CSR and Social Governance · CSR Projects and Implementation Agency

CSR Projects, Programmes and Activities under the Companies Act

Updated 11 October 2026 · Fact-checked

A CSR project, programme or activity is a social spend that falls within Schedule VII, follows the Board-approved CSR Policy, and is not part of the company's normal business. An ongoing project is a multi-year project with a timeline of up to three years, excluding the year it starts. Local areas get preference.

Understand CSR Projects, Programmes and Activities

Section 135 makes a qualifying company spend at least two per cent of its average net profit of the three preceding financial years on CSR. The spend counts only if it goes into activities that come under Schedule VII and are carried out under the company's CSR Policy. The CSR Committee recommends the policy, the Board approves it, and the Board must ensure the listed activities are undertaken.

The three words are used loosely, so keep the idea simple. An activity is a single action, such as a health camp. A programme is a set of related activities with a common aim. A project is a planned piece of work with a defined scope, budget and timeline, such as building a school block. For the exam, what matters is that each one must fit Schedule VII, and you must say so.

CSR is not the same as business as usual. Under the CSR Rules, the following do not count: activities in the normal course of business, one-off events such as marathons, awards or sponsorships, contributions to political parties, activities that benefit only employees and their families, and activities outside India (with a narrow exception for training Indian sports personnel). Check each fact pattern against this list first.

An ongoing project is a multi-year project that the company has taken up to meet its CSR obligation, with a timeline of not more than three years excluding the year of commencement. It also covers projects started in an earlier year and run to the timelines set in the CSR Policy. The point of the label is the unspent-money rule. Under section 135(6), unspent money that relates to an ongoing project goes to a special Unspent CSR Account instead of a Schedule VII Fund.

Geographical preference is a statutory rule. Section 135(5) says the company shall give preference to the local area and areas around it where it operates when spending the CSR amount. This is a preference, not a ban on spending elsewhere. A company can spend in other areas, but it should be able to explain why when the local area is not chosen.

Key rules to remember

Minimum CSR spend: CSR obligation ≥ 2% × average net profit of the 3 immediately preceding financial years; Net profit is calculated under section 198 and excludes sums prescribed by the Rules. A company that has not completed three years since incorporation uses the preceding years it has.
Ongoing project timeline: Ongoing project = multi-year project, timeline ≤ 3 years excluding the year of commencement; Projects started earlier also qualify if they run within the timelines in the CSR Policy. A longer project is not an ongoing project in the Rules' sense.
Unspent amount, ongoing project: Transfer to Unspent CSR Account within 30 days of financial year end; spend within 3 financial years from transfer; else transfer to Schedule VII Fund within 30 days of the third year's end; This is section 135(6).
Unspent amount, not an ongoing project: Transfer to a Schedule VII Fund within 6 months of the financial year's expiry; The Board must also give reasons in its report under section 134(3)(o). This is the second proviso to section 135(5).
Local area rule: Preference to the local area and areas around where the company operates; First proviso to section 135(5).
Penalty for default: Company: lower of 2 × amount not transferred or ₹1 crore. Officer in default: lower of 1/10 of the amount or ₹2 lakh; Section 135(7).

How to solve CSR Projects, Programmes and Activities questions

Use this order for any question on whether a spend is a valid CSR project or how to treat it.

1Identify the company's obligation: check applicability under section 135(1) and compute two per cent of the three-year average net profit.
2Test each activity against Schedule VII. Name the relevant item, such as education, health, rural development or environment.
3Apply the exclusions: normal course of business, one-off events, political contributions, employees-only benefit, and activities outside India.
4Classify the work as a one-year activity or a multi-year project. If multi-year, check whether the timeline is within three years excluding the commencement year, so it is an ongoing project.
5Check the process: the activity must be in the CSR Policy and the Annual Action Plan, which the Board approves on the CSR Committee's recommendation.
6Check the location. Is the spend in the local area or areas around it? If not, note that this is a preference and ask whether reasons are recorded.
7Deal with any unspent amount: ongoing project means the Unspent CSR Account route; otherwise the Schedule VII Fund within six months. State the deadlines and the penalty on default.
8Conclude clearly: valid CSR spend or not, and what the Board must do.

Quickest way: Four-question screen

When to use it: Use this when a case study lists several spends and you have little time.

Is it under Schedule VII? If not, it is not CSR.
Is it excluded (business as usual, one-off event, political, employees only, outside India)? If so, it does not count.
Is it multi-year within three years excluding the start year? If so, call it an ongoing project and use section 135(6) for any unspent amount.
Is it local? If not local, say that the preference was not followed and note the justification.

Common mistakes in CSR Projects, Programmes and Activities

Treating any multi-year project as an ongoing project.
Students read 'ongoing' as 'continuing over several years'.
Fix: Remember the limit: timeline not exceeding three years excluding the year of commencement. A longer project does not fit this definition.
Saying unspent money on every project must go to the Unspent CSR Account.
Students mix up section 135(5) and 135(6).
Fix: Only unspent money relating to an ongoing project goes to the Unspent CSR Account. Other unspent money goes to a Schedule VII Fund within six months.
Counting a one-off event or business-linked spend as CSR.
The activity looks charitable, so it is assumed to qualify.
Fix: Always run the exclusion list. A sponsored event or an activity that is part of the company's normal business does not count.
Calling local area preference a strict ban on spending elsewhere.
Students overstate the proviso.
Fix: The text says the company shall give preference to the local area and areas around it. It is a preference, not a prohibition.
Mixing up the timelines of 30 days, six months and three financial years.
There are several deadlines in one section.
Fix: Write them as a short table in your notes: 30 days to transfer to the Unspent CSR Account, three financial years to spend it, 30 days after the third year to transfer to the Fund, six months for non-ongoing unspent money.
Forgetting the Board and Committee process.
Students focus only on Schedule VII.
Fix: Mention that the activity must be in the CSR Policy and Annual Action Plan, recommended by the Committee and approved by the Board.

Worked examples

Example 1

Ganga Textiles Ltd spent money on four items in a year: (a) building classrooms in a village near its factory, (b) sponsoring a company-branded cricket tournament, (c) a medical camp only for its own employees' families, (d) contributing to a political party. Which can count as CSR?

Show the solution

Test (a): education falls under Schedule VII and the village is near the factory, so the local area preference is met. It counts.
Test (b): a branded tournament is a sponsorship and a one-off event, which is excluded. It does not count.
Test (c): a benefit only for employees and their families is excluded. It does not count.
Test (d): contributions to political parties are excluded. It does not count.

Answer: Only item (a) counts as a CSR project. Items (b), (c) and (d) fall within the exclusions in the CSR Rules.

Example 2

Kaveri Power Ltd has an average net profit of ₹60 crore over the three preceding years. In FY 2027-28 it spends ₹70 lakh. Its CSR Policy and Annual Action Plan include a three-year school building project that began in FY 2026-27, and the ₹50 lakh balance relates to this project. State the compliance steps, the deadlines and the maximum penalty if it defaults on the transfer.

Show the solution

Obligation: 2% × ₹60 crore = ₹1.2 crore, or ₹1,20,00,000.
Unspent amount: ₹1,20,00,000 − ₹70,00,000 = ₹50,00,000.
The project is multi-year and its timeline is within three years excluding the commencement year, so it is an ongoing project. Section 135(6) applies.
The year ends on 31 March 2028. The company must transfer ₹50,00,000 to the Unspent CSR Account in a scheduled bank within 30 days, that is by 30 April 2028.
It must spend the amount within three financial years from the transfer, that is by 31 March 2031 (FY 2028-29, 2029-30, 2030-31).
If not spent, it must transfer the balance to a Schedule VII Fund within 30 days of the end of the third financial year, that is by 30 April 2031.
Penalty on default: company pays lower of 2 × ₹50,00,000 = ₹1,00,00,000 and ₹1 crore, so ₹1 crore. Officer in default pays lower of 1/10 × ₹50,00,000 = ₹5,00,000 and ₹2 lakh, so ₹2 lakh.

Answer: The company should move ₹50 lakh to the Unspent CSR Account by 30 April 2028 and spend it by 31 March 2031. On default, the penalty is ₹1 crore on the company and ₹2 lakh on each officer in default.

Exam tips

Start every answer with the Schedule VII link, then the exclusions. Examiners reward this order.
Quote the ongoing project test exactly: multi-year, not more than three years excluding the year of commencement.
In unspent amount cases, show the figures and the dates. Compute the 2% first and state the balance.
Use the words 'preference' and 'shall give preference' for the local area rule. Do not say it is mandatory spending only in the local area.
End with a clear conclusion in one line: counts or does not count, and the action the Board should take.

Practice questions from CSR Projects and Implementation Agency

CSR Projects, Programmes and Activities: frequently asked questions

What is an ongoing project under the CSR rules?

It is a multi-year project that a company undertakes to meet its CSR obligation, with a timeline of not more than three years excluding the year it starts. It also includes projects started earlier that run to the timelines in the CSR Policy. Unspent money on such a project follows section 135(6).

What is the difference between an ongoing project and a multi-year project?

An ongoing project is a type of multi-year project. It must meet the three-year limit, excluding the commencement year. A multi-year project with a longer timeline does not fall under the ongoing project definition, so its unspent money does not get the Unspent CSR Account route.

Must CSR money be spent only in the local area?

No. Section 135(5) requires the company to give preference to the local area and areas around where it operates. It can spend elsewhere, but it should be able to justify that choice.

What happens if CSR money for an ongoing project is not spent in three years?

The company must transfer the balance in the Unspent CSR Account to a Fund specified in Schedule VII within 30 days from the completion of the third financial year. Default attracts the penalty in section 135(7).