CSR under section 135: who must spend, how much, and what to do with unspent money

Last updated 25 Oct 2026 · India

Short answer. Section 135 of the Companies Act applies if, in the immediately preceding financial year, the company had 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 spend at least 2% of its average net profit of the three preceding years on CSR. If the amount is not spent and is not for an ongoing project, it goes to a Schedule VII fund within 6 months of the year end. If it is for an ongoing project, it goes to an Unspent CSR Account within 30 days of the year end and must be spent within the next three years. If the obligation is ₹50 lakh or less, a CSR committee is not needed; the board does its work.

Step by step

Test the three thresholds on last year's audited figures.
Compute average net profit (as defined in section 198) for the three preceding years and take 2%.
Board (or CSR committee) approves the CSR policy and annual action plan.
Spend through eligible routes and keep implementation records; report in the board report and the CSR form on MCA.
At year end, move any unspent amount within 30 days (ongoing projects) or 6 months (others).

Common mistakes

Using current-year figures for applicability instead of the preceding year.
Missing the 30-day transfer to the Unspent CSR Account.
Counting activities for employees only as CSR; they generally do not qualify.
Not tracking excess spend, which can be set off in later years within the rules.

Failure to transfer unspent amounts attracts a penalty under section 135(7): twice the amount to be transferred or ₹1 crore, whichever is less, for the company.

Frequently asked questions

When does CSR become mandatory?

When, in the immediately preceding financial year, net worth is ₹500 crore or more, turnover ₹1,000 crore or more, or net profit ₹5 crore or more.

How much must be spent on CSR?

At least 2% of the average net profits of the three immediately preceding financial years.

What happens to unspent CSR money?

Ongoing projects: transfer to an Unspent CSR Account within 30 days of year end and spend within three years. Otherwise: transfer to a Schedule VII fund within six months of year end.

Official sources

Not tax or legal advice. This is a free explainer of public rules; deadlines and rules can change by notification, so confirm on the official portal or with your CA before you file. Last checked 25 Oct 2026.

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