CSR and Social Governance · CSR Policy

CSR Committee: Constitution and Functions under Section 135

Updated 11 October 2026 · Fact-checked

The CSR Committee is a Board committee that section 135 requires for companies meeting the net worth, turnover or net profit threshold. It has three or more directors, including at least one independent director. It recommends the CSR Policy and spending amount to the Board and monitors the Policy. The Board approves and ensures implementation.

Understand CSR Committee: Constitution and Functions

Section 135 of the Companies Act, 2013 makes CSR a Board-level duty. The law does not leave it to management alone. It asks the Board to set up a dedicated committee that studies CSR and advises the Board.

The committee is required when a company had, in the immediately preceding financial year, a net worth of ₹500 crore or more, or turnover of ₹1,000 crore or more, or a net profit of ₹5 crore or more. Meeting any one of the three is enough.

The composition rule is simple. The committee has three or more directors, and at least one must be an independent director. If a company is not required to appoint an independent director under section 149(4) (for example, a private company), it needs only two or more directors on the committee. The Board's report must disclose the composition of the committee.

The committee advises and monitors. The Board decides and ensures. The committee formulates and recommends the CSR Policy, recommends the amount to be spent, and monitors the Policy from time to time. The Board then approves the Policy after considering those recommendations, discloses its contents in the Board's report, places it on the website (if any), and ensures the activities are undertaken.

There is a relief for small spenders. If the amount the company must spend under section 135(5) does not exceed ₹50 lakh, the committee need not be constituted. The Board of Directors discharges the committee's functions instead.

Key rules to remember

Trigger for CSR Committee: Net worth ≥ ₹500 crore OR turnover ≥ ₹1,000 crore OR net profit ≥ ₹5 crore (in the immediately preceding financial year); Any one condition is enough. Test the immediately preceding financial year.
Composition (general): Minimum 3 directors, of whom at least 1 is an independent director; The section says directors, not only non-executive directors.
Composition (no independent director required): Minimum 2 directors; Applies where the company is not required to appoint an independent director under section 149(4).
Functions of the Committee: Formulate and recommend CSR Policy (Schedule VII activities) + recommend expenditure amount + monitor the Policy from time to time; Three functions under section 135(3).
Duties of the Board: Approve Policy after considering Committee's recommendations + disclose it in Board's report and on website + ensure activities are undertaken; Section 135(4). The Board also ensures the 2% spend under section 135(5).
Small-spend exemption: If CSR amount under s.135(5) ≤ ₹50 lakh, no Committee; the Board discharges its functions; Section 135(9). The test is the amount to be spent, not profit.
Spending obligation (context): At least 2% of average net profit of the 3 immediately preceding financial years; Net profit is calculated under section 198, as prescribed.

How to solve CSR Committee: Constitution and Functions questions

Use this method for any question on the CSR Committee, whether it asks about composition, functions or the Board's role.

1Identify the company type and whether it meets any one threshold of net worth, turnover or net profit in the immediately preceding financial year.
2Compute the CSR amount if the facts allow: 2% of the average net profit of the three preceding financial years.
3Check the ₹50 lakh test. If the amount does not exceed ₹50 lakh, no committee is needed and the Board performs its functions.
4If a committee is needed, test the composition: at least three directors, at least one independent. Apply the two-director rule if the company need not appoint an independent director.
5List what the committee does: formulate and recommend the Policy, recommend the amount, monitor the Policy.
6List what the Board does: approve the Policy, disclose it in the Board's report and on the website, and ensure activities are carried out.
7Write the conclusion in one line: is the committee required, is the composition valid, and who does the task in question.

Quickest way: Threshold, amount, composition, roles

When to use it: Use this in a short-answer or case question when time is limited.

Write the three thresholds and tick which one is met.
Write the CSR amount. Compare it with ₹50 lakh.
Write the minimum committee size and the independent director rule.
Split the task: Committee recommends and monitors; Board approves and ensures.
End with a one-line conclusion.

Common mistakes in CSR Committee: Constitution and Functions

Saying all three thresholds must be met before a committee is required.
Students read the list of thresholds as a combined test.
Fix: Remember the word 'or'. Any one of net worth, turnover or net profit is enough.
Applying the ₹50 lakh relief to profit or turnover instead of the CSR amount.
The figure is easily confused with the ₹5 crore profit threshold.
Fix: Section 135(9) refers to the amount to be spent under section 135(5). Compute 2% of average net profit first.
Saying the committee approves the CSR Policy.
The committee formulates the Policy, so students assume it also approves it.
Fix: The committee formulates and recommends. The Board approves after taking the recommendations into account.
Requiring an independent director in every case.
Students memorise the main rule and forget the proviso.
Fix: A company not required to appoint an independent director under section 149(4) needs a committee of two or more directors.
Believing a company below the ₹50 lakh limit is free of CSR duties.
Students read the exemption as covering the whole section.
Fix: Only the committee requirement falls away. The Board discharges the committee's functions, and the spending obligation remains.
Testing thresholds on the current year or a three-year average.
The three-year average belongs to the spend calculation, so it gets mixed up.
Fix: Applicability uses the immediately preceding financial year. The three-year average is used only for the 2% amount.

Worked examples

Example 1

Sundaram Textiles Ltd, an unlisted public company, had a net worth of ₹320 crore, turnover of ₹1,150 crore and net profit of ₹4 crore in the immediately preceding financial year. Its Board has five directors, one of whom is independent. Is it required to constitute a CSR Committee? If so, can the committee consist of the independent director and two other directors?

Show the solution

Test the thresholds. Net worth ₹320 crore is below ₹500 crore. Turnover ₹1,150 crore is at least ₹1,000 crore. Net profit ₹4 crore is below ₹5 crore.
Only one condition needs to be met. The turnover condition is met, so section 135 applies.
The committee requirement then depends on the CSR amount. The facts do not give average net profit, so assume the amount exceeds ₹50 lakh. If it did not, the Board would perform the functions.
On composition, the committee must have three or more directors, with at least one independent director.
The proposed committee has three directors, including the independent director. This satisfies the rule.

Answer: Yes, Sundaram Textiles is covered because its turnover is at least ₹1,000 crore, and any one threshold is enough. It must constitute a CSR Committee unless its CSR amount does not exceed ₹50 lakh. A committee of the independent director and two other directors is validly constituted.

Example 2

Kaveri Components Pvt Ltd is a private company that is not required to appoint an independent director. In the three immediately preceding financial years its net profits were ₹18 crore, ₹22 crore and ₹20 crore. It is covered by section 135. Must it constitute a CSR Committee? Who approves the CSR Policy?

Show the solution

Average net profit = (18 + 22 + 20) ÷ 3 = 60 ÷ 3 = ₹20 crore.
CSR amount = 2% of ₹20 crore = ₹0.40 crore = ₹40 lakh.
₹40 lakh does not exceed ₹50 lakh, so the committee requirement under section 135(1) does not apply.
The functions of the committee are then discharged by the Board of Directors.
The Board therefore formulates the Policy and approves it. It must still disclose the Policy contents in its report and place it on the website, if any. It must also ensure the company spends the ₹40 lakh.

Answer: The CSR amount is ₹40 lakh, which does not exceed ₹50 lakh. Kaveri Components need not constitute a CSR Committee. Its Board performs the committee's functions and approves the CSR Policy. The spending obligation of ₹40 lakh still applies.

Exam tips

Write the section number and the exact threshold wording. Examiners reward the structure of provision, facts, conclusion.
In case questions, always compute the 2% amount before deciding whether a committee is needed.
Draw a clear line between the committee's tasks (formulate, recommend, monitor) and the Board's tasks (approve, disclose, ensure).
Mention the two-director proviso and the ₹50 lakh relief when the facts hint at a private or small company.
If asked to draft a committee resolution or terms of reference, include composition, the three functions and the Board report disclosure.

Practice questions from CSR Policy

CSR Committee: Constitution and Functions in other exams

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

CMA FinalCSR Committee, CSR Policy and Board Responsibilities

CSR Committee: Constitution and Functions: frequently asked questions

How many members must a CSR Committee have?

It must have three or more directors, and at least one must be an independent director. If the company is not required to appoint an independent director under section 149(4), two or more directors are enough.

Is a CSR Committee needed if the CSR amount is below ₹50 lakh?

No. If the amount to be spent under section 135(5) does not exceed ₹50 lakh, the committee need not be constituted. The Board of Directors discharges its functions.

What is the difference between the role of the CSR Committee and the Board?

The committee formulates and recommends the CSR Policy, recommends the spending amount and monitors the Policy. The Board approves the Policy, discloses it, and ensures the activities are undertaken and the required amount is spent.

Where is the committee's composition disclosed?

The Board's report under section 134(3) must disclose the composition of the CSR Committee.