CSR Audit & Form CSR-2 Filing: Section 135 & Unspent CSR Account Rules

Under Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, eligible corporate entities in India must spend at least 2% of their average net profits made during the 3 immediately preceding financial years on approved activities listed in Schedule VII.

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1. Applicability Thresholds (Section 135(1))

A company (including private limited companies, unlisted public companies, and foreign companies with project offices in India) must comply with CSR provisions if in the immediately preceding financial year it meets any of the following:

• Net Worth: ₹500 Crore or more; OR
• Turnover: ₹1,000 Crore or more; OR
• Net Profit (Section 198): ₹5 Crore or more.

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2. Treatment of Unspent CSR Amount

Section 135(5) and 135(6) prescribe strict deadlines for unspent CSR obligations:

Scenario A: Unspent Amount NOT Relating to an Ongoing Project

• The unspent amount must be transferred to a Fund specified in Schedule VII (such as PM CARES Fund, PM National Relief Fund, or Clean Ganga Fund) within 6 months from the close of the financial year (i.e. on or before 30th September).

Scenario B: Unspent Amount Relating to an Ongoing Project

• The company must open a special bank account titled "Unspent Corporate Social Responsibility Account" in a scheduled commercial bank within 30 days from the end of the financial year (on or before 30th April).
• The funds must be spent on the approved ongoing project within 3 financial years.
• If still unspent after 3 years, the remaining balance must be transferred to a Schedule VII fund within 30 days.

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3. Mandatory Form CSR-2 E-Filing

Form CSR-2 (Report on Corporate Social Responsibility) is a standalone electronic form filed on the MCA portal:

• It serves as an addendum to the annual filing in Form AOC-4 / AOC-4 XBRL.
• Contains detailed disclosures of CSR Committee composition, net profit calculation under Section 198, ongoing projects, impact assessment reports, and capital asset creation details.

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4. Penalties for Non-Compliance (Section 135(7))

Failure to comply with transfer of unspent CSR funds triggers heavy financial penalties:

• On the Company: Twice the amount required to be transferred to the Fund or Unspent Account, or ₹1 Crore, whichever is less.
• On Every Defaulting Officer: One-tenth of the unspent amount or ₹2 Lakhs, whichever is less.

For corporate secretarial audits and CSR compliance review in Raipur, connect with our Corporate Legal & MCA Advisory team.