CSR and Social Governance · CSR Projects and Implementation Agency

CSR Monitoring, Impact Assessment and Reporting Explained

Updated 11 October 2026 · Fact-checked

CSR monitoring means the Board and CSR Committee track projects through a transparent mechanism. Large companies with an average CSR obligation of ₹10 crore or more must commission impact assessment of big completed projects. Unspent money goes to an Unspent CSR Account (ongoing projects) or a Schedule VII fund, and the Board report and Form CSR-2 disclose it.

Understand Monitoring, Impact Assessment and Reporting

Spending CSR money is only half the duty. Section 135 also expects the Board to ensure that the activities in the CSR Policy are actually undertaken. That is why monitoring, impact assessment and reporting sit together at the end of the CSR cycle.

Monitoring is ongoing. Under the CSR Rules, the Board must make sure the CSR Committee sets up a transparent monitoring mechanism for projects and programmes. In practice this means milestones, utilisation records, site visits and periodic reports to the Committee. The Chief Financial Officer (or the person responsible for financial management) certifies that funds were used for the purposes and in the manner the Board approved.

Impact assessment asks a different question: did the project change anything? It is mandatory only for bigger companies. Under the CSR Rules it applies where the company's average CSR obligation in the three immediately preceding financial years is ₹10 crore or more. It covers projects with an outlay of at least ₹1 crore that were completed at least one year earlier. The report is placed before the Board and annexed to the annual report on CSR. The company may book the cost of the study as CSR expenditure, up to the higher of 5% of the total CSR expenditure for the year or ₹50 lakh.

Unspent amounts are handled by two routes under section 135. For an ongoing project, the unspent amount goes to a special Unspent Corporate Social Responsibility Account in a scheduled bank within 30 days from the end of the financial year. It must be spent within three financial years from the date of transfer. If it is not, it goes to a Schedule VII fund within 30 days from the end of the third financial year. For any other unspent amount, the company transfers it to a Schedule VII fund within six months of the end of the financial year. In both cases, the Board's report must state the reasons for not spending.

Reporting has two layers. The Board's report discloses the CSR Committee composition and the CSR Policy contents, and carries the annual report on CSR in the prescribed format. The policy is also placed on the company's website. Separately, the company files Form CSR-2 on the MCA portal along with its financial statement filing, giving the CSR details. Learn this as the filing-side counterpart of the Board report disclosure.

Key rules to remember

Impact assessment trigger: Average CSR obligation of last 3 FYs ≥ ₹10 crore AND project outlay ≥ ₹1 crore AND project completed ≥ 1 year ago; All three conditions must be met. Under the CSR Rules, the report goes to the Board and is annexed to the annual report on CSR.
Impact assessment cost cap: Higher of (5% × total CSR expenditure of the year) or ₹50 lakh; The cost can be counted as CSR expenditure up to this limit.
Ongoing project: unspent amount: Transfer to Unspent CSR Account within 30 days of FY end; spend within 3 financial years of transfer; else transfer to Schedule VII fund within 30 days of completing the third financial year; Section 135(6). Applies only to ongoing projects that meet the prescribed conditions.
Other unspent amount: Transfer to a Schedule VII fund within 6 months of the expiry of the financial year; Second proviso to section 135(5). The Board report must give reasons for not spending.
Penalty for default (section 135(7)): Company: lower of 2 × amount not transferred or ₹1 crore. Officer in default: lower of 1/10 of amount not transferred or ₹2 lakh; Apply the 'whichever is less' test separately for the company and the officer.
Minimum spend: At least 2% of average net profit of the three immediately preceding financial years; Net profit is calculated under section 198. Preference goes to the local area and areas around it.
Committee exemption: CSR amount to be spent ≤ ₹50 lakh → no CSR Committee; the Board performs its functions; Section 135(9). This affects who monitors.

How to solve Monitoring, Impact Assessment and Reporting questions

Most questions on this topic are case-based. Work through the facts in a fixed order so no condition is missed.

1Identify what is asked: monitoring, impact assessment, unspent amount, or reporting and disclosure.
2Compute the CSR obligation: 2% of the average net profit of the three preceding financial years, and note the three-year average obligation if impact assessment is in issue.
3For impact assessment, test each condition separately: average obligation of ₹10 crore or more, project outlay of ₹1 crore or more, and completion at least one year earlier.
4For unspent amounts, first decide whether the project is ongoing. Then pick the route: Unspent CSR Account (30 days) or Schedule VII fund (six months).
5Fix the dates. Count from the financial year end (31 March) and, for the third-year deadline, from the end of the third financial year after transfer.
6State the consequence of default: penalty on the company and on the officer in default, each with its own cap.
7Name the reporting step: Board's report disclosure, annual report on CSR, website placement and Form CSR-2 filing.
8Conclude in one clear sentence that answers the question asked.

Quickest way: Three-test shortcut for CSR scenarios

When to use it: Use it when a case gives numbers and dates and you have limited time.

Test 1: Is the company's average CSR obligation ₹10 crore or more? If not, impact assessment is not mandatory.
Test 2: Is the unspent money for an ongoing project? If yes, Unspent CSR Account within 30 days; if no, Schedule VII fund within six months.
Test 3: For any default, compute 'twice the amount or ₹1 crore, whichever is less' for the company and 'one-tenth or ₹2 lakh, whichever is less' for the officer.
Close with the disclosure: reasons in the Board's report and CSR-2 filing.

Common mistakes in Monitoring, Impact Assessment and Reporting

Saying every company must conduct impact assessment.
Students remember the word 'mandatory' but forget the thresholds.
Fix: Always state the ₹10 crore average obligation test, then the ₹1 crore outlay and one-year completion tests for the project.
Sending all unspent CSR money to the Unspent CSR Account.
The Unspent Account is better known than the six-month route.
Fix: Only unspent amounts of ongoing projects go to the Unspent CSR Account. Other unspent amounts go to a Schedule VII fund within six months of the financial year end.
Mixing up the 30-day and six-month deadlines.
Both deadlines are in section 135 and look similar.
Fix: Link 30 days to ongoing projects (and to the end of the third year) and six months to non-ongoing unspent amounts.
Applying the penalty as a flat ₹1 crore on the company and ₹2 lakh on the officer.
Students forget the 'whichever is less' formula.
Fix: Compute twice the amount and one-tenth of the amount first, then compare with ₹1 crore and ₹2 lakh, and take the lower figure.
Treating Form CSR-2 and the Board's report as the same thing.
Both disclose CSR details.
Fix: The Board's report (with the annual report on CSR) is the internal disclosure to members. CSR-2 is a separate filing on the MCA portal along with the financial statement filing.
Forgetting who monitors when the company is below the ₹50 lakh limit.
Students assume a Committee always exists.
Fix: Where the amount to be spent does not exceed ₹50 lakh, the CSR Committee is not required and the Board discharges its functions under section 135(9).

Worked examples

Example 1

Sundaram Industries Ltd has an average CSR obligation of ₹12 crore over the last three financial years. In the current year it spent a total of ₹12 crore on CSR. A school-building project with an outlay of ₹1.5 crore was completed two years ago. Is impact assessment required for it? What is the maximum cost of the study that can be counted as CSR expenditure?

Show the solution

Test 1: Average CSR obligation is ₹12 crore, which is at least ₹10 crore. The company is covered.
Test 2: Project outlay is ₹1.5 crore, which is at least ₹1 crore. Satisfied.
Test 3: The project was completed two years ago, which is at least one year earlier. Satisfied.
Cost cap: 5% of ₹12 crore = ₹60 lakh. The alternative is ₹50 lakh.
The cap is the higher of the two, so it is ₹60 lakh.

Answer: Yes, impact assessment is required for the school project. The cost of the study up to ₹60 lakh can be counted as CSR expenditure. The report goes to the Board and is annexed to the annual report on CSR.

Example 2

Kaveri Textiles Ltd had a CSR obligation of ₹4 crore for FY 2026-27. It spent ₹3 crore. The remaining ₹1 crore relates to an ongoing project. State what the company must do, the deadlines, and the maximum penalty if it fails to transfer the amount at the right time.

Show the solution

The unspent ₹1 crore relates to an ongoing project, so section 135(6) applies.
Transfer it to the Unspent CSR Account in a scheduled bank within 30 days from the end of the financial year. The year ends on 31 March 2027, so the deadline is 30 April 2027.
The amount must be spent within three financial years from the date of transfer: FY 2027-28, 2028-29 and 2029-30, that is, by 31 March 2030.
If it is still unspent, transfer it to a Schedule VII fund within 30 days from the completion of the third financial year, that is, by 30 April 2030.
The Board's report must state the reasons for not spending the amount.
Penalty on default for ₹1 crore: company is liable to the lower of twice ₹1 crore (₹2 crore) and ₹1 crore, so ₹1 crore.
Officer in default: the lower of one-tenth of ₹1 crore (₹10 lakh) and ₹2 lakh, so ₹2 lakh.

Answer: Transfer ₹1 crore to the Unspent CSR Account by 30 April 2027, spend it by 31 March 2030, and otherwise move it to a Schedule VII fund by 30 April 2030. On default, the company's penalty is ₹1 crore and each officer in default is liable to ₹2 lakh.

Exam tips

Write the three impact assessment conditions as a short list, then apply each to the facts. Examiners reward the test, not just the conclusion.
Always separate ongoing projects from other unspent amounts. Most unspent-amount questions turn on this distinction.
Do the date arithmetic in your answer. A stated deadline such as 30 April 2027 shows that you applied the rule.
For penalty questions, show both comparisons for the company and the officer. A bare final figure loses marks.
Close disclosure questions by naming all channels: Board's report, annual report on CSR, website placement and Form CSR-2.

Practice questions from CSR Projects and Implementation Agency

Monitoring, 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.

Monitoring, Impact Assessment and Reporting: frequently asked questions

Who needs to do CSR impact assessment?

Under the CSR Rules, companies with an average CSR obligation of ₹10 crore or more in the three immediately preceding financial years must do it. It covers projects with an outlay of at least ₹1 crore that were completed at least one year earlier. Other companies may do it voluntarily.

What happens to unspent CSR money for an ongoing project?

The company transfers it to an Unspent CSR Account within 30 days from the end of the financial year. It must spend it within three financial years. If it fails, it transfers the balance to a Schedule VII fund within 30 days from the completion of the third financial year.

What is the CSR-2 form?

CSR-2 is the form in which a company reports its CSR details on the MCA portal. It is filed along with the financial statement filing. It is separate from the annual report on CSR that forms part of the Board's report.

Is a CSR Committee compulsory for every company covered by section 135?

No. Where the amount to be spent does not exceed ₹50 lakh, the Committee need not be constituted. The Board then performs the Committee's functions under section 135(9).