CSR and Social Governance · Corporate Social Responsibility

CSR Committee and Board Responsibilities under Section 135

Updated 11 October 2026 · Fact-checked

Under section 135 of the Companies Act, 2013, a qualifying company must form a CSR Committee of three or more directors, including one independent director. The Committee recommends the CSR Policy and spending. The Board approves the Policy, discloses it, ensures activities happen and ensures the 2% spend. Answer by stating provision, facts, conclusion.

Understand CSR Committee and Board Responsibilities

Section 135 puts CSR in the hands of the Board. A company that crosses the size limits cannot treat CSR as a casual donation exercise. It must set up a structure: a Board committee that plans, and the Board that approves and is answerable.

The size limits are net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more, during the immediately preceding financial year. Meeting any one limit is enough. Such a company must constitute a Corporate Social Responsibility Committee of the Board.

The Committee has three jobs. It formulates and recommends the CSR Policy, which indicates the activities to be undertaken in areas or subjects specified in Schedule VII. It recommends the amount of expenditure. And it monitors the Policy from time to time. The Committee only recommends and monitors. It does not give the final approval.

The Board does that. It takes the Committee's recommendations into account, approves the Policy, discloses its contents in the Board's report and places it on the company's website, if any. It must also ensure the activities in the Policy are undertaken, and that the company spends at least 2% of the average net profits of the three immediately preceding financial years. The Board's report must also disclose the composition of the Committee.

There is a relief for small spenders. If the amount to be spent under sub-section (5) does not exceed ₹50 lakh, the Committee need not be constituted, and the Board itself discharges the Committee's functions.

Key rules to remember

Applicability thresholds: Net worth ≥ ₹500 crore OR turnover ≥ ₹1,000 crore OR net profit ≥ ₹5 crore (immediately preceding financial year); Any one condition is enough. Section 135(1).
Committee composition: At least 3 directors, including at least 1 independent director; If the company need not appoint an independent director under section 149(4), the Committee needs 2 or more directors.
Committee functions: Formulate and recommend Policy + recommend expenditure + monitor Policy; Section 135(3). Three functions, all recommendatory or supervisory.
Board duties: Approve Policy + disclose it and put it on website + ensure activities are undertaken + ensure 2% spend; Section 135(4) and (5). Disclosure of Committee composition is in the Board's report under section 135(2).
Minimum CSR spend: Spend ≥ 2% × average net profit of the 3 immediately preceding financial years; Net profit is calculated as per section 198 and excludes prescribed sums. For a company not yet three years old, use the immediately preceding years completed.
Small-spend relief: If amount to be spent ≤ ₹50 lakh, no Committee; Board performs its functions; Section 135(9).

How to solve CSR Committee and Board Responsibilities questions

Use this order for any question on the CSR Committee or the Board's duties. It mirrors provision, analysis, conclusion.

1Check applicability. Test net worth, turnover and net profit against the three limits for the immediately preceding financial year.
2Compute the CSR obligation if numbers are given: 2% of the average net profit of the three immediately preceding financial years.
3Decide whether the Committee is needed. If the amount to be spent is ₹50 lakh or less, the Board does the Committee's work.
4Check composition. Count directors (three or more) and independent directors (at least one), or two or more if no independent director is required.
5Allocate roles. Committee: formulate, recommend, monitor. Board: approve, disclose, ensure activities and spend.
6Check disclosures. Committee composition goes in the Board's report; the Policy contents go in the report and on the website, if any.
7Add consequences for default if asked: reasons in the Board's report, transfer rules and penalty under section 135(7).
8Write a clear conclusion tied to the facts.

Quickest way: Committee recommends, Board decides

When to use it: Use for short-answer or role-allocation questions when time is tight.

Write the one-line rule: Committee recommends and monitors; Board approves and ensures.
List the Committee's three functions: Policy, amount, monitoring.
List the Board's four duties: approve, disclose, undertake activities, spend 2%.
State the composition: three directors, one independent.
Close with the ₹50 lakh exception if the facts show a small obligation.

Common mistakes in CSR Committee and Board Responsibilities

Saying the CSR Committee approves the CSR Policy.
Students link the Committee with all CSR decisions.
Fix: The Committee formulates and recommends. The Board approves the Policy under section 135(4).
Requiring all three thresholds to be met.
The three limits are listed together and read as cumulative.
Fix: They are alternatives. Meeting any one of net worth, turnover or net profit triggers section 135.
Applying the ₹50 lakh exemption to the whole of section 135.
Students think a small spender has no CSR duty.
Fix: Only the Committee requirement falls away. The Board performs its functions and the 2% duty remains.
Using the current year's profit for the 2% spend.
Confusion between the applicability test and the spend base.
Fix: Applicability uses the immediately preceding financial year. The spend uses the average net profit of the three immediately preceding years.
Forgetting that two directors may suffice.
Students memorise only 'three directors with one independent'.
Fix: Mention the proviso: where a company is not required to appoint an independent director under section 149(4), two or more directors suffice.
Leaving out disclosures.
Focus stays on spending.
Fix: State both: Committee composition in the Board's report, and Policy contents in the report and on the website, if any.

Worked examples

Example 1

Sundaram Textiles Ltd, an unlisted public company, had net worth of ₹320 crore, turnover of ₹1,150 crore and net profit of ₹4 crore in the immediately preceding financial year. Its average net profit for the three preceding years was ₹30 crore. Advise on the CSR Committee, the Board's duties and the minimum spend.

Show the solution

Provision: section 135(1) applies if net worth is ₹500 crore or more, or turnover is ₹1,000 crore or more, or net profit is ₹5 crore or more.
Analysis of applicability: net worth ₹320 crore is below the limit. Turnover ₹1,150 crore is above ₹1,000 crore. Net profit ₹4 crore is below the limit. One condition is met, so section 135 applies.
Minimum spend: 2% × ₹30 crore = ₹0.60 crore = ₹60 lakh.
Committee: the amount exceeds ₹50 lakh, so the exemption in section 135(9) does not apply. A CSR Committee of three or more directors, including at least one independent director, must be constituted.
Board duties: approve the Policy after considering the Committee's recommendations, disclose its contents in the Board's report, place it on the website if any, ensure the activities are undertaken, ensure ₹60 lakh is spent, and disclose the Committee's composition in the Board's report.

Answer: Section 135 applies because turnover exceeds ₹1,000 crore. The minimum spend is ₹60 lakh. As this exceeds ₹50 lakh, a CSR Committee of at least three directors with one independent director is required.

Example 2

Kaveri Pharma Ltd must spend ₹40 lakh on CSR this year. Its Board asks whether it must still form a CSR Committee and who will recommend the Policy. Advise.

Show the solution

Provision: section 135(9) says that where the amount to be spent under section 135(5) does not exceed ₹50 lakh, the requirement to constitute the Committee under section 135(1) does not apply.
Analysis: the amount is ₹40 lakh, which is within ₹50 lakh.
Consequence: the functions of the Committee are discharged by the Board. So the Board formulates the Policy, recommends the expenditure and monitors the Policy.
Continuing duties: the Board must still approve the Policy, disclose its contents in its report, place it on the website if any, ensure the activities are undertaken and ensure the ₹40 lakh is spent. If it fails to spend, it must give reasons in its report and follow the transfer rules.

Answer: Kaveri Pharma need not form a CSR Committee. The Board itself performs the Committee's functions, and all its other section 135 duties continue.

Exam tips

Write section 135 sub-section numbers where you are sure, such as (1) for composition, (3) for Committee functions, (4) for Board duties and (9) for the ₹50 lakh relief.
In case studies, test applicability first. Marks are often given for showing which threshold was met.
Show the 2% calculation with the three-year average, then compare it with ₹50 lakh before deciding on the Committee.
Keep a two-column answer in mind: Committee (formulate, recommend, monitor) and Board (approve, disclose, ensure).
Mention website disclosure with the words 'if any', as the section does.

Practice questions from Corporate Social Responsibility

CSR Committee and Board Responsibilities in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CSR Committee and Board Responsibilities: frequently asked questions

Who must be on the CSR Committee under section 135?

The Committee must have three or more directors, with at least one independent director. If the company is not required to appoint an independent director under section 149(4), it needs two or more directors.

Does the CSR Committee approve the CSR Policy?

No. The Committee formulates and recommends the Policy to the Board. The Board approves it after taking the recommendations into account.

What are the functions of the CSR Committee?

It formulates and recommends the CSR Policy indicating Schedule VII activities, recommends the amount of expenditure, and monitors the Policy from time to time.

Is a CSR Committee needed if the CSR spend is small?

If the amount to be spent does not exceed ₹50 lakh, the Committee requirement does not apply. The Board of Directors discharges the Committee's functions.

What must the Board disclose about CSR?

The Board's report must disclose the composition of the CSR Committee and the contents of the CSR Policy. The Policy must also be placed on the company's website, if any.