Unspent CSR money: ongoing projects and the Unspent CSR Account

When a company covered by Section 135 of the Companies Act, 2013 spends less than its CSR obligation in a financial year, the unspent amount has to go somewhere. If it relates to an ongoing project, it goes into a special bank account, the Unspent CSR Account, within 30 days, and the company has three more years to spend it. Anything else goes to a government fund listed in Schedule VII within six months.

These rules took effect on 22 January 2021, when CSR moved from “comply or explain” to “comply or transfer”. Before that, a company only had to explain a shortfall in its board’s report. Now it must explain and move the money, and missing a deadline carries a penalty.

This guide is for CSR teams and finance staff, and for NGOs whose funding depends on how companies handle the year-end. It covers the two routes, what counts as an ongoing project, the account itself, the deadlines with worked dates, interest and surplus, and what it all means for implementing agencies. It reflects the law as in force on 3 October 2026.

The two routes for unspent money

In both cases, the board must also give the reasons for the shortfall in its report. One year’s shortfall can be split between the two routes: the part that relates to ongoing projects goes to the account, and the rest goes to a fund.

What counts as an ongoing project

Everything turns on this classification, so it pays to get it right when a project is approved, not at the year-end.

The MCA’s FAQs add four tests:

• It must have started in the year. A project counts as ongoing only if it commenced within the financial year, with identifiable start and completion dates (FAQ 6.1).
• Starting means a work order or contract. A project has commenced when the company has issued a work order or awarded a contract for it (FAQ 6.2). Board approval alone isn’t enough.
• One plus three years, at most. The year of commencement plus three financial years, and “Under no circumstances” longer (FAQ 6.3).
• Only from 2020-21. The ongoing-project rules apply to unspent money from 2020-21 onwards; for earlier years, the board was free to decide (FAQ 7.7).

A one-day health camp postponed to April, a budget line “for NGOs next year”, or a building with no work order by 31 March are not ongoing projects. Their unspent money takes the six-month route.

The Unspent CSR Account

The rules around the account:

• A scheduled bank. That is a bank listed in the Second Schedule to the Reserve Bank of India Act, 1934, which includes the main public, private and foreign banks operating in India.
• One account per year, not per project. Each year’s unspent ongoing-project money goes into that year’s account, which all of the year’s ongoing projects can share (FAQ 7.5). A company with shortfalls in three successive years holds three accounts.
• Ring-fenced. The money can’t be used for the business, offered as collateral or charged as security (FAQ 7.6).
• A committee is required. Since 20 September 2022, any company with money in an Unspent CSR Account must have a CSR committee, however small its current obligation. See the CSR committee.
• The duty survives. If the company stops meeting the Section 135 tests, the money in the account must still be spent or transferred on time.
• Reported every year. The annual report on CSR shows the account for each of the three preceding years, with balances and any deficiency. See the annual report on CSR.

The six-month route to a Schedule VII fund

Three points from the FAQs and the Rules:

• No spending in the gap. Money taking this route can’t be spent on CSR projects during the six months; it must be transferred (FAQ 7.3).
• Which funds. Only funds in Schedule VII count: the Swachh Bharat Kosh, the Clean Ganga Fund, the Prime Minister’s National Relief Fund, the PM CARES Fund and other central government funds notified for the welfare of Scheduled Castes, Scheduled Tribes, other backward classes, minorities and women (FAQ 3.15). A state or chief minister’s relief fund doesn’t count (FAQ 3.16).
• Any listed fund will do. Rule 10 says that until a particular fund is specified for unspent money, it can go to any fund in Schedule VII.

A year-end timeline

For money left unspent at the end of 2025-26:

The board’s report for 2025-26 must explain the shortfall. The deadlines run from the end of the financial year, so a company whose year ends on another date counts 30 days and six months from that date.

Worked examples

Interest and surplus

CSR money sometimes earns money. Rule 7(2) of the CSR Rules says any surplus arising from CSR activities can’t become part of the company’s business profit. It must be ploughed back into the same project, transferred to the Unspent CSR Account and spent in line with the CSR policy and plan, or sent to a Schedule VII fund within six months of the year’s end.

The FAQs count interest an implementing agency earns on CSR funds as surplus, along with revenue from a CSR project and money from selling materials used in one (FAQ 3.4). They don’t separately address interest earned on the company’s own Unspent CSR Account. The prudent course is to keep that interest inside CSR too, and to agree the treatment with your auditors. Surplus can’t be counted as excess spending for set-off: see setting off excess spending.

What it means for NGOs

The year-end rules shape how companies fund implementing agencies:

• Tranches move earlier. Companies want money released in time to be used before 31 March. Expect tranches tied to utilisation certificates, and a reluctance to release large sums in March.
• Multi-year projects need paperwork. For a project to be ongoing, the company needs a contract or work order in the year it starts, clear start and end dates, and a budget for each year. A well-drafted CSR agreement gives it all three.
• Unused balances must be reported fast. Your funder has to know its unspent amount within days of 31 March to meet the 30 April deadline. Agree a date in early April for confirming balances.
• Interest is not yours to keep. Interest on CSR funds in your account is surplus. Report it and use it for the project.

Penalties, and the pending Bill

A company that misses either 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 penalty doesn’t replace the transfer, which must still be made (FAQ 8.2). See penalties for breaking the CSR rules.

For the whole annual cycle, see how CSR works in India, step by step. The CSR Law in Depth course has more scenarios on ongoing projects and transfers.