# Corporate Social Responsibility (CSR) — Section 135
## 1. Applicability — Trigger Thresholds
A company (including a foreign company having a branch in India) must constitute a CSR Committee if, during the immediately preceding FY, it meets any one of:
- Net worth ≥ ₹ 500 crores, OR
- Turnover ≥ ₹ 1,000 crores, OR
- Net profit (before tax) ≥ ₹ 5 crores.
### Definitions
Net worth = PUSC + Reserves out of profits + Securities Premium – Accumulated losses, Deferred Expenditure, Misc. Expenditure not written off (as per audited B/S). Excludes revaluation reserves, write-back of depreciation and amalgamation reserves.
Net profit computed under Section 198 but excludes:
- Profit from overseas branch.
- Dividend received from an Indian company on which CSR is applicable.
## 2. Amount to be Spent on CSR
| Item | Rule |
|---|---|
| CSR spend | At least 2% of average net profits of immediately preceding 3 FYs (or of shorter period if company is younger). |
| Surplus from CSR activities | Not treated as business profit. Use in the same project, OR transfer to Unspent CSR Account / Schedule VII fund within 6 months of FY end. |
| Excess spend | If a company spends in excess of the obligation (excess ≠ surplus), it may set off the excess against CSR obligation of the next 3 FYs — BOD resolution required. |
## 3. Failure to Spend — Unspent Amount Treatment
```
CSR amount not spent in FY
│
├── Ongoing Project ── Transfer to Unspent CSR Account within 30 days of FY end
│ └── Spend within 3 FYs per CSR Policy
│ └── Else transfer to Schedule VII fund within 30 days of completion of 3rd FY
│
└── Not an Ongoing Project ── Transfer to Schedule VII fund within 6 months of FY end
```
> Ongoing Project = project (other than one-time) not exceeding 3 years excluding the FY of commencement.
## 4. CSR on Capital Assets
A capital asset created/acquired through CSR spend must be held by:
- A Section 8 company, OR
- A Registered Public Trust / Society (with charitable objects and a CSR Registration Number), OR
- The beneficiaries of the CSR project, OR
- A Public Authority.
## 5. Administrative Overhead Cap
BOD must ensure admin overheads do not exceed 5% of total CSR expense for the FY. Direct costs of designing, implementing, monitoring & evaluating CSR projects are NOT admin overheads.
## 6. Penal Provisions for Default
| Defaulter | Penalty (lower of) |
|---|---|
| Company | 2× the amount required to be transferred to Schedule VII Fund / Unspent CSR A/c OR ₹ 1 crore |
| Officer in default | 1/10th of such amount OR ₹ 2 lakhs |
## 7. CSR Committee
| Item | Rule |
|---|---|
| Composition | 3 or more directors, at least 1 independent director. |
| If independent director not required | 2 or more directors (no ID needed). |
| Private company with only 2 directors | Those 2 directors form the Committee. |
| Foreign company | 2 persons — (a) the person authorised to accept service of notice u/s 380(1), and (b) a person nominated by the foreign company. |
### Exceptions
- If CSR obligation ≤ ₹ 50 lakhs → no CSR Committee required; BOD discharges its functions.
- A company having amount in Unspent CSR A/c MUST constitute a CSR Committee.
### Duties of CSR Committee
- Formulate & recommend CSR Policy to BOD (areas per Schedule VII).
- Recommend the amount of CSR spend.
- Monitor the CSR policy.
### Annual Action Plan (recommended by Committee to BOD)
- List of projects in Schedule VII areas.
- Manner of execution (itself / through Section 8 company etc.).
- Utilisation of funds & implementation schedule.
- Monitoring & reporting mechanism.
- Details of need and impact assessment.
BOD may alter the plan anytime on the Committee's recommendation.
### Duty of BOD
After considering Committee's recommendations, BOD shall:
- Approve CSR Policy,
- Disclose the policy in the BOD Report, and
- Place the policy (with Committee composition & approved projects) on the company's website.
## 8. Activities NOT Treated as CSR
- Activities undertaken in normal course of business.
- Activities benefiting employees of the company.
- Activities undertaken outside India — except training of Indian sports personnel representing State/UT (national level) or India (international level).
- Activities done on a sponsorship basis to derive marketing benefit for products/services.
- Contribution to a political party, direct or indirect.
- Activities fulfilling other statutory obligations.
## 9. Schedule VII — Permitted CSR Areas (Indicative)
Promoting gender equality, sports, employment, health, education; Har Ghar Tiranga Campaign; eradicating hunger & poverty; contribution to universities, Swach Bharat Kosh, PM National Relief Fund, PM CARES Fund or funds set up by CG; slum area development; rural development; disaster management; benefit of armed forces veterans; etc.