Section 135 of the Companies Act 2013 turns CSR from a choice into an obligation for larger companies. Most of the work is not the year-end report. It is keeping clean records all year, so the report almost writes itself. Here is what to track, and when.
Who it applies to
Section 135 applies if, in the preceding financial year, your company had any of these:
- 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.
If it applies, the company spends at least 2% of its average net profit of the three preceding financial years on activities listed in Schedule VII. Net profit is calculated under section 198, so ask finance for that figure, not the one in the annual report headline.
What counts as CSR spending
- Schedule VII activities, such as health, education and skills, environment, rural development and disaster relief. Record the Schedule VII item for every project.
- Projects you run yourselves, or through an implementing agency. An agency needs a CSR-1 registration number from the Ministry of Corporate Affairs. Most companies also check the NGO's PAN and its 12A/12AB and 80G registrations.
- Administrative overheads up to 5% of total CSR spending, and impact assessment costs within their own limit.
Employee volunteering is not CSR expenditure under section 135. Volunteering still matters for engagement and for BRSR, but report the hours separately from the 2%.
Money left unspent
- Ongoing projects (projects that run over more than one financial year): move the unspent amount to an Unspent CSR Account within 30 days of the year end. Spend it within three financial years. Anything left after that goes to a Schedule VII fund.
- Everything else: transfer the unspent amount to a Schedule VII fund, such as the PM CARES Fund, within six months of the year end.
- Spent more than 2%? The excess may be set off against the obligation of the next three years, with a board resolution.
What gets reported
- The Annual Report on CSR (Annexure II) in the board's report.
- Form CSR-2, with project-level data, filed with the MCA.
- For the top 1,000 listed companies, SEBI's BRSR: Principle 8 asks for the beneficiaries of each CSR project and the share from vulnerable and marginalised groups, and for CSR work in aspirational districts.
A checklist for the year
- Agree the obligation with finance at the start of the year, and set the CSR budget by project.
- For each project, record the Schedule VII item, whether it is ongoing, the state and district, whether it is in your local area or an aspirational district, and the implementing agency.
- Before paying an NGO, check its CSR-1 and 12A/12AB. Keep a copy of each certificate and watch the expiry dates.
- Record every payment with the receipt, and mark which amounts are overheads or impact assessment.
- Ask NGOs for the number of people helped and the share from vulnerable groups as projects finish, not in March.
- In the last quarter, check what will be left unspent and plan the transfers before the deadlines.
Doing it in CorpHands
The CSR compliance page works out the obligation from the profits you enter, tracks spending by type against the 5% overhead and impact assessment limits, and shows unspent amounts with their deadlines and the Unspent CSR Account for each year. NGO partners carry their CSR-1, PAN, 12A/12AB and 80G details, and payments stay blocked while a required registration is missing or expired. At year end, print the Annual Report on CSR and download the CSR-2 and BRSR Principle 8 data. See how it works.
This article gives general information on the Companies Act 2013 and the CSR Rules as amended to 2026. It is not legal advice. Confirm your figures and filings with your auditor and company secretary.