CSR under section 135: who must spend, how much, unspent amounts and reporting

India is one of the few countries where corporate social responsibility spending is a legal obligation. Section 135 of the Companies Act, 2013 sets who must spend, how much, and what happens to money not spent in the year — and the rules on unspent amounts are strict. This guide covers the obligation, the calculation, the deadlines, impact assessment, reporting, and what changed in 2026.

Who must spend on CSR?

A company must comply with section 135 if, during the immediately preceding financial year, it had any one of¹:

• a net worth of ₹500 crore or more;
• a turnover of ₹1,000 crore or more; or
• a net profit of ₹5 crore or more.

It must constitute a CSR committee of the board — three or more directors, at least one of them independent (two or more where the company is not required to have an independent director) — except where its CSR obligation does not exceed ₹50 lakh, in which case the board carries out the committee's functions. A company with money in an Unspent CSR Account must have a CSR committee in any case¹⁴.

How much?

The company must spend, in each financial year, at least 2% of its average net profits made during the three immediately preceding financial years, under its CSR policy¹. Net profit here is calculated under section 198 of the Act, as adjusted by the CSR Rules.

Spending must go to activities listed in Schedule VII — among them eradicating hunger and promoting health care, education, gender equality, environmental sustainability, national heritage, measures for armed forces veterans, sports, contributions to specified funds, research, rural development, slum development and disaster management. Since May 2026, a new rule 4A of the CSR Rules lets a company count subscriptions to zero coupon zero principal instruments on a Social Stock Exchange, up to 10% of its total CSR expenditure, with no impact assessment needed for them⁵.

Administrative overheads may not exceed 5% of total CSR expenditure for the year².

What if the money is not spent?

The 2021 amendments made unspent amounts subject to fixed dates¹²:

Excess spending can be set off against the obligation of up to the three succeeding financial years, by board resolution — but not any surplus arising from CSR activities².

Penalties

Failing to transfer unspent amounts as required attracts a penalty on the company of twice the amount required to be transferred or ₹1 crore, whichever is less, and on each officer in default of one-tenth of that amount or ₹2 lakh, whichever is less¹.

Implementing agencies and impact assessment

• CSR projects implemented through an agency — a trust, society or section 8 company — require that agency to be registered with the MCA in Form CSR-1, a requirement in force since 1 April 2021².
• Companies with an average CSR obligation of ₹10 crore or more in the three immediately preceding financial years must have an impact assessment done by an independent agency for projects with outlays of ₹1 crore or more that were completed at least a year before the study. Its cost may be booked as CSR expenditure, up to 2% of total CSR expenditure or ₹50 lakh, whichever is higher³.

Reporting

CSR is reported in three places:

1. The board's report, which must include an annual report on CSR in the format of Annexure II to the CSR Rules; the company also publishes its CSR committee, policy and approved projects on its website³.
2. Form CSR-2, filed with the MCA as an addendum to the financial statements form AOC-4⁶.
3. The BRSR, for listed companies that file one. Section A asks whether CSR is applicable under section 135, with turnover and net worth; Principle 8 asks for details of social impact assessments of projects undertaken under applicable laws, and — as leadership indicators — CSR in designated aspirational districts and the beneficiaries of CSR projects⁸.

Keeping one set of CSR figures — obligation, spend by project, transfers and their dates — avoids the board's report, CSR-2 and the BRSR telling three slightly different stories.

What is changing?

• In force since May 2026: rule 4A — subscriptions on a Social Stock Exchange, up to 10% of CSR expenditure⁵.
• Proposed, not yet law: the Corporate Laws (Amendment) Bill, 2026, introduced in March 2026 and referred to a Joint Parliamentary Committee, which reported in August 2026, would raise the net profit threshold to ₹10 crore (or another sum to be prescribed) and allow classes of companies to be exempted⁷. Summaries of the Bill also describe 90 days for transfers to the Unspent CSR Account and a ₹1 crore threshold for the CSR committee⁹. Until it is passed and notified, the current rules apply.

How ESGTrack helps

ESGTrack works out whether CSR applies and the 2% to spend, tracks set-offs and unspent amounts by their dates, and prepares the Annexure II report and the Form CSR-2 details — feeding BRSR Section A and Principle 8 from the same figures. See compliance programmes and our guide to EPR for plastic packaging.