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Guide

How CSR works in India, step by step

Every company covered by the CSR law goes through the same cycle each year, from checking last year’s figures in April to filing Form CSR-2 after its accounts. Here is each step, who does it and the dates that matter.

SocioStory Knowledge desk

Reviewed 11 min read

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At a glance11 min read

  • Coverage is decided on last year’s figures; the minimum spend is 2% of the average net profit of the last three years.
  • The CSR committee recommends the policy and an annual action plan; the board approves them and can alter the plan mid-year with reasonable justification.
  • Money paid to an implementing agency counts as spent only when the agency uses it, so release tranches in time to be used before 31 March.
  • Unspent money for ongoing projects must reach the Unspent CSR Account by 30 April. Other unspent money must go to a Schedule VII fund by 30 September.
  • The annual report on CSR goes in the board’s report, the policy and projects go on the website, and Form CSR-2 is filed after the financial statements.
On this page
  1. The CSR year in nine steps
  2. Steps 1 and 2: check coverage and work out the amount
  3. Step 3: the CSR policy and the annual action plan
  4. Steps 4 and 5: choose partners and sign agreements
  5. Step 6: spend and monitor through the year
  6. Step 7: move unspent money after 31 March
  7. Steps 8 and 9: report, and assess impact where required
  8. The CSR calendar
  9. What the cycle means for NGOs
  10. Questions people ask
  11. Sources

Corporate social responsibility (CSR) in India runs on a yearly cycle tied to the company’s financial year, usually April to March. After each year closes, a company checks whether Section 135 of the Companies Act, 2013 covers it, works out how much it must spend, approves a plan, funds projects through the year, deals with any money left unspent and reports what it did.

This guide walks through the cycle from the company’s side, with a calendar of deadlines, for CSR teams, company secretaries and the NGOs they fund. New to CSR? Start with what CSR is.

The CSR year in nine steps

  1. Check coverage on last year’s figures.
  2. Work out the obligation: 2% of the average net profit of the last three years.
  3. Approve the policy and the annual action plan: the CSR committee recommends, the board approves.
  4. Choose how to implement, and with whom.
  5. Sign agreements and plan tranches.
  6. Spend and monitor through the year.
  7. Move unspent money after 31 March, by 30 April or 30 September.
  8. Report in the board’s report, on the website and in Form CSR-2.
  9. Assess impact, where the rules require it.

Steps 1 and 2: check coverage and work out the amount

Coverage is decided on the immediately preceding financial year. A company must spend on CSR in 2026-27 if, in 2025-26, it had a net worth of ₹500 crore or more, a turnover of ₹1,000 crore or more, or a net profit of ₹5 crore or more. Any one test is enough: see which companies must spend on CSR.

The amount is at least 2% of the average net profit of the three immediately preceding financial years (or the years completed, if fewer), calculated under Section 198 of the Act, before tax. Surplus from earlier CSR projects is added, and any excess the board has resolved to set off is subtracted. See how much a company must spend.

Step 3: the CSR policy and the annual action plan

The Ministry of Corporate Affairs (MCA), which administers the law, calls CSR “a Board-driven process” and says the government has no direct role in approving projects. The CSR committee recommends the CSR policy (the company’s standing statement of its approach) and the amount to spend, and monitors the policy (Section 135(3)). It also recommends an annual action plan under Rule 5(2) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 (the CSR Rules). The board approves both, and discloses the policy in its report and on the company’s website.

The law sets no date for the plan, but late-starting projects are the likeliest to leave money unspent at 31 March.

A company whose obligation is ₹50 lakh or less doesn’t need a committee, and the board does its work (Section 135(9)), unless money sits in its Unspent CSR Account, explained in step 7 (Rule 3(1), since 20 September 2022). See the CSR committee and the CSR policy and annual action plan.

Steps 4 and 5: choose partners and sign agreements

There are four main ways to carry out CSR, and many companies mix them:

RouteWho does the workKey condition
DirectlyThe company’s own teamNo CSR-1 registration needed
Implementing agencyThe company’s foundation, a body set up by a government or by law, or an independent NGORegistered on Form CSR-1; an independent NGO also needs three years’ track record in similar work
CollaborationSeveral companies funding one projectEach company’s CSR committee can report its share separately
Social Stock ExchangeA not-for-profit issuing zero coupon zero principal instrumentsUp to 10% of the year’s total CSR expenditure, since 27 May 2026

An implementing agency carries out CSR projects for a company. An NGO acting as one must be a Section 8 company, registered public trust or registered society with the required income-tax registrations. CSR-1 shows eligibility, not quality, so the company still does its own due diligence. See ways to implement CSR and choosing an NGO partner.

A written agreement then sets out the scope, budget, reporting, who owns any assets created, and what happens to interest earned and to money unused at 31 March. Money goes out in tranches (instalments) against milestones, timed for use within the year, because of one rule:

See CSR agreements and CSR budgets.

Step 6: spend and monitor through the year

  • Monitoring. The board must satisfy itself that money disbursed was used for the purposes and in the manner it approved, and the chief financial officer (CFO), or whoever is responsible for financial management, certifies this (Rule 4(5)). It also tracks ongoing projects against their approved timelines and year-wise budgets (Rule 4(6)). See monitoring CSR projects.
  • Overheads. The general costs of running the company’s CSR function, such as its CSR team’s salaries, can’t exceed 5% of total CSR expenditure for the year (Rule 7(1)).
  • Surplus. Income from CSR activities, such as interest an NGO earns on CSR funds, can’t become business profit. It goes back into the same project, into the Unspent CSR Account, or to a Schedule VII fund within six months of the year’s end (Rule 7(2)).

If needs change, the board can alter the plan mid-year: a flood in October can justify moving money to relief work, which Schedule VII covers.

Step 7: move unspent money after 31 March

Since 22 January 2021, unspent CSR money can’t simply carry over. Where it goes depends on whether it belongs to an ongoing project: a multi-year project, approved by the board and started within the year (a work order issued or contract awarded), with a timeline of no more than three years after the year it started.

Unspent moneyWhere it goesDeadline
For an ongoing projectThe company’s Unspent CSR Account for that year, at a scheduled bank30 days after the year ends: 30 April
Still in that account after three financial yearsA Schedule VII fund, such as the PM National Relief Fund30 days after the third year ends
Everything elseA Schedule VII fundSix months after the year ends: 30 September

The board’s report must also explain any shortfall, and money awaiting the six-month transfer can’t be spent on projects first.

A company that misses a deadline is liable to a penalty of twice the amount it should have transferred or ₹1 crore, whichever is less, and each officer in default to one-tenth of that amount or ₹2 lakh, whichever is less. The transfer is still due. See unspent CSR money and penalties. A company that spent more than required can, by board resolution, set off the excess over the next three years.

Steps 8 and 9: report, and assess impact where required

  • The board’s report includes an annual report on CSR in the format in Annexure II to the CSR Rules, covering the policy, the committee, the obligation, the spending, the last three years’ Unspent CSR Accounts, capital assets and the reasons for any shortfall. See the annual report on CSR.
  • The website shows the committee, the CSR policy and every project the board has approved (Rule 9).
  • Form CSR-2 goes to the Registrar of Companies with project-level detail. It is linked to Form AOC-4, which files the financial statements within 30 days of the annual general meeting, and is filed after it. The MCA has changed CSR-2’s timing more than once, so check the current due date. See Form CSR-2.
  • The BRSR: the largest listed companies also cover CSR in their Business Responsibility and Sustainability Report.

Impact assessment applies to a company whose average CSR obligation over the three preceding years is ₹10 crore or more. It must commission an independent assessment of each project with an outlay of ₹1 crore or more, once the project has been complete for at least a year. The cost can count as CSR, up to 2% of the year’s total CSR expenditure or ₹50 lakh, whichever is higher. See impact assessment under the CSR rules.

The CSR calendar

The cycle for 2026-27, with the tasks for earlier years that fall within it. Legal deadlines are in bold; the other timings are good practice.

WhenWhat happensWhere the rule is
April to May 2026Confirm coverage on 2025-26’s figures; work out the obligation; approve the annual action planSection 135(1) and (5); Rule 5(2)
By 30 April 2026Move 2025-26’s unspent ongoing-project money into a new Unspent CSR Account; move any balance left in the 2022-23 account to a Schedule VII fundSection 135(6)
Through the yearRelease tranches against milestones; monitor projects; keep the website up to dateSection 135(3); Rules 4(6) and 9
Before the board approves its reportThe CFO’s certificate, the annual report on CSR for 2025-26 and any impact assessment reportsRules 4(5), 8(1) and 8(3)
By 30 September 2026Transfer 2025-26’s other unspent money, and any surplus not ploughed back or moved to the account, to a Schedule VII fund; hold the annual general meetingSection 135(5); Rule 7(2); Section 96
Within 30 days of the meetingFile the financial statements on AOC-4, then Form CSR-2 by the date the MCA setsSection 137; Rule 12(1B), Companies (Accounts) Rules, 2014
February to March 2027Check what partners will use by 31 March; minute decisions on ongoing projectsFAQ 7.4; Rule 4(6)
By 30 April and 30 September 2027The two transfer deadlines for 2026-27’s unspent moneySection 135(5) and (6)

What the cycle means for NGOs

  • Budgets are set early. Most of a company’s money is committed once its annual action plan is approved, so ask each company when it plans, and send proposals well before then.
  • March is crunch time. Expect questions in February about what you’ll use by 31 March, and report promptly. Your utilisation reports, including interest earned on CSR funds, support the CFO’s certificate.
  • Register early. File Form CSR-1 well before planning season: you need a CSR registration number to implement a company’s CSR.

See how NGOs can get CSR funding and reporting to funders.

Questions people ask

When do companies decide their CSR budget?

The amount depends on the previous three years’ profits, so it can be worked out once the financial year ends on 31 March and confirmed when the accounts are audited. The board then approves an annual action plan of projects, on the CSR committee’s recommendation, and can change it later with reasonable justification.

What are the deadlines for unspent CSR money?

For a financial year ending 31 March, unspent money for an ongoing project must be moved to the company’s Unspent CSR Account by 30 April and spent within the next three financial years. Other unspent money must go to a Schedule VII fund, such as the PM National Relief Fund, by 30 September.

Does CSR money paid to an NGO count as spent?

Not when it is paid. The MCA’s FAQs say that disbursing money to an implementing agency doesn’t amount to spending unless the agency uses it, so only money the agency has actually used counts. Time tranches so partners can use them within the year.

When is Form CSR-2 filed?

Form CSR-2, a company’s annual CSR report to the Registrar of Companies, is filed after Form AOC-4, which files the financial statements within 30 days of the annual general meeting. The MCA has set separate deadlines in some years, so check the current due date on the MCA portal.

Sources

  1. The Companies Act, 2013 (Section 135 and Schedule VII) · India Code, Ministry of Law and Justice
  2. Frequently asked questions on CSR (General Circular 14/2021) · Ministry of Corporate Affairs
  3. National CSR Portal: CSR law, rules and data · Ministry of Corporate Affairs
  4. Companies (CSR Policy) Amendment Rules, 2026 and Schedule VII item (xiii) (press release, 29 May 2026) · Press Information Bureau
  5. Section 135, the CSR Rules and Rule 12(1B) of the Companies (Accounts) Rules, consolidated text · ca2013.com

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