## CARO Clause: Transfer of Unspent CSR Amount under Section 135(5)
### Background: Section 135(5), Companies Act 2013
Every qualifying company must spend at least 2% of the average net profits of the immediately preceding three financial years on Corporate Social Responsibility (CSR) activities listed in Schedule VII to the Companies Act.
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### Two Scenarios — What the Auditor Checks
#### Scenario A: Non-Ongoing Projects
> Has the company transferred any unspent CSR amount (for non-ongoing projects) to a Fund specified in Schedule VII within 6 months of the expiry of the financial year?
#### Scenario B: Ongoing Projects
> Has any unspent amount relating to ongoing projects been transferred to the designated Unspent CSR Special Account?
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### Key Distinction at a Glance
| Project Type | Transfer Destination | Deadline |
|---|---|---|
| Non-ongoing project | Fund specified in Schedule VII (e.g., PM CARES, Clean Ganga Fund) | Within 6 months of FY end |
| Ongoing project | Special Unspent CSR Account opened by the company | Before the end of the FY (transfer within specified timelines) |
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### Schedule VII
Schedule VII lists the specific categories of activities eligible for CSR spending, such as eradicating hunger, promoting education, healthcare, environmental sustainability, and contribution to national relief funds.
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### Auditor's Procedure
1. Compute total CSR obligation for the year (2% of average net profits).
2. Verify actual CSR spend and classify each project as ongoing or non-ongoing.
3. Identify any unspent amounts.
4. Check transfer to correct destination within the prescribed deadline.
5. Report non-compliance in CARO.