Section 135 of the Companies Act, 2013
Section 135 of the Companies Act, 2013 – Corporate Social Responsibility (CSR)
📘 Overview:
Section 135 makes it mandatory for certain companies to spend a portion of their profits on Corporate Social Responsibility (CSR) activities and outlines the framework for compliance, reporting, and penalties.
✅ Applicability (Sub-section 1):
Every company (including holding and subsidiary) having:
Net worth ≥ ₹500 crore, or
Turnover ≥ ₹1,000 crore, or
Net profit ≥ ₹5 crore
during any financial year,
shall constitute a CSR Committee and comply with CSR provisions.
🏛️ CSR Committee:
Composition:
Minimum 3 directors, including at least 1 independent director
If a company is not required to appoint an independent director, then 2 or more directors can form the CSR Committee.
Functions:
Formulate and recommend CSR policy
Recommend the amount to be spent
Monitor implementation of CSR projects
💰 CSR Expenditure (Sub-section 5):
The company must spend at least 2% of the average net profits of the last 3 financial years on CSR activities.
Preference must be given to local areas where the company operates.
🔁 Unspent Amount (Sub-sections 5 & 6):
If not spent:
Relating to ongoing projects: Transfer to “Unspent CSR Account” within 30 days of financial year end and utilise within 3 years.
Other cases: Transfer to a Schedule VII Fund (like PM CARES) within 6 months of the financial year end.
📋 Reporting & Disclosure (Sub-section 4 & Rules):
The Board’s Report must include:
CSR policy contents
CSR Committee composition
Amount spent/unspent
Reasons for unspent amount
❗ Penalty for Non-Compliance (Sub-section 7):
Company: Penalty up to twice the unspent amount or ₹1 crore, whichever is less
Every officer in default: Penalty up to 1/10th of the unspent amount or ₹2 lakh, whichever is less
📝 CSR Activities (as per Schedule VII):
Include but are not limited to:
Eradicating hunger and poverty
Education and vocational skills
Gender equality
Environmental sustainability
PM CARES Fund
Rural development
Health and sanitation
🎯 Objective:
To ensure companies give back to society, especially in areas needing development, while promoting inclusive growth and social welfare.
RELATED Blog
0 comments