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CSR and Social Governance · CSR Policy

CSR Reporting, Monitoring and Impact Assessment Explained

Updated 11 October 2026 · Fact-checked

CSR reporting means the Board discloses the CSR Committee's composition, the CSR policy and the spending in its report, and explains any shortfall. Monitoring means the Committee tracks the policy and projects. Impact assessment is an independent study of outcomes. Default attracts penalties under section 135(7). Answer with provision, facts, conclusion.

Understand CSR Reporting, Monitoring and Impact Assessment

A company covered by section 135 must do more than spend money. It must plan, track, report and answer for the result. This topic is about that accountability chain.

Start with the Board's report. Under section 135(2), the report under section 134(3) must disclose the composition of the CSR Committee. Under section 135(4), the Board approves the CSR Policy after considering the Committee's recommendations. It must disclose the contents of the policy in its report and place it on the company's website, if any. If the company fails to spend the required amount, the Board must state the reasons in its report under section 134(3)(o).

Next, monitoring. Under section 135(3)(c), the CSR Committee must monitor the CSR Policy from time to time. Section 135(4)(b) requires the Board to ensure that the activities in the policy are actually undertaken. The detailed machinery is in the CSR Rules, not the section text. These cover the annual action plan, the monitoring mechanism, the annexure to the Board's report and impact assessment. State these as rule-based points.

Impact assessment is the measurement step. Under Rule 8(3) of the CSR Rules, a company with an average CSR obligation of ₹10 crore or more in the three immediately preceding financial years must get an impact assessment done by an independent agency. It applies to projects with an outlay of ₹1 crore or more that were completed at least one year before the assessment. The report is placed before the Board and annexed to the Board's report on CSR. These thresholds sit in the Rules, not in section 135.

Finally, penalties. Section 135(7) punishes default in complying with sub-section (5) (spending or transferring to a Schedule VII Fund) or sub-section (6) (transferring to the Unspent CSR Account). The penalty is fixed by reference to the amount that should have been transferred, and is capped.

Key rules to remember

Company penalty, section 135(7)
Lower of (2 × amount required to be transferred) and ₹1 crore
Amount is that required to go to the Schedule VII Fund or the Unspent CSR Account, as the case may be.
Officer in default penalty, section 135(7)
Lower of (1/10 × amount required to be transferred) and ₹2 lakh
Applies to every officer of the company who is in default.
Lesser penalty, section 446B
Not more than one-half of the specified penalty, capped at ₹2 lakh (company) and ₹1 lakh (officer)
Applies to a One Person Company, small company, start-up company or Producer Company, notwithstanding other provisions of the Act.
Annual CSR spend, section 135(5)
At least 2% × average net profit of the three immediately preceding financial years
Net profit is calculated under section 198 and excludes sums prescribed. For a company not yet three years old, use the immediately preceding years available.
Unspent amount, ongoing project, section 135(6)
Transfer within 30 days from end of the financial year to the Unspent CSR Account; spend within 3 financial years; else transfer to a Schedule VII Fund within 30 days of completing the third year
Unspent amount for a project that is not ongoing goes to a Schedule VII Fund within six months of the end of the financial year, under the second proviso to section 135(5).
Committee exemption, section 135(9)
If amount to be spent ≤ ₹50 lakh, no CSR Committee is needed; the Board performs its functions
Reporting duties remain with the Board.

How to solve CSR Reporting, Monitoring and Impact Assessment questions

Use this order for any case question on CSR reporting, monitoring, impact assessment or penalty.

  1. 1Identify whether the company falls under section 135(1): net worth ₹500 crore or more, turnover ₹1,000 crore or more, or net profit ₹5 crore or more in the immediately preceding financial year.
  2. 2Compute the obligation: 2% of the average net profit of the three preceding years, as calculated under section 198.
  3. 3Decide who acts. If the obligation is ₹50 lakh or less, the Board does the Committee's work under section 135(9).
  4. 4Find what was spent and what is unspent. Classify unspent money as ongoing project or other.
  5. 5Apply the transfer rule: Unspent CSR Account within 30 days for ongoing projects; Schedule VII Fund within six months otherwise.
  6. 6List the reporting duties: Committee composition, policy contents, website posting, reasons for shortfall in the Board's report.
  7. 7Check impact assessment applicability under the CSR Rules and name the monitoring steps.
  8. 8State the penalty under section 135(7), then test section 446B for a small company or start-up. Conclude clearly.

Quickest way: Four-line penalty check

When to use it: Use when a question asks for the penalty on a company and its officers for CSR default.

  1. Find the amount that should have been transferred.
  2. Company: compute 2 times that amount and compare with ₹1 crore. Take the lower.
  3. Officer: compute one-tenth of the amount and compare with ₹2 lakh. Take the lower.
  4. If the company is small, a start-up, a One Person Company or a Producer Company, halve each penalty and cap at ₹2 lakh and ₹1 lakh.

Common mistakes in CSR Reporting, Monitoring and Impact Assessment

  • Saying the company penalty is always ₹1 crore.

    Students remember only the cap.

    Fix: The penalty is the lower of twice the amount and ₹1 crore. Always compute both.

  • Applying the penalty to the whole CSR obligation instead of the amount required to be transferred.

    The words 'amount required to be spent' and 'amount required to be transferred' look alike.

    Fix: Use the unspent amount that should have gone to the Fund or the Unspent CSR Account.

  • Mixing the 30-day and six-month transfer timelines.

    Both relate to unspent amounts.

    Fix: Ongoing project: Unspent CSR Account within 30 days of year end. Other unspent amount: Schedule VII Fund within six months.

  • Ignoring section 446B for small companies or start-ups.

    Students treat section 135(7) as the final word.

    Fix: Section 446B gives a lesser penalty: not more than half, capped at ₹2 lakh and ₹1 lakh.

  • Stating impact assessment applies to every CSR company.

    Students generalise the idea.

    Fix: It applies only to companies and projects meeting the thresholds in the CSR Rules. Give the conditions.

  • Thinking a company with obligation under ₹50 lakh has no CSR duty.

    Confusion over section 135(9).

    Fix: Only the Committee is dispensed with. The spending and reporting duties stay, and the Board discharges the Committee's functions.

Worked examples

Example 1

Navbharat Textiles Ltd failed to spend ₹40 lakh of its CSR obligation for a financial year. None of it related to an ongoing project, and it was not transferred. Compute the penalty on the company and on each officer in default under section 135(7). The company is not a small company or start-up.

Show the solution
  1. Amount required to be transferred to a Schedule VII Fund = ₹40 lakh.
  2. Company: twice the amount = ₹80 lakh. The cap is ₹1 crore. The lower is ₹80 lakh.
  3. Officer: one-tenth of ₹40 lakh = ₹4 lakh. The cap is ₹2 lakh. The lower is ₹2 lakh.
  4. Section 446B does not apply because the company is not a small company, start-up, OPC or Producer Company.

Answer: Company: ₹80 lakh. Each officer in default: ₹2 lakh.

Example 2

Greenfield Foods Pvt Ltd is a recognised start-up. It defaulted on a ₹30 lakh transfer to a Schedule VII Fund. Find the penalties on the company and an officer in default.

Show the solution
  1. Under section 135(7), company: twice ₹30 lakh = ₹60 lakh, which is below ₹1 crore. Penalty = ₹60 lakh.
  2. Officer: one-tenth of ₹30 lakh = ₹3 lakh, above ₹2 lakh. Penalty = ₹2 lakh.
  3. Section 446B applies to a start-up company: not more than half the specified penalty.
  4. Company: half of ₹60 lakh = ₹30 lakh, which exceeds the ₹2 lakh cap under section 446B, so the maximum penalty is ₹2 lakh.
  5. Officer: half of ₹2 lakh = ₹1 lakh, which equals the ₹1 lakh cap, so the maximum is ₹1 lakh.

Answer: Company: not more than ₹2 lakh. Officer in default: not more than ₹1 lakh.

Exam tips

  • Write the section number with each point: 135(2) composition, 135(4) policy and website, 135(5) proviso reasons, 135(6) account, 135(7) penalty.
  • In penalty problems, show both limbs of 'whichever is less' and say which wins.
  • For impact assessment, state the thresholds as set in the CSR Rules and say they are in the Rules, not in section 135.
  • In case questions, always test section 135(9) and section 446B before concluding.
  • Close with a practical point: board minutes, website upload and annexure in the Board's report.

Practice questions from CSR Policy

CSR Reporting, Monitoring and Impact Assessment in other exams

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

CSR Reporting, Monitoring and Impact Assessment: frequently asked questions

What must the Board's report say about CSR?

It must disclose the CSR Committee's composition and the contents of the CSR Policy. If the company has not spent the required amount, it must give reasons. The CSR Rules prescribe the annual report format as an annexure.

What is the penalty for CSR non-compliance under section 135?

The company pays the lower of twice the amount required to be transferred and ₹1 crore. Each officer in default pays the lower of one-tenth of that amount and ₹2 lakh. Section 446B reduces this for small companies, start-ups, OPCs and Producer Companies.

Is impact assessment compulsory for all companies?

No. The CSR Rules apply it only to companies and projects that meet prescribed thresholds. Check the current Rules for the exact figures and conditions.

Who monitors CSR activities?

The CSR Committee monitors the policy from time to time. The Board must ensure the activities in the policy are undertaken. Where the obligation is ₹50 lakh or less, the Board does the Committee's work.