Section 135 of the Companies Act, 2013 established the statutory framework governing Corporate Social Responsibility (CSR) in India, transforming CSR from a voluntary goodwill exercise into a regulated compliance regime. What was once viewed primarily as a spending obligation has now evolved into a governance-driven framework requiring structured oversight, timely execution, and transparent disclosures. Over the years, regulatory scrutiny has revealed that CSR non-compliance is rarely the result of a company choosing not to spend. More often, it arises from missed disclosures, delays in transferring unspent amounts, gaps in Board oversight, and simple reporting oversights.
Key Requirements Under Section 135
| Sub Section Compliance Mandate | |
| 135 (1)
Constitution of CSR Committee |
Every company having net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more or a net profit of Rs. 5 crore or more during the immediately preceding FY shall constitute a CSR Committee of the Board consisting of 3 or more Directors, out of which at least 1 director shall be an independent director.
Provided where a company is not required to appoint an independent director under section 149(4), it shall have in its CSR Committee 2 or more Directors. |
| 135 (2)
Disclosure |
Board’s report shall disclose the composition of the CSR Committee. |
| 135 (3)
TOR of CSR Committee |
The CSR Committee shall:
a. formulate and recommend to Board, a CSR Policy; b. recommend the amount of expenditure to be incurred on the CSR activities; and c. monitor the CSR Policy of the company. U/S 135 (9): Where the amount to be spent by a company does not exceed Rs. 50 lakh, the requirement for constitution of the CSR Committee shall not be applicable. |
| 135 (4)
CSR Policy |
The Board of every company referred to in sub-section (1) shall,
a. after considering recommendations by the CSR Committee, approve the CSR Policy and disclose contents of such Policy in its report and also place it on the company’s website, if any, and b. ensure that the activities as are included in CSR Policy of the company are undertaken by the company. |
| 135 (5)
CSR Spent |
Board of every company referred to in sec 135(1), shall ensure that the company spends, in every FY, at least 2% of the average net profits of the company made during the 3 immediately preceding FYs in pursuance of its CSR Policy.
The company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for CSR activities.
If company fails to spend such amount, the Board shall, in its report specify the reasons for not spending the amount and, unless unspent amount relates to any ongoing project, transfer such unspent amount to a Fund specified in Schedule VII, within a period of 6 months of the expiry of the FY. If the company spends an amount in excess of the requirements, such company may set off such excess amount against the requirement to spend. |
| 135 (6)
Unspent Amount |
Any unspent amount pursuant to any ongoing project shall be transferred to a special account (Unspent CSR Account) in any scheduled bank within 30 days from end of fy.
Such amount shall be spent by the company within a period of 3 FYs from the date of such transfer as per its obligation towards the CSR Policy, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of 30 days from the date of completion of the 3rd FY. |
| 135 (7)
Penalty |
Penalty for non-compliance u/s 5 or 6:
On Company: Twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent CSR Account or Rs. 1 crore, whichever is less; & On every officer of the company who is in default: 1/10th of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent CSR Account or Rs. 2 lakh, whichever is less. |
Companies (Corporate Social Responsibility Policy) Rules, 2014
| Rule | Compliance Mandate |
| 2(d) | CSR shall not include the following, namely:
i. activities undertaken in pursuance of normal course of business of the company; ii. any activity undertaken by the company outside India except for training of Indian sports personnel representing any State or Union territory at national level or India at international level; iii. contribution of any amount directly or indirectly to any political party under section 182 of the Act; iv. activities benefitting employees of the company; v. activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services; vi. activities carried out for fulfilment of any other statutory obligations under any law in force in India; |
| 7(1) | The board shall ensure that the administrative overheads shall not exceed five percent of
total CSR expenditure of the company for the financial year. |
| 7(2) | Any surplus arising out of the CSR activities shall not form part of the business profit of a company and shall be ploughed back into the same project or shall be transferred to the Unspent CSR Account and spent in pursuance of CSR policy and annual action plan of the company or transfer to a Fund specified in Schedule VII, within a period of 6 months of the
expiry of the FY. |
| 7(3) | Where a company spends an amount in excess of requirement, such excess amount may be set off against the requirement to spend up to immediate succeeding 3 FYs provided
that the excess amount available for set off shall not include the surplus arising out of the CSR activities and the Board of the company shall pass a resolution to that effect. |
| 7(4) | The CSR amount may be spent by a company for creation or acquisition of a capital asset, which shall be held by –
a. a company established under section 8 of the Act, or a Registered Public Trust or Registered Society, having charitable objects and CSR Registration Number or b. beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities; or c. a public authority: |
ADJUDICATION ORDERS (ROC/RD)
Recent adjudication orders indicate that regulators are increasingly focusing on compliance with CSR spending and timely transfer of unspent amounts, along with proper disclosures; failures in these areas — including non-transfer of unspent CSR funds, inadequate reporting, or incomplete project-wise disclosures
— are being treated as significant non-compliances and have resulted in substantial penalties on companies and officers in default.
| Company | Date Orde | of
r |
Authority | Provision Violated | Nature of Non-Compliance |
| M/s Bigtec Private Limited | March 26,
2025 |
ROC
(Bangalore) |
Section 135(5) | The Company failed to spent the CSR Obligation/ transfer for the financial year 2021 – 22. It was a suo moto application. | |
| M/s Xiaomi Technology India Private
Limited |
Sept 2024 | 13, | ROC
(Bangalore) |
Section 135(5) | The Company failed to transfer the unspent amount as specified in Schedule VII of the Act within six months from the
end of the financial year. |
| M/s SIVARAJ SPINNING MILLS PRIVATE
LIMITED |
August 30,
2024 |
ROC
(Coimbatore) |
Section 135(4)(a) r/w Section
135(3)(o) and |
The Company failed to disclose the CSR spending details in tabular form as given in Companies (CSR) Rules, 2014. | |
| M/s Workforce Logiq India Private Limited | May 24,
2024 |
ROC
(Karnataka) & Adjudication Officer |
Section135(5) and 135(6) | The Company failed to transfer the unspent amount as specified in Schedule VII of the Act within six months of the expiry of the financial year. | |
| M/s Freudenberg Performance Materials India
Private Limited |
August 21,
2024 |
ROC (Tamil Nadu, A&N, Chennai) | Section135(5) and 135(6) | Failure to transfer the unspent amount to an eligible government fund within 6 months & also fails to explain the reason in the board report. | |
| M/s Kony India Private Limited | Dec 13,
2023 |
RD
(Hyderabad) |
Section 135(6) | Failure to transfer unspent CSR Amount into a separate Unspent CSR Account in a bank within a period of thirty days from
the end of a Financial year. |
|
| M/s Saddles International Automotive & Aviation Interiors Private
Limited |
Jan 08,
2025 |
RD
(Hyderabad) |
Section135(5) and 135(6) | – Failure to adopt the CSR Policy for 3
financial years. – Failure to spend the required CSR obligation on specific CSR activities. – Non reporting or failure to disclose the adequate reasons in the Board Report. |
|
Insight: CSR compliance is no longer about spending – it’s about governance, transparency, and accountability
CSR compliance is no longer about “how much you spent” — it’s about how well you governed, disclosed, and documented it. A proactive CSR compliance audit not only ensures alignment with the law but also strengthens corporate reputation, and helps avoid costly penalties. CSR compliance today is no longer measured by how much a company spends, but by how responsibly and transparently it governs, discloses,
and documents its CSR actions. Effective CSR compliance requires identifying eligible social causes, ensuring proper oversight through a functioning CSR Committee, maintaining transparency through clear policy disclosures, and accurately reporting CSR activities in statutory filings.
CS Suresh Pandey
Practising Company Secretary
SPG & Associates 9968300649
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