Chartered Accountant · ICAI M.No. 153926 · FRN 136869W · Reviewed on 7 October 2026
Who is caught, and how it is tested
Section 135 is tested every year on the immediately preceding year’s numbers — cross any one of the three thresholds and CSR applies for the current year. A CSR committee of the board is needed only where the obligation exceeds ₹50 lakh; below that, the board itself discharges the committee’s role (section 135(9)). The spend target is 2% of the section 198 average net profit of the preceding three years — a computation with its own add-backs and exclusions, not simply the P&L bottom line.
What qualifies
Spending must land within Schedule VII heads (education, health, environment, rural development and so on), through the company or an implementing agency with CSR-1 registration. Administrative overheads are capped at 5% of total CSR expenditure. Spend more than 2% in a year and the excess can be set off against the next three years’ obligations (Rule 7(3)). Contributions to the promoter’s own foundation work only if that trust/section-8 company is CSR-1 registered and genuinely delivers Schedule VII programmes.
Unspent money: the clocks and the penalty
Unspent amounts tied to an ongoing project go into a dedicated Unspent CSR Account within 30 days of year-end, to be used within three financial years. Unspent amounts with no ongoing project go to a Schedule VII fund within six months. Default invites section 135(7) penalties: on the company, the lower of twice the unspent amount or ₹1 crore; on each officer, the lower of one-tenth of the unspent amount or ₹2 lakh — plus the annual CSR-2 filing exposes the numbers to MCA every year. Our ROC & MCA compliance practice builds the CSR calendar into the annual filing cycle.