How the Companies CSR Policy Amendment Rules apply in 2026 — applicability, committee, unspent account, impact assessment, CSR-2 filing and penalties.
Corporate Social Responsibility (CSR) has moved from a discretionary boardroom topic to an audited statutory obligation. The Companies (CSR Policy) Amendment Rules — last refreshed in 2022 and further tightened by MCA notifications through 2026 — define exactly how CSR is governed, executed, reported and impact-assessed under Section 135 of the Companies Act, 2013.
When CSR applies
Section 135 applies if, in the immediately preceding financial year, a company had a net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more. Such companies must spend at least 2% of the average net profits of the immediately preceding three financial years on CSR activities listed in Schedule VII.
Key amendment-rule changes
- Mandatory CFO certification on CSR expenditure utilisation.
- Unspent amounts pertaining to ongoing projects must be transferred to a separate CSR Unspent Account within 30 days of year-end and used within three years.
- Unspent amounts not earmarked to ongoing projects must be transferred to a Schedule VII fund within six months of year-end.
- Mandatory impact assessment by an independent agency for projects with outlay of ₹1 crore or more, in companies with average CSR obligation of ₹10 crore or more in the preceding three years.
- Filing of Form CSR-2 disclosing detailed CSR spend, structure and impact data.
Governance: the CSR Committee
Every covered company must constitute a CSR Committee of the Board (three or more directors, at least one independent). Where the CSR obligation is below ₹50 lakh, the requirement to form a separate committee is dispensed with — the Board itself discharges these duties. The committee formulates, recommends and monitors the CSR policy and approves the annual action plan.
Permissible activities and what does not count
Schedule VII lists permitted areas — education, health, sanitation, rural development, environment, gender equality, disaster relief, technology incubation, and contributions to specified national funds. Activities undertaken in the normal course of business, contributions to political parties, employee-benefit activities and one-off events do not count. Implementing agencies must be registered with MCA under Form CSR-1.
Reporting and penalties
- Annual report on CSR appended to the Board's Report in the prescribed format.
- Form CSR-2 filed online with MCA.
- Form AOC-4 disclosure of CSR amount spent and unspent.
- Penalty for non-transfer of unspent amount: twice the amount, capped at ₹1 crore on the company and ₹2 lakh on each officer in default.
Modes of implementation
CSR projects can be undertaken directly by the company, through a Section 8 company / registered trust / society established by the company or its holding/subsidiary/associate, or through any other entity established under an Act of Parliament or a State legislature. From the amendment, every implementing agency (other than those covered under the last category) must register itself with MCA in Form CSR-1 before any company can undertake CSR activities through it. The CSR-1 registration generates a unique CSR Registration Number that has to be quoted in all CSR documentation.
Set-off, carry-forward and excess spending
- Excess CSR spend in a financial year can be set off against the CSR obligation of up to the immediately succeeding three financial years.
- Capital assets created from CSR funds must be held by a Section 8 company, registered public trust, registered society, or beneficiaries — not by the company.
- Administrative overheads cannot exceed 5% of total CSR expenditure for the financial year.
- Surplus arising out of CSR activities (e.g., interest on idle CSR balance) must be ploughed back into the same project or transferred to the Unspent CSR Account.
Annual action plan — content and approval
Every CSR Committee must recommend, and the Board approve, an annual action plan in the prescribed format covering the list of CSR projects/programmes to be undertaken, the manner of execution, the modalities of utilisation of funds, monitoring mechanisms, and the impact assessment plan where applicable. The Board can alter the plan during the year only based on a reasoned recommendation from the CSR Committee. Documenting this trail is mandatory under the amendment rules and is the first piece of evidence examined in any compliance review.
Conclusion
CSR is now a fully audited compliance stream — committee, policy, action plan, implementing agency due diligence, fund transfer, impact assessment and disclosure. Treat it like any other statutory obligation with documented evidence at each step. The reputational and financial cost of non-compliance is now substantially higher than the cost of doing CSR well.
