Which companies must comply with CSR obligations under Section 135?

Question

My company crossed a certain net worth this year and I want to know if we now have to spend on corporate social responsibility. I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

Which companies must comply with CSR obligations under Section 135? is governed in India primarily by Companies Act 2013, Section 135, Companies (Corporate Social Responsibility Policy) Rules 2014, Rule 4 and Companies Act 2013, Schedule VII. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 135(1) applies to companies with net worth of Rs.500 crore or more, turnover of Rs.1000 crore or more, or net profit of Rs.5 crore or more during the immediately preceding financial year.

Such companies must constitute a CSR committee and spend at least 2 percent of average net profits of the preceding three financial years on CSR activities listed in Schedule VII.

Rule 4 of the CSR Rules permits implementation through the company itself, a Section 8 company, registered trust or society, subject to registration on Form CSR-1 with the Registrar.

Unspent CSR amounts for ongoing projects must be transferred to a separate Unspent CSR Account within 30 days of the financial year end and spent within three years, failing which it is transferred to a specified fund in Schedule VII.

Section 135(7) makes non-compliance a penal offence, imposing monetary penalty on the company and every officer in default, in addition to disclosure requirements in the board's report.

What to do next: 1) Check applicability thresholds against your latest audited financial statements; 2) Constitute a CSR committee and adopt a CSR policy under Section 135(3); 3) Select an implementing agency registered on Form CSR-1; 4) Transfer and spend unspent CSR amounts within the statutory timelines.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Companies Act 2013, Section 135 carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.