Yes, CSR funds can be used to create school infrastructure — but under Rule 7(4) of the Companies (CSR Policy) Rules, 2014, the resulting asset cannot be held by the contributing company. It must be owned by a Section 8 company, a registered public trust or society with a CSR Registration Number, the project beneficiaries, or a public authority. A school building funded by CSR therefore cannot sit inside a commercial property company. That one sentence determines how every compliant CSR-funded education project in India is structured.
What does Rule 7(4) actually say?
Rule 7(4) was inserted by the Companies (CSR Policy) Amendment Rules, 2021. It permits CSR spending on the creation or acquisition of a capital asset, and then restricts who may hold that asset. The permitted holders are: a company established under Section 8 of the Companies Act, 2013; a registered public trust or registered society with charitable objects, holding a CSR Registration Number under Rule 4(2); the beneficiaries of the CSR project, in the form of self-help groups, collectives or similar entities; or a public authority.
The list is exhaustive. The contributing company itself is deliberately excluded, and so is any ordinary for-profit company. The intent is straightforward: money a company is statutorily required to give away cannot circle back onto a commercial balance sheet as an appreciating asset.
Why does this matter for school projects specifically?
Because a school is capital-asset-heavy in exactly the way Rule 7(4) targets. Land, buildings, laboratories and sports facilities are all capital assets. A corporate donor who imagines "we will build the school with our CSR budget and the developer will own it" is describing a non-compliant structure — however good the intent.
CSR money cannot build a campus held inside a commercial PropCo. Any structure that pretends otherwise is not aggressive — it is non-compliant, and it is the first thing a CFO certifying disbursement under Rule 4(5) will refuse to sign.
So what can CSR lawfully fund at a school?
Everything the building was built to make possible. Schedule VII item (ii) covers promoting education, including special education and employment-enhancing vocational skills; item (vii) covers training to promote rural, nationally recognised, Paralympic and Olympic sports. In practice, well-designed CSR programmes at a school fund the access and capability layer rather than the bricks.
| Well suited to CSR | Not eligible, or needs a separate vehicle |
|---|---|
| Fully funded seats and scholarships for children from underserved catchments | Land or campus construction where title vests in a for-profit company |
| Teacher recruitment, certification and continuing professional development | Working capital or subsidy accruing to the commercial operator |
| Sports coaching, equipment and programmes under Schedule VII item (vii) | Activities in the normal course of the contributor's own business |
| Digital classrooms, libraries and laboratories where title vests in the Section 8 entity or beneficiaries | Spending routed through an agency without a CSR Registration Number |
| Transport and boarding support enabling access from distant catchments | Benefits confined to the contributor's own employees or their families |
How is a compliant structure designed?
The compliant answer is a split structure. Commercial real-asset capital funds the campus through a property company that leases it to the school at arm's length. CSR capital flows through a Section 8 implementing entity — with 12A and 80G approvals and a Form CSR-1 filing — into the access layer: scholarships, teacher development, sport, digital learning. Where CSR does create capital assets, such as a laboratory or a sports facility, title vests in the Section 8 entity or the beneficiaries, not in the property company.
Rule 7(4) is often described as an obstacle. It is better understood as the provision that makes education structures coherent: it tells corporate capital exactly where it belongs, and it protects the donor by making the boundary auditable.
What will a corporate CSR committee check before committing?
Five things, and they are all documentary: an implementing entity registered under Rule 4(2) with a valid CSR Registration Number; a project design in which benefit demonstrably flows to identified beneficiaries rather than to the operator; CFO certification of disbursement and utilisation under Rule 4(5); a board-approved annual action plan naming the project under Rule 5(2); and, where the contributor's CSR obligation is ₹10 crore or more and the project outlay exceeds ₹1 crore, independent impact assessment under Rule 8(3)(a). A project that builds these requirements in at inception converts a one-year donation into a multi-year programme.
Frequently asked questions
Can a company keep ownership of a school building it funded through CSR?
No. Rule 7(4) of the Companies (CSR Policy) Rules, 2014 expressly prevents a capital asset created from CSR funds from being held by the contributing company. The asset must be held by a Section 8 company, a registered public trust or society with a CSR Registration Number, the beneficiaries, or a public authority.
Can CSR pay the salaries of teachers at a private school?
CSR can fund teacher recruitment, certification and professional development where the benefit flows to the educational programme and its beneficiaries through a registered implementing entity. It cannot subsidise the ordinary payroll of a commercial operator — that would be an operating subsidy to a for-profit business rather than a CSR activity.
What is a Section 8 company and why does it keep appearing in CSR structures?
A Section 8 company is a not-for-profit company under the Companies Act, 2013, formed to promote objects such as education, with profits applied to those objects and no dividends to members. It is one of the entity types permitted to hold CSR-funded capital assets and to act as a registered implementing agency, which is why compliant education structures route CSR through one.
Is building a school an eligible CSR activity under Schedule VII?
Promoting education is eligible under Schedule VII item (ii), and school infrastructure can be created with CSR funds — provided the resulting asset is held by one of the entities permitted under Rule 7(4). Eligibility of the activity and permitted ownership of the asset are two separate tests, and a compliant project must pass both.
