CSR Compliance & CSR-2 Filing

Overview

Somewhere in the last board meeting, someone asked whether the company now owes CSR spend. It usually happens the year net worth, turnover or net profit quietly crosses a line nobody was tracking for this purpose. Section 135 of the Companies Act 2013, read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended, applies to any company that in the immediately preceding financial year had net worth of ₹500 crore or more, OR turnover of ₹1,000 crore or more, OR net profit of ₹5 crore or more — any one of the three, not all three. Once you are in, a chain of obligations follows: a policy, a committee, a spend, and two separate filings.

The number itself is not 2% of your profit-and-loss figure. It is 2% of the average net profit computed under Section 198 of the Companies Act across the three immediately preceding financial years (or the years completed since incorporation, if younger), and Section 198 profit excludes items such as overseas-branch profits and dividends from other Indian companies — so the CSR base is usually not the number your P&L shows. A company that owes ₹50 lakh or less under this calculation is exempt from constituting a separate CSR Committee, unless it is sitting on an Unspent CSR Account balance from an earlier ongoing project, in which case the committee requirement returns regardless of the current year’s spend.

Schedule VII sets out what the money can go toward — education, health, sanitation, environmental sustainability, hunger and poverty relief, heritage protection, and more — read liberally rather than as a narrow checklist. Money committed to a genuine multi-year project (up to three years after the year it started) goes into a separate Unspent CSR Account within 30 days of the financial year-end and must be spent within the next three years on that project; money not tied to any ongoing project instead goes straight to a Schedule VII fund within six months. Above ₹10 crore of average CSR obligation, larger projects also need an independent impact assessment, whose cost can itself be booked as CSR spend within a cap.

Routing CSR funds through an NGO, trust or Section 8 company requires that entity to hold a CSR-1 registration first — without the Registration Number, a corporate cannot count the money as valid CSR spend, and the entity typically needs live 12A and 80G registration to qualify. Where the recipient is itself a Section 8 company crossing the same thresholds, whether its own charitable activity counts as CSR is a genuinely unresolved question — we flag it rather than assume an answer. On the filing side, Form CSR-2 is a separate e-form filed only after your AOC-4 is in — MCA has repeatedly extended its due date, so we track the notified date rather than assume last year’s.

Who it’s for

• Companies that have just crossed the net worth, turnover or net profit threshold under Section 135 and need to confirm whether CSR now applies
• Companies with an existing CSR obligation that need the Board’s Report CSR annexure and CSR-2 filed correctly and on time
• NGOs, trusts and Section 8 companies that need CSR-1 registration to legally receive CSR funds from corporate donors
• Companies holding an Unspent CSR Account balance or a lapsed ongoing project that needs to be transferred correctly before a penalty attaches
• Boards that need their CSR Committee composition reviewed — including whether the ₹50 lakh exemption genuinely applies to them

Eligibility & requirements

• Applicability: net worth ₹500 crore or more, OR turnover ₹1,000 crore or more, OR net profit ₹5 crore or more, in the immediately preceding financial year
• Spend: at least 2% of average net profit (computed under Section 198, not book profit) across the three preceding financial years
• Governance: a CSR Committee of three or more directors (at least one independent), reduced to two directors where an independent director is not otherwise required — unless the company qualifies for the ₹50 lakh spend exemption and holds no Unspent CSR Account balance
• Activities must sit within Schedule VII, interpreted liberally rather than narrowly
• Any implementing agency receiving CSR funds must hold a valid CSR-1 registration and, typically, current 12A and 80G status
• Companies with average CSR obligation of ₹10 crore or more must get an independent impact assessment done for completed projects above ₹1 crore outlay

How CapEasy handles it

1. We work through the last three years’ financials against the Section 135 thresholds and the Section 198 net-profit method to confirm whether — and how much — CSR applies to you
2. We draft or refresh the CSR policy against Schedule VII, and confirm whether your CSR Committee composition (or the ₹50 lakh exemption) is correctly applied
3. The board reviews and approves the policy, the project list, and the year’s CSR budget on that basis
4. Where funds route through an implementing agency, we check its CSR-1 registration and 12A/80G status before the money moves — not after
5. We track unspent amounts through the correct channel — the Unspent CSR Account for ongoing projects, or a direct Schedule VII fund transfer for everything else — against their statutory windows
6. We prepare the Board’s Report CSR annexure with the Section 198 average net profit, obligation, committee details and spend disclosure
7. We file Form CSR-2 once your AOC-4 is in, tracking the year’s notified due date rather than assuming a prior year’s extension carries forward

Documents you’ll typically need

• Audited financial statements and net-profit workings for the three preceding financial years
• Existing CSR policy and CSR Committee resolution, if any
• Project-wise CSR spending records, including which projects are multi-year "ongoing projects"
• CSR-1 registration certificates for any implementing agency the funds route through
• Bank statements for the Unspent CSR Account, where one has been opened
• Impact assessment report, where the ₹10 crore average-obligation threshold is crossed
• The prior year’s AOC-4 acknowledgment, needed before CSR-2 can be filed

CapEasy is a private consultancy and is not affiliated with any government authority. We help you assess eligibility and prepare and file your application; eligibility and approval depend on your specifics and the relevant department’s discretion.