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CSR and Social Governance · Corporate Social Responsibility

CSR Implementation, Impact Assessment and Reporting under Companies Act

Updated 11 October 2026 · Fact-checked

CSR implementation is how a company carries out its approved CSR projects, directly or through registered implementing agencies. It also covers ongoing projects, impact assessment of large completed projects, and disclosure in the Board's report. In an answer, state the provision, apply the facts, then conclude with the compliance step.

Understand Implementation, Impact Assessment and Reporting

Section 135 makes the Board responsible for two things: approving the CSR Policy and ensuring that the activities in it are actually undertaken. Implementation is the second part. A company may run a project itself or route it through an implementing agency.

Under the Companies (CSR Policy) Rules, an agency can be a Section 8 company, a registered public trust or a registered society, with 12A and 80G registration, or an entity set up by the company, the Central Government or a State Government. An agency must file Form CSR-1 electronically with the Registrar and obtains a unique CSR Registration Number. The company should engage only agencies that hold this number. The Board must also be satisfied about the agency's track record and keep control through agreed milestones, fund utilisation reports and monitoring.

A project can run beyond one year. An ongoing project is a multi-year project with a timeline not exceeding three years excluding the year it started, as the Rules define it. Section 135(6) deals with its unspent money. The company moves it within thirty days from the end of the financial year to a special Unspent Corporate Social Responsibility Account in a scheduled bank. It must spend the money within three financial years from the transfer. If it fails, it transfers the balance to a Schedule VII Fund within thirty days from the completion of the third financial year.

If the unspent amount does not relate to an ongoing project, section 135(5) requires the Board to give reasons in its report and transfer the amount to a Schedule VII Fund within six months of the end of the financial year.

Impact assessment tests whether a project achieved its social outcome. Under the Rules it applies to companies with a large average CSR obligation and to projects of large outlay that were completed at least a year earlier. Reporting closes the loop. The Board's report discloses the composition of the CSR Committee (section 135(2)) and the CSR Policy contents (section 135(4)). It also carries an annual CSR report in the prescribed format, and the reasons for any shortfall in spending.

Key rules to remember

Annual CSR spend
Minimum spend = 2% × average net profit of the three immediately preceding financial years
Net profit is calculated under section 198 and excludes the sums the Rules specify. If the company is less than three years old, use the immediately preceding years available.
Unspent amount, ongoing project
Transfer to Unspent CSR Account within 30 days from the end of the financial year; spend within 3 financial years from transfer; otherwise transfer to a Schedule VII Fund within 30 days from completion of the third financial year
Section 135(6). Applies only to ongoing projects that meet the prescribed conditions.
Unspent amount, other than ongoing project
Board's report states reasons; transfer to a Schedule VII Fund within 6 months of the end of the financial year
Second proviso to section 135(5).
Penalty for default
Company: lower of 2 × amount not transferred or ₹1 crore. Officer in default: lower of one-tenth of that amount or ₹2 lakh
Section 135(7). It applies to default under sub-section (5) or (6).
Impact assessment trigger
Average CSR obligation ≥ ₹10 crore in the three preceding years, and projects with outlay ≥ ₹1 crore completed at least one year earlier
From the CSR Rules, not from section 135. Assessment spend may be booked as CSR, up to the cap the Rules set (5% of the year's CSR spend or ₹50 lakh, whichever is higher).
Small CSR obligation
If the amount to be spent does not exceed ₹50 lakh, no CSR Committee is needed; the Board performs its functions
Section 135(9).

How to solve Implementation, Impact Assessment and Reporting questions

Use this order for any case question on implementation, impact assessment or reporting.

  1. 1Identify the company's position: is it covered by section 135(1), and what is its CSR obligation for the year?
  2. 2Classify the project: direct, through an implementing agency, or ongoing (multi-year, within the three-year limit).
  3. 3If an agency is used, check CSR-1 registration, the CSR Registration Number, and the Board's monitoring arrangements.
  4. 4Work out the unspent amount, if any, and decide whether it relates to an ongoing project or not.
  5. 5Apply the correct transfer route and time limit: Unspent CSR Account (30 days) or Schedule VII Fund (6 months).
  6. 6Test impact assessment: check the average obligation and the project outlay and completion date against the Rules.
  7. 7State the reporting: Board's report, annual CSR report format, website disclosure and the reasons for shortfall.
  8. 8Conclude with the penalty exposure under section 135(7) if the company defaulted, and the corrective action.

Quickest way: Four-question check

When to use it: Use it when time is short and the question is a short fact pattern.

  1. Who implements the project? If an agency, is it CSR-1 registered?
  2. Is the project ongoing? If yes, the unspent money goes to the Unspent CSR Account within 30 days.
  3. If not ongoing, the unspent money goes to a Schedule VII Fund within six months, with reasons in the Board's report.
  4. Does the size trigger impact assessment? Then write the penalty and reporting lines in one sentence each.

Common mistakes in Implementation, Impact Assessment and Reporting

  • Treating all unspent CSR money as transferable within six months.

    Students remember one time limit and apply it everywhere.

    Fix: Split the cases. Ongoing project: Unspent CSR Account within 30 days, then three years to spend. Other: Schedule VII Fund within six months.

  • Saying any NGO can be an implementing agency.

    Students ignore the registration condition.

    Fix: State that the agency must be a permitted type and must hold a CSR Registration Number from Form CSR-1.

  • Applying impact assessment to every company.

    The word 'mandatory' is remembered without its conditions.

    Fix: Quote both thresholds: the company's average obligation and the project's outlay and completion period.

  • Confusing the three-year spending window with the project's duration.

    Both use the number three.

    Fix: The project timeline excludes the year of commencement. The spending window runs from the date of transfer to the Unspent CSR Account.

  • Writing the penalty as a fixed amount.

    Students recall the caps and forget the 'whichever is less' rule.

    Fix: Compute both limbs and pick the lower, for the company and for the officer separately.

  • Forgetting that a Board's report disclosure is required even when CSR spend is nil.

    Students think reporting follows only from spending.

    Fix: Disclose the Committee composition and the Policy, and state reasons for any shortfall.

Worked examples

Example 1

Meridian Textiles Ltd has a CSR obligation of ₹3,00,00,000 for FY 2026-27. It spends ₹2,00,00,000. The balance of ₹1,00,00,000 relates to an ongoing project that meets the prescribed conditions. The company transfers nothing. Explain the position, including the penalty.

Show the solution
  1. Provision: under section 135(6), unspent money for an ongoing project must go to the Unspent CSR Account within 30 days from the end of the financial year.
  2. Facts: the balance of ₹1,00,00,000 relates to an ongoing project, but nothing was transferred.
  3. Conclusion on default: the company is in default of section 135(6).
  4. Company penalty: twice the amount = ₹2,00,00,000. The cap is ₹1,00,00,000. The lower is ₹1,00,00,000.
  5. Officer penalty: one-tenth of ₹1,00,00,000 = ₹10,00,000. The cap is ₹2,00,000. The lower is ₹2,00,000.
  6. Compliance point: the Board's report should state the reasons for the shortfall, and the company should transfer the amount to the Unspent CSR Account without further delay.

Answer: The company is in default of section 135(6). The company faces a penalty of ₹1,00,00,000 and each officer in default faces ₹2,00,000.

Example 2

Kaveri Pharma Ltd had an average CSR obligation of ₹12 crore over the three preceding years. It completed a project of ₹1.5 crore outlay 14 months ago and another of ₹80 lakh outlay 18 months ago. Is impact assessment required, and can its cost be counted as CSR?

Show the solution
  1. Rule: impact assessment applies where the average CSR obligation is ₹10 crore or more, for projects with outlay of ₹1 crore or more completed at least one year earlier.
  2. Company test: ₹12 crore is above ₹10 crore, so the company is covered.
  3. Project 1: outlay ₹1.5 crore is above ₹1 crore and it was completed 14 months ago, which is over one year. Assessment is required.
  4. Project 2: outlay ₹80 lakh is below ₹1 crore. Assessment is not required under the rule.
  5. Cost: the expense may be booked as CSR spend within the cap in the Rules (5% of the year's CSR spend or ₹50 lakh, whichever is higher).
  6. Reporting: the impact assessment report should be placed before the Board and attached to the annual CSR report.

Answer: Impact assessment is required for the ₹1.5 crore project only. Its cost can be counted as CSR expenditure within the cap in the Rules.

Exam tips

  • Write the section 135(5) and 135(6) routes as two separate headings. Examiners reward the distinction.
  • Always add the registration step (Form CSR-1 and the CSR Registration Number) when an agency is involved.
  • In penalty questions, show both limbs of the 'whichever is less' calculation.
  • Cite section numbers only for what the Act says (135(2), (4), (5), (6), (7), (9)). Describe Rules provisions in words.
  • End a case answer with the Board's report disclosure and the corrective compliance step.

Practice questions from Corporate Social Responsibility

Implementation, Impact Assessment and Reporting in other exams

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

Implementation, Impact Assessment and Reporting: frequently asked questions

Does an implementing agency need CSR-1 registration?

Yes. Under the CSR Rules, an agency that implements a company's CSR projects must file Form CSR-1 with the Registrar and obtain a CSR Registration Number. The company should confirm this number before releasing funds.

What is an ongoing project under CSR rules?

It is a multi-year project with a timeline not exceeding three years, excluding the year in which it started. Section 135(6) allows its unspent money to be held in the Unspent CSR Account and spent over three financial years.

Is impact assessment compulsory for all companies?

No. The Rules require it only for companies with a large average CSR obligation and for completed projects above a prescribed outlay. Smaller companies may do it voluntarily.

Where is CSR reported?

The Board's report discloses the CSR Committee's composition and the contents of the CSR Policy. It also includes an annual CSR report in the prescribed format, and the reasons if the company fell short of its spending.