Applicability of CSR Provisions and Constitution of CSR Committee
# Applicability of CSR (Section 135)
## Which Companies Must Comply?
Every company (including foreign companies operating in India) must comply with CSR provisions if, during the immediately preceding financial year, it satisfies any one of the following thresholds:
Criterion
Threshold
Net Worth
Rs. 500 crore or more
Turnover
Rs. 1,000 crore or more
Net Profit
Rs. 5 crore or more
> Note: Only one of the three criteria needs to be satisfied for applicability.
## Constitution of CSR Committee
A qualifying company must constitute a CSR Committee of the Board consisting of a minimum of 3 directors, out of which at least 1 shall be an Independent Director.
### Special Cases for Composition
If the company is not required to appoint an Independent Director: The committee may be constituted without an ID.
Private Company with only 2 directors: The CSR Committee may consist of only 2 directors.
Foreign Company: The CSR Committee shall comprise of at least 2 persons, of which:
One person shall be nominated by the foreign company.
The other person shall be the person resident in India authorised under Section 380(1)(d).
## When is CSR Committee NOT Required?
If the amount required to be spent by a company on CSR does not exceed Rs. 50 lakh, the requirement of constituting a CSR Committee is not applicable, and the functions of the CSR Committee shall be discharged by the Board itself.
## Disclosure in Board's Report
The Board's report must disclose:
The composition of the CSR Committee.
The annual report on CSR activities.
Worked example
### Example 1
Example 1: ABC Ltd. had Net Worth of Rs. 600 crore, Turnover of Rs. 800 crore, and Net Profit of Rs. 4 crore in FY 2024-25. Is CSR applicable for FY 2025-26?
Answer: Yes. Even though only Net Worth (Rs. 600 crore >= Rs. 500 crore) is satisfied, satisfaction of any ONE criterion makes CSR applicable.
### Example 2
Example 2: XYZ Pvt Ltd has only 2 directors on its Board and meets CSR thresholds. How should the CSR Committee be constituted?
Answer: A private company with only 2 directors may constitute the CSR Committee with only those 2 directors (no requirement of 3 directors or an ID in this case).
### Example 3
Example 3: PQR Ltd's CSR obligation works out to Rs. 40 lakh. Does it need to form a CSR Committee?
Answer: No. Since the CSR spend does not exceed Rs. 50 lakh, no CSR Committee is needed; the Board itself shall discharge the functions.
⚠️ Common exam mistakes
Believing that ALL three criteria (Net Worth + Turnover + Net Profit) must be satisfied. Only ONE is needed.
Using the current year's figures to test applicability. The criteria are tested for the IMMEDIATELY PRECEDING financial year.
Forgetting that CSR applies to FOREIGN companies operating in India as well.
Constituting CSR Committee even when CSR spend does not exceed Rs. 50 lakh - Board can directly discharge functions.
Overlooking that the proviso allows companies without ID requirement to have a committee without an ID.
Bare-Act text Section 135(1) and 135(9) · Companies Act, 2013 · click to expand
Section 135(1): Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.
Proviso: Where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors.
Section 135(9): Where the amount to be spent by a company under sub-section (5) does not exceed fifty lakh rupees, the requirement under sub-section (1) for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee provided under this section shall, in such cases, be discharged by the Board of Directors of such company.