CSR compliance in India runs on two connected sets of obligations — what the funding company has to do under Section 135, and what the non-profit receiving that funding has to have in place before it can legally accept it. Getting one side right doesn’t help if the other side hasn’t been checked.
The 2% obligation, and who it applies to
A company crosses into CSR obligation under Section 135 of the Companies Act if it meets any one of three thresholds in the immediately preceding financial year: net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more. Once triggered, the obligation is to constitute a CSR Committee, adopt a CSR policy, and spend at least 2% of the company’s average net profit over the preceding three financial years on eligible Schedule VII activities — a rolling calculation, not a one-year snapshot, so the obligation doesn’t disappear just because the current year was a weak one.
CSR-1: an NGO’s registration to legally receive the funds
Since 1 April 2021, no trust, society, or Section 8 company can legally receive CSR funds from any company unless it has registered as an implementing agency with the Ministry of Corporate Affairs on Form CSR-1 — regardless of how strong the project itself is. Valid 12A and 80G registration is a precondition for filing it. For a non-profit courting corporate CSR budgets, CSR-1 is the gate everything else has to pass through first, not a formality to handle after a funder has already committed.
Unspent CSR amounts: two different clocks
What happens to money a company didn’t spend by year-end depends on whether it relates to an ongoing project. Unspent amounts tied to an ongoing project move into a separate Unspent CSR Account within 30 days of the financial year-end, and the company then has three more financial years to actually spend it before any leftover balance has to move on. Everything else — unspent amounts with no ongoing project attached — has a harder deadline: transfer to a fund specified in Schedule VII (such as the PM National Relief Fund) within six months of the financial year-end, with no ongoing-project extension available.
The penalty for missing the transfer
Failing to make that transfer on time is a default under Section 135(7), not a late fee. The company is liable for twice the unspent amount or ₹1 crore, whichever is less; every officer in default is separately liable for one-tenth of the unspent amount or ₹2 lakh, whichever is less. Filing the transfer late still counts as a default even once the money eventually moves — the six-month and 30-day clocks are the actual compliance dates, not soft targets.
Impact assessment for larger programs
A formal impact assessment is mandatory only where a company’s total CSR obligation for the year exceeds ₹10 crore, and then only for the individual projects within that spend with an outlay of ₹1 crore or more. It doesn’t apply by default to every CSR project a company runs, which is worth confirming early rather than assuming either way — commissioning one where it isn’t required is avoidable cost, and missing one where it is required is a compliance gap.
Common questions
Does CSR-1 registration replace an NGO's 12A and 80G registrations, or come on top of them?
On top of them, not instead. CSR-1 requires valid 12A and 80G registration as a precondition — it's the additional, separate step that makes the NGO eligible to legally receive CSR funds from companies, not a substitute for the tax-exemption registrations it already needs to operate.
If a company's CSR spend for the year falls short, what actually happens to the shortfall?
It depends on whether the shortfall relates to an ongoing project. Amounts tied to an ongoing project move to a separate Unspent CSR Account within 30 days of the financial year-end, with three more financial years to actually spend it. Everything else has to move to a Schedule VII fund within six months of the year-end — there's no ongoing-project extension available for it.
Is a formal impact assessment required for every CSR project?
No — only when the company's overall CSR obligation for the year exceeds ₹10 crore, and only for the individual projects within that spend with an outlay of ₹1 crore or more. Smaller obligations and smaller projects don't trigger the requirement, though many companies still commission one voluntarily for larger optional spends.
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