Section 135, Companies Act 2013 — the CSR mandate

In short

Section 135 of the Companies Act, 2013 is the foundation of mandatory corporate social responsibility in India — the first law of its kind globally. It requires qualifying companies to spend a portion of their profits on social good and to govern and report that spending formally.

Who it applies to

Any company (including foreign companies with an Indian branch) that in the immediately preceding financial year had net worth of ₹500 crore or more, OR turnover of ₹1,000 crore or more, OR net profit of ₹5 crore or more.

Key points

• —Spend at least 2% of the average net profit of the three preceding financial years on CSR.
• —Constitute a CSR Committee of the Board (relaxed for companies spending under ₹50 lakh).
• —Adopt and disclose a CSR policy and the projects undertaken on the company website and board report.
• —Activities must fall within Schedule VII to qualify as CSR.
• —Funds may be spent directly or through eligible implementing agencies registered via Form CSR-1.
• —Unspent amounts tied to ongoing projects move to a separate 'Unspent CSR Account'; other unspent amounts go to a Schedule VII fund within set timelines.

Deadlines & renewal

CSR spending is assessed each financial year; unspent-amount transfers have strict 30-day / 6-month windows after year-end.

What to do

Companies: confirm threshold applicability each year and document the 2% computation. NGOs: ensure CSR-1 registration so a company can route funds to you as CSR.

Worth knowing

Non-compliance can attract monetary penalties on the company and officers — but timing differences and permitted carry-forward mean a gap in a single year is not automatically a violation.