CSR Compliance for Companies in India: Who Must Spend and How Much

A company must comply with CSR (Corporate Social Responsibility) rules under Section 135 of the Companies Act if, in the immediately preceding financial year, it has net worth above ₹500 crore, turnover above ₹1,000 crore, or net profit above ₹5 crore — meeting any one of these three thresholds triggers the obligation to spend at least 2% of average net profit of the preceding 3 years on CSR activities.

What qualifying companies must do

1. Constitute a CSR Committee of the Board (3+ directors, including 1 independent director, where applicable)
2. Formulate and disclose a CSR Policy indicating the activities to be undertaken
3. Spend at least 2% of average net profit (of the preceding 3 financial years) on CSR activities
4. Disclose CSR spending and activities in the Board's Report
5. File Form CSR-2 with the ROC annually, detailing CSR spend and activities

What counts as a valid CSR activity

Activities listed in Schedule VII of the Companies Act — education, health, environment, poverty eradication, rural development, disaster relief, and more — carried out directly, through a registered trust/society, or via a Section 8 company.

What happens to unspent CSR money

• For an ongoing project: must be transferred to a special "Unspent CSR Account" within 30 days of the financial year-end, and spent within 3 years
• For non-ongoing/general CSR: unspent amount must be transferred to a government-specified fund (like the PM CARES Fund) within 6 months of the financial year-end

Penalty for non-compliance

Failure to transfer unspent CSR funds as required attracts a penalty on the company of twice the unspent amount or ₹1 crore (whichever is less), and on every officer in default, up to ₹2 lakh.

Does a small/startup company need to comply?

No — CSR applies only once a company crosses one of the three thresholds above. Most startups and SMEs are not covered until they reach significant scale.

Crossed a CSR threshold? Our compliance team sets up the CSR Committee, policy and annual CSR-2 filing.