How much must a company spend on CSR?

CA Vijay R Singh, FCA
Chartered Accountant · ICAI M.No. 153926 · FRN 136869W

Short answerA company covered by CSR must spend at least 2% of its average net profit of the preceding three financial years on CSR activities each year. If it can’t spend it, the amount must be transferred to a specified fund or an ‘unspent CSR account’ and used within the permitted time. Underspending must be explained and is increasingly enforced.

The 2% rule

Under Section 135, a company that crosses the CSR thresholds (net worth ₹500 crore, turnover ₹1,000 crore, or net profit ₹5 crore) must spend at least 2% of its average net profit of the preceding three years on CSR each year. It also forms a CSR committee and adopts a CSR policy.

If it can't spend it

CSR is now effectively mandatory spend, not just ‘comply or explain’. Unspent amounts relating to an ongoing project must go to a dedicated Unspent CSR Account and be used within three years; other unspent amounts must be transferred to a specified government fund. Underspending without proper treatment attracts penalties. Confirm the current thresholds and treatment.

A worked example

Example: a company with an average net profit of ₹50 crore must spend ₹1 crore (2%) on CSR. If it commits ₹70 lakh to an ongoing school project but only spends ₹40 lakh this year, the unspent ₹30 lakh of that project goes to its Unspent CSR Account for completion within three years. The spend is then reported in Form CSR-2. Our team can help structure and report CSR.

Trusts & Societies

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This answer is general information for trusts and societies, not tax or legal advice. Tax rates, thresholds and forms change with each Finance Act — please confirm the current position for your own facts, or speak to us, before acting.