CSR applicability and reporting

Check the applicability thresholds

Section 135 uses alternative thresholds in the immediately preceding financial year: net worth of at least ₹500 crore, turnover of at least ₹1,000 crore, or net profit of at least ₹5 crore. Meeting any one can bring the company within the CSR framework.

Prepare a calculation using the applicable statutory definitions. Do not assume that a management profit figure or a group-level total is the correct measure for the individual company. Retain the workings even where the conclusion is that the thresholds are not met.

Calculate the spending requirement

The general spending requirement is at least two per cent of the applicable average net profits for the three immediately preceding financial years. Companies with a shorter operating history require the corresponding assessment of their completed preceding years. Use the statutory profit basis and adjustments.

Keep the calculation separate from the applicability test. The year that brings a company into scope and the years used to calculate its spending obligation are not necessarily the same set of figures.

Establish governance and project eligibility

Assess the applicable committee and board responsibilities, including any exception to constituting a committee. Approve the policy and action plan through the proper route and identify who will monitor progress and expenditure.

Section 135(9) normally allows the Board to perform the committee’s functions where the amount required to be spent does not exceed ₹50 lakh. Also check the company’s Unspent CSR Account: rule 3, as amended in September 2022, requires a company with an amount in that account to constitute a CSR Committee and comply with section 135(2)–(6). Do not rely on the current-year spending figure alone.

ICSI consolidated CSR Rules: rule 3 and amendment history — consulted 1 October 2026.

Map proposed activities to Schedule VII and the CSR rules, including exclusions. A charitable payment or a project described as socially useful should not automatically be counted as eligible CSR expenditure. Review implementing-agency eligibility and registration where relevant.

Activities designed exclusively for employees do not qualify as CSR. A public-benefit project is not automatically excluded merely because employees receive an incidental benefit. Likewise, distinguish a project’s incidental brand recognition from sponsorship undertaken to market the company’s products or services.

Build the project file

• Approved project purpose, scope, beneficiaries and budget.
• Eligibility assessment and the Schedule VII basis.
• Implementing-agency checks and agreement where applicable.
• Milestones, payment schedule and monitoring responsibility.
• Evidence of disbursement and utilisation.
• Progress reports and completion evidence.
• Assessment of impact-assessment requirements where applicable.

Check whether independent impact assessment is required

Rule 8(3) applies where the company’s average CSR obligation is at least ₹10 crore over the three immediately preceding financial years. For such a company, assess projects with outlays of at least ₹1 crore that were completed at least one year before the impact study. The company-level and project-level conditions must both be checked; the assessment is undertaken through an independent agency.

The amended cost ceiling for booking impact-assessment expenditure as CSR is the higher of two per cent of total CSR expenditure for that financial year or ₹50 lakh. The September 2022 amendment replaced the earlier five-per-cent/lower-of formulation, which still appears in some older FAQs. Keep this calculation separate from the administrative-overhead limit below.

References: MCA impact-assessment applicability FAQs; ICSI October 2022 amendment explanation; ICSI May 2026 CSR guidance. Consulted 1 October 2026.

Distinguish administrative overheads from project costs

Separate company-level CSR administration from direct project costs. The administrative-overhead ceiling is five per cent of total CSR expenditure for the financial year. Direct expenditure on designing, implementing, monitoring or evaluating a particular project belongs to project cost, rather than automatically entering that overhead category. Record the basis for allocating each cost.

National CSR eXchange FAQs: administrative overheads, employee benefits and sponsorship — consulted 1 October 2026.

Track unspent amounts separately

Maintain a reconciliation of the obligation, eligible expenditure, any permitted adjustments and the unspent balance. Distinguish qualifying ongoing projects from other unspent amounts because the transfer and utilisation rules differ.

Do not treat a year-end explanation in the board report as a substitute for required transfers. Determine the applicable account, destination and timeline from the current provisions and preserve bank evidence of compliance.

• Qualifying ongoing projects: transfer the unspent amount to the company’s designated Unspent CSR Account within 30 days after the financial year ends.
• Other unspent amounts: transfer to a fund included in Schedule VII within six months after the financial year ends. That interval is a transfer deadline, not additional time to spend the amount on another CSR project.

Maintain an Unspent CSR Account for the relevant financial year; separate accounts are not required for each project. Preserve project-level allocations and bank reconciliations within that year’s account. These funds are not available for ordinary business use.

Section 135(6) gives three financial years from the transfer to spend the transferred amount in accordance with the CSR policy. If it remains unspent, transfer the balance to a Schedule VII fund within 30 days after completion of the third financial year. Track each transfer year separately so that a new allocation does not obscure an older balance’s deadline.

ICSI statutory text: section 135(6) and (9) — consulted 1 October 2026.

MCA National CSR eXchange: FAQs on unspent amounts and separate accounts — consulted 1 October 2026.

Reconcile disclosures and filings

Use one reconciled project schedule for the board report, website disclosures and applicable CSR reporting forms. Check the reporting period and current form instructions, including any year-specific filing arrangements.

Prepare CSR-2 alongside the financial-statement filing. The 2025 V3 annual-filing changes introduced CSR-2 as a linked form to AOC-4. Identify the applicable AOC-4 variant and reporting year before preparing the submission, and reconcile the CSR obligation, expenditure, unspent balances and project information with the approved reports.

The separate CSR-2 filing relief for FY 2023–24, extended to 15 August 2025 during the V3 migration, was a historical arrangement. Do not carry that date forward as an annual CSR deadline. Check the instructions and any relief applicable to the actual filing year, then retain the submitted forms, acknowledgement and payment/status evidence together.

ICSI July 2025: CSR-2 linked-form changes; MCA parliamentary answer, 8 December 2025: annual-filing migration and historical relief — consulted 1 October 2026.

For example, a payment to an implementing agency may need utilisation evidence before it supports the company’s conclusion about project spending. Keep the payment record and the evidence of its use distinguishable rather than treating them as identical documents.

Carry the evidence into the next year

Review continuing projects, unspent balances, permitted set-offs and outstanding reporting actions when the next year begins. A change in current profitability does not justify discarding the records of earlier obligations.

Kosha.Services can help organise the threshold workings, project register and reporting reconciliation. Bring the financial statements, policy, approvals, project agreements and utilisation records so the review covers both calculation and delivery evidence.