Companies Act 2013 Section 135: Corporate Social Responsibility (2026)

Explainer · Company Law · Companies Act 2013

Updated for 2026 · Claw Editorial

Section 135 of the Companies Act, 2013 is the corporate social responsibility (CSR) law. It makes companies above a certain size put part of their profit back into society, by spending at least 2 per cent of their average net profit on approved CSR activities each year. India was among the first countries to make CSR spending a statutory duty rather than a voluntary gesture. This explainer sets out which companies must comply, how much they must spend, how the CSR Committee works, and what happens to money that is not spent. Last verified October 2026.

01The short answer

Section 135 of the Companies Act, 2013 is titled "Corporate Social Responsibility". It applies to a company that, in the immediately preceding financial year, has a net worth of Rs. 500 crore or more, or a turnover of Rs. 1,000 crore or more, or a net profit of Rs. 5 crore or more.

Such a company must set up a CSR Committee of the Board, adopt a CSR policy, and spend at least 2 per cent of its average net profit of the three immediately preceding financial years on CSR activities. The activities that count are listed in Schedule VII of the Act, such as eradicating hunger, promoting education and health, and protecting the environment.

02Which companies must do CSR

A company is caught by Section 135 if it meets any one of these tests in the immediately preceding financial year:

Meeting any one test is enough. A company that stops meeting the thresholds for three straight financial years is no longer required to comply until it crosses them again.

03How much must be spent

A covered company must spend, in every financial year, at least 2 per cent of the average net profit it made during the three immediately preceding financial years. "Net profit" for this purpose is worked out under the method the Act and the CSR rules prescribe, which is not the same as book profit.

The money must go to the CSR activities set out in Schedule VII, and the company must give preference to the local area around where it operates.

04The CSR Committee and policy

A covered company must constitute a CSR Committee of the Board, generally of three or more directors, of which at least one is an independent director, linking to Section 149 on independent directors. The committee:

• formulates and recommends a CSR policy, setting out the activities the company will take up from Schedule VII;
• recommends the amount of spending; and
• monitors the CSR policy and spending from time to time.

The Board must approve the policy, disclose it on the company website, and report CSR spending in the Board's report. Where the amount to be spent is small, the rules relax the requirement to have a separate committee.

05Unspent CSR money

The Act now deals carefully with money a company does not spend in a year:

• if the unspent amount relates to an ongoing project, it must be transferred within 30 days of the end of the financial year to a special "Unspent CSR Account", and spent on that project within the next three financial years;
• if the unspent amount does not relate to an ongoing project, it must be transferred within six months of the end of the financial year to a fund listed in Schedule VII, such as the Prime Minister's National Relief Fund.

Section 135 also provides penalties on the company and the officers in default for failing to spend or transfer, so CSR is now a real, enforceable duty.

06Why it matters

Section 135 is a live compliance and disclosure duty for most large Indian companies, and the Ministry of Corporate Affairs and the Registrar have begun enforcing CSR defaults with penalties. Questions over whether a company crossed the threshold, whether its spending qualified under Schedule VII, and whether unspent money was transferred on time, can all become the subject of show cause notices and adjudication.

For a company secretary it is an annual cycle of committee, policy, spending and reporting. For an investor or researcher, CSR spending and any CSR default are part of company due diligence and the company's public filings in an MCA company search.

07Where Claw fits

Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.

CSR disputes, over thresholds, qualifying spend, or unspent transfers, surface in Registrar adjudication orders, appeals and writ petitions. Claw lets you search more than 30 crore judgments, with Supreme Court decisions from 1950 and High Court decisions from 1990, to see how courts and authorities have read the CSR duty and its penalties, with results in under 5 seconds. You can also track a live matter, with its orders and hearings, by company or party name across 9,102 courts, benches and forums. Claw does not use the documents you upload to train its AI models.

Create a FREE Claw account to track any Section 135 or CSR matter by party name and follow every hearing, and use case search across Indian courts to find how courts have applied the CSR rules.

08Sources and further reading

• India Code (Companies Act, 2013, bare text): indiacode.nic.in
• Ministry of Corporate Affairs (CSR Policy Rules): mca.gov.in
• PRS Legislative Research (CSR amendments): prsindia.org
• Claw: clawlaw.in

This explainer is general information, not legal advice. The thresholds, the list of activities in Schedule VII and the penalties under Section 135 can change, and an amendment bill is pending, so check the current text and take advice from a company secretary or counsel before you act.

09Frequently asked questions