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Companies Act, 2013 · Chapter IX · Accounts of companies
Section 135 of the Companies Act, 2013 Corporate Social Responsibility
In force Change proposed — not yet law Explainer reviewed 23 October 2026
Who it applies to
- Companies meeting any one of the three thresholds in the immediately preceding financial year
- Their Boards and CSR committees
What the section says
- CSR applies if, in the immediately preceding financial year, the company had net worth of ₹500 crore or more, OR turnover of ₹1,000 crore or more, OR net profit of ₹5 crore or more (s.135(1)).
- Such a company forms a CSR Committee of three or more directors, at least one independent. If it need not have independent directors, two or more directors are enough (s.135(1)). If the CSR obligation does not exceed ₹50 lakh, no committee is needed and the Board performs its functions (s.135(9)).
- The committee recommends a CSR policy (activities from Schedule VII) and the amount to spend, and monitors it. The Board approves the policy, discloses it in the Board's report and on the website, if any (s.135(3)-(4)).
- The Board must ensure spending of at least 2% of average net profits of the three immediately preceding financial years (or fewer years for a newer company), preferring the local area. Net profit is computed under section 198 (s.135(5)).
- Unspent amount not relating to an ongoing project must be transferred to a Schedule VII fund within six months of the end of the financial year. Unspent amount for an ongoing project goes to an Unspent CSR Account within 30 days of year end, to be spent within three financial years, failing which it goes to a Schedule VII fund (s.135(5)-(6)). Excess spending can be set off against the next years as prescribed.
- The pending Corporate Laws (Amendment) Bill, 2026 proposes (clause 43) to raise the ₹5 crore net-profit trigger to ₹10 crore, to extend the Unspent CSR Account transfer period from 30 to 90 days, and to raise the no-committee limit from ₹50 lakh to ₹1 crore. It is not law; the current thresholds apply.
Penalty for breach
| Who | Consequence |
|---|---|
| The company: default under s.135(5) or (6) | Penalty of twice the amount required to be transferred, or ₹1 crore, whichever is less |
| Every officer in default | Penalty of one-tenth of the amount required to be transferred, or ₹2 lakh, whichever is less |
Section 135(7), as substituted by the Companies (Amendment) Act, 2020.
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Common questions
When does CSR become applicable to a company?
When in the immediately preceding financial year its net worth is ₹500 crore or more, or turnover ₹1,000 crore or more, or net profit ₹5 crore or more. Any one test is enough.
Is a CSR committee always required?
No. If the amount to be spent does not exceed ₹50 lakh, the Board itself performs the committee's functions (section 135(9)).
What happens to unspent CSR money?
If it is for an ongoing project, it goes to an Unspent CSR Account within 30 days of year end and must be spent within three years. Otherwise it must go to a Schedule VII fund (such as the PM's National Relief Fund) within six months of year end.
Type a section number (185, 10A) or a plain topic
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Talk to us →Section number, heading and status: Companies Act, 2013 as consolidated on India Code (amendments to about 2020–21). Sources for this page: Companies Act, 2013: India Code consolidated text. Reviewed 23 October 2026. General information, not legal advice; confirm on the official sources before relying on a provision.