spend. The law doesn't ask companies to "do good" in the abstract; it defines CSR as expenditure and hands the mechanics to the Companies (CSR Policy) Rules, 2014, as amended in 2021. CSR expenditure means money spent on projects that fall under Schedule VII: education, healthcare, poverty alleviation, environmental sustainability, rural development carried out either directly or through a registered implementing agency, tied to a specific outlay that the CSR Committee and the Board have approved.

That framing is the whole reason volunteer hours don't qualify. A project can be CSR expenditure. The people volunteering on it cannot, because no traceable, auditable rupee changed hands for their time.

The Short Answer, And The Paper Trail Behind It

Employee volunteer hours are not CSR expenditure. Employees may participate in CSR-eligible projects freely, but their time cannot be monetised or counted toward the mandatory 2% spend.

The confusion has a real origin, which is why so many CSR teams still get this wrong. In June 2014, the MCA issued General Circular No. 21/2014, and clarification (iv) stated that salaries paid to regular CSR staff and to company volunteers in proportion to time spent specifically on CSR could be factored into CSR project cost. For a brief window, companies had explicit permission to price employee time into their obligation.

It lasted three months. On 17 September 2014, General Circular No. 36/2014 noted that Rule 4(6) of the CSR Rules had been amended, and that "consequently, clarification (iv) in General Circular No. 21 of 2014 dated 18.06.2014 shall stand omitted." No fanfare, no explanation; the provision simply disappeared. As the KPMG N100 study later observed, this withdrawal left a compliance question hanging over the sector for years: companies kept letting employees volunteer, but whether anyone was still (incorrectly) booking that time as spend became impossible to see from the outside.

The Companies (CSR Policy) Amendment Rules, 2021 settled it. The current position is unambiguous: volunteer participation is welcomed as an engagement tool, but it cannot be notionally costed into CSR spend. A practical guide to Section 135 from Catch Foundation puts it as plainly as anyone: volunteer hours, employee salaries, and internal manpower costs cannot be counted as CSR expenditure, though employees may volunteer as long as the project itself is CSR-eligible. The project can be spent. The people cannot.

Why Salaries And Volunteer Time Can't Be Monetised

There's exactly one channel through which employee-related cost legitimately touches CSR accounting, and understanding its limits is what separates a clean CSR-2 filing from a risky one.

The 5% Administrative Overheads Cap

Under the amended Rules, "administrative overheads" expenses for the general management and administration of CSR functions can include the salary and training costs of employees working full-time in a company's dedicated CSR division. This is capped at 5% of total CSR expenditure for the financial year.

Read that carefully, because the cap is a ceiling, not a bucket that soaks up volunteer time from the wider workforce. It covers the people whose entire job is running CSR. It does not stretch to the marketing executive who spends a weekend teaching schoolchildren to code; that person's salary is paid by a completely separate business function, regardless of whether they volunteer, and none of it is attributable to a CSR project.

The MCA's 2021 FAQ circular is explicit that expenses directly incurred for designing, implementing, monitoring, and evaluating a specific CSR project belong in project cost, while general CSR-function overheads (employee costs, utilities, office supplies) sit in the capped 5%.

The "Benefits Only Employees" Exclusion

There's a second guardrail worth knowing. The CSR Rules explicitly exclude activities that benefit only the company's own employees and their families from qualifying as CSR. This exists to stop firms dressing up internal welfare gyms, wellness camps, and staff training as community work.

It does not block volunteering. If a CSR project is genuinely aimed at the public and employees simply choose to take part, their participation doesn't disqualify it. What the clause blocks is the reverse: designing an "initiative" around your own staff and calling it CSR. The safe test is whether the project's beneficiaries are external, and whether it would exist and qualify with or without employee volunteers present.

Why Do Companies Pour Resources Into Volunteering Anyway?

If volunteering can't move the compliance needle, why do India's largest companies invest so heavily in it? Because the return shows up somewhere the CSR ledger doesn't measure: in retention, culture, and employer brand.

The engagement data is striking. In a survey of volunteering culture reported by India CSR, 96% of employees said volunteering improved their productivity and lowered their stress, and 94% said it made them feel they were making a real difference and that this, in turn, made them more likely to recommend their employer to friends and family. That's a talent and branding dividend with no connection to the 2% mandate whatsoever.

TCS and Salesforce: Scale Without Double-Counting

The numbers some companies operate at are genuinely enormous, and they illustrate the model perfectly.

Tata Consultancy Services reported that its CSR programming generated 9.4 million global employee volunteer hours in FY 2025-26 (year ended 31 March 2026), up from 8.9 million the year before, a figure disclosed in its own annual CSR announcement. Much of that time flows into Literacy as a Service (LaaS), TCS's flagship programme launched in 2000, which has reached over 2.85 million learners through a network of 241,000+ facilitators. Crucially, LaaS is funded as a CSR programme; the volunteer hours are layered on top through its "Each One Empowers One" initiative. The hours amplify the programme's reach; they are never booked as its cost.

Salesforce runs the same play at global scale. Its SEC proxy statement (DEF 14A) discloses approximately 8.7 million employee volunteer hours logged from the company's inception through 31 January 2024, built on its 1-1-1 model of donating 1% of equity, product, and employee time. Salesforce tracks those hours publicly, celebrates them, and builds culture around them precisely because their value is reputational and internal, not a line in a statutory spend report.

How Much Of India's CSR Actually Involves Employees?

Here's what the data shows about the relationship between spend and participation.

The Spending Picture

According to the National CSR Portal, Indian companies spent ₹34,908.75 crore on CSR in FY 2023-24 across 27,188 companies, up from ₹10,065.93 crore in FY 2014-15, a 2.47x increase over the decade, as compiled by India CSR. Even as that spend has scaled, the volunteering layer running beside it has grown into something closer to a parallel engagement economy tracked separately, funded differently, and governed by an entirely different set of expectations than the statutory 2%.

There's a nuance in that growth story worth sitting with. Research from Columbia Business School: Does a Government Mandate Crowd Out Voluntary Corporate Social Responsibility? Evidence from India, by Chazen Senior Scholar Shivaram Rajgopal and ISB professor Prasanna Tantri, published in the Journal of Accounting Research, found that mandating CSR had an unintended side effect. Firms that voluntarily spent above 2% before the law largely pulled their spending back down toward the required minimum once it became a compliance exercise. As one executive quoted in the study put it, board-level conversations shifted from "what should we do" to "does it count, and does it meet the legal requirement." Turning a good instinct into a hard rule, the research suggests, doesn't always multiply generosity; sometimes it just relocates it.

The Participation Picture

On participation, KPMG's analysis of India's 100 largest listed companies by market cap (the "N100" study) offers the clearest longitudinal read available. Employee involvement in CSR project implementation has climbed steadily: around 56% of N100 companies reported employee volunteering in both 2016-17 and 2017-18, rising to 59% in the most recent year analysed. What the same research flags is the persistent grey zone: it remains largely undocumented whether companies handle the salary cost of volunteering employees correctly within their books. That's exactly the ambiguity the 2021 amendment was designed to close going forward.

What You Can Do Legitimately

There is a right way to connect volunteering to CSR spend. It just never involves pricing the hours themselves.

Skilled volunteering inside a funded project. If your company funds a CSR project a digital-literacy programme, a health camp and employees volunteer their skills within that already-funded work, the project cost remains CSR expenditure exactly as approved. The volunteering adds delivery capacity and depth without changing what gets booked. This is the model TCS and most large Indian programmes actually run on: fund the project through the CSR budget, then layer employee time on top as a value-add.

Routing spend through a registered implementing agency. Companies can channel CSR funds through an NGO, Section 8 company, or registered trust that has filed Form CSR-1 with the MCA. When that agency runs volunteer-driven programmes, the company's payment to the agency is the CSR expenditure; the agency's own volunteer mobilisation is simply how it delivers outcomes. This lets you support grassroots, volunteer-heavy delivery without any risk of double-counting employee time as spend.

Common Mistakes That Trigger Audit Problems

Two errors show up again and again in CSR reporting, and both have gotten riskier as Form CSR-2 filings and mandatory impact assessments have raised the bar for defensible spend.

• Bundling volunteer costs into project cost. Travel, materials, and event logistics for a volunteering day get lumped directly into project cost without separating what's genuinely attributable to the CSR project from what's an internal engagement expense. Auditors increasingly expect this line to be clean, attribute only true project costs to CSR, and keep engagement-day logistics in a separate bucket.
  
• Structuring the activity around your own employees. An internal wellness drive relabelled as a "CSR health initiative" risks falling foul of the exclusion on activities benefiting only the workforce. Always ensure the beneficiary population is external and the project would qualify with or without staff participation.

How Relific Keeps Spend And Engagement Data Cleanly Separated

Keeping "money spent" and "hours volunteered" cleanly apart is the exact operational problem Relific was built around, and it's the problem the company solves day to day for organisations running CSR at serious scale, including Tata Trusts, the India Development Foundation, Sehgal Foundation, and Rise Against Hunger. As CSR reporting has moved from spreadsheets to statutory scrutiny Form CSR-2, mandatory third-party impact assessment, and SEBI's BRSR for listed companies the cost of blurring those two numbers has risen sharply, and the teams feeling it most are the ones with the largest volunteering programmes.

The reason the two data sets stay separate on Relific is that the platform was designed around the distinction this article is about. Spend and engagement live in different places by design:

• Voluntee-R captures the engagement side volunteer hours, participation, causes supported as its own dataset, so employee time is measured and celebrated without ever touching the spend ledger.
• ProGran tracks CSR grants and project spend, tagged to the relevant Schedule VII category, so every rupee is audit-ready for CSR-2.
• Surve-R handles the third-party impact and outcome measurement that larger projects now require by law.

Because engagement and expenditure are structurally separate, a CSR head can report both numbers accurately: the volunteering story and the statutory spend, without the two ever contaminating each other, which is precisely the mistake the MCA's rules are written to prevent.

That distinction runs through Relific's published work, too. Its guide on how to track volunteer hours for CSR reporting walks through the mechanics of keeping engagement data clean; its analysis of how India's top CSR spenders structure their programmes shows what best-in-class separation looks like at scale; and for teams building a programme from the ground up, the CSR software guide is a practical starting point.

Is India's Approach Unusual? Yes Uniquely So

India remains the only country in the world with a legally mandated CSR spending requirement written into company law. In the US, UK, and most of Europe, corporate volunteering and community giving are voluntary, reputation-driven activities, and companies are free to fold employee time, in-kind contributions, and cash donations together into whatever internal "social impact" figure they choose to publish. That flexibility simply doesn't exist here, because Section 135 isn't a voluntary reporting framework; it's a statutory spending floor with real governance consequences for shortfalls.

That structural difference is also why the boundary around volunteering has to be drawn so tightly. Without a hard line, a mandate designed to guarantee a minimum flow of real project funding could be quietly diluted by companies substituting cheaper, harder-to-verify "contributions" like staff time for actual spend. The rule against counting volunteer hours isn't bureaucratic fussiness. It's what keeps the 2% floor meaningful.

Best Practice: Run ISR Alongside CSR, Not Inside It

The smartest Indian companies treat employee volunteering as a distinct, parallel track often called Individual Social Responsibility (ISR) rather than forcing it into the CSR ledger. In practice, that means three things:

• Fund it separately. Give volunteering its own budget lines: paid volunteering leave, travel, recognition drawn from HR or "soft" CSR budgets that sit outside the statutory 2% pool.
• Track it separately. Run it on its own dashboard: hours logged, employees engaged, causes supported. These are engagement metrics, not spend.
• Report it separately. Tell the volunteering story in your ESG disclosures and annual-report narrative, distinct from your CSR-2 filing.

This keeps the compliance spend clean while giving your volunteering programme real institutional backing and a story worth telling stakeholders. Purpose-built reporting infrastructure earns its keep exactly here: maintaining both data sets in parallel, so the qualitative volunteering narrative and the audit-ready quantitative spend never blur into each other.

The Bottom Line

The rule itself is simple, even if the conversation around it isn't: employee volunteering is a powerful complement to CSR in India, but it will never be a substitute for CSR spend. Section 135 was written to guarantee a minimum, auditable flow of capital toward Schedule VII causes, and the MCA has twice moved to make sure volunteer hours can't quietly dilute that guarantee.

The companies getting the most out of both worlds TCS, Salesforce, HDFC Bank, Reliance aren't trying to blur the line. They fund real projects at real scale, then let their people show up for the work on top of that: tracked, celebrated, and reported entirely on their own terms. Getting that separation right in your own reporting spend audit-ready in one place, engagement measured in another is a systems problem before it's a compliance one. It's the problem Relific's CSR and impact intelligence platform is built to solve, and the one it already handles for organisations like Tata Trusts and Rise Against Hunger. If that's the line your team is trying to hold, book a demo and see how the two data sets stay separate by design.