CSR and Social Governance · Guidelines on CSR

CSR Committee and Board Responsibilities under Section 135

Updated 11 October 2026 · Fact-checked

Under Section 135 of the Companies Act, 2013, a qualifying company sets up a CSR Committee of three or more directors, including one independent director. The Committee recommends the CSR policy and spend. The Board approves the policy, discloses it, and ensures the activities are carried out and the spend is made.

Understand CSR Committee and Board Responsibilities

Section 135 does not leave CSR to management alone. It puts the responsibility on the Board and gives a Board committee the job of shaping and watching the programme. You must keep the two roles apart: the Committee recommends and monitors, the Board approves and ensures.

The duty starts with size. A company must act if, in the immediately preceding financial year, it had net worth of ₹500 crore or more, or turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more. Meeting any one test is enough.

Such a company constitutes a CSR Committee of the Board with three or more directors, at least one of whom is an independent director. If the company is not required to appoint an independent director under section 149(4), the Committee needs two or more directors. The composition must be disclosed in the Board's report.

The Committee has three functions under the section: formulate and recommend a CSR Policy showing the activities to be undertaken in areas or subjects specified in Schedule VII; recommend the amount of expenditure on those activities; and monitor the policy from time to time.

The Board then takes the Committee's recommendations into account, approves the policy, discloses its contents in its report and places it on the company's website, if any. It must also ensure the policy's activities are undertaken and that the company spends at least 2% of average net profit of the three immediately preceding financial years. The section also relaxes the structure for small spends: where the amount to be spent does not exceed ₹50 lakh, no Committee is required and the Board discharges the Committee's functions.

Key rules to remember

Applicability thresholds: Net worth ≥ ₹500 crore OR turnover ≥ ₹1,000 crore OR net profit ≥ ₹5 crore (immediately preceding financial year); Any one test triggers section 135(1). They are alternatives, not cumulative.
CSR Committee composition: At least 3 directors, including at least 1 independent director; If the company need not appoint an independent director under section 149(4), at least 2 directors.
Committee functions: Formulate and recommend policy + recommend expenditure + monitor policy; Section 135(3). Policy must indicate activities in areas or subjects specified in Schedule VII.
Board duties: Approve policy + disclose it in report and on website + ensure activities are undertaken + ensure the prescribed spend; Section 135(4) and (5).
Minimum spend: 2% × average net profit of the 3 immediately preceding financial years; Net profit is calculated as per section 198. If the company has not completed three years since incorporation, the immediately preceding years are used.
Small spend relief: Amount to be spent ≤ ₹50 lakh ⇒ no CSR Committee; Board performs its functions; Section 135(9). The test is the amount to be spent, not profit.

How to solve CSR Committee and Board Responsibilities questions

Use this order for any case question on the CSR Committee or the Board's role. It follows provision, analysis, conclusion.

1Check applicability: test net worth, turnover and net profit of the immediately preceding financial year against ₹500 crore, ₹1,000 crore and ₹5 crore. One is enough.
2Work out the CSR obligation: 2% of the average net profit of the three immediately preceding financial years, using section 198 profit.
3Decide whether a Committee is needed: if the amount to be spent is ₹50 lakh or less, the Board performs the Committee's functions.
4If a Committee is needed, test composition: at least three directors and one independent director, or two directors if section 149(4) does not require an independent director.
5Assign roles: the Committee formulates, recommends and monitors; the Board approves, discloses and ensures.
6Check disclosure: Committee composition in the Board's report under section 134(3); policy contents in the report and on the website, if any.
7Conclude with the consequence: state the compliance step or the penalty exposure under section 135(7), if the facts show default.

Quickest way: Three-question check

When to use it: Use it when a short case gives figures and asks whether a Committee is needed or who must do what.

Q1: Does any of the three thresholds apply? If not, section 135 does not apply.
Q2: Is 2% of average net profit above ₹50 lakh? If yes, form the Committee. If not, the Board acts.
Q3: Is the task about recommending or monitoring (Committee) or approving, disclosing and ensuring (Board)? Write the answer on that split.

Common mistakes in CSR Committee and Board Responsibilities

Saying all three thresholds must be met.
Students read the list as cumulative.
Fix: The section uses 'or'. Meeting any one of net worth, turnover or net profit triggers the duty.
Using the current year's profit for the 2% spend.
The applicability test uses the preceding year, which blurs with the spend base.
Fix: Applicability looks at the immediately preceding financial year; the spend uses the average net profit of the three immediately preceding years.
Testing the ₹50 lakh relief against profit or turnover.
Students remember the figure but not what it measures.
Fix: Compare the amount required to be spent under section 135(5) with ₹50 lakh. If it does not exceed that, the Board discharges the Committee's functions.
Giving the Committee the power to approve the CSR policy.
Both bodies deal with the policy.
Fix: The Committee formulates and recommends. The Board approves after taking the recommendations into account.
Requiring an independent director in every company's Committee.
Students ignore the proviso.
Fix: If the company is not required to appoint an independent director under section 149(4), two or more directors suffice.
Forgetting the disclosure duties.
Answers stop at constitution and approval.
Fix: Add: composition in the Board's report, policy contents in the report, and the policy on the website, if any.

Worked examples

Example 1

Sundaram Textiles Ltd had a net worth of ₹320 crore, turnover of ₹1,150 crore and net profit of ₹4 crore in the immediately preceding financial year. Is it required to constitute a CSR Committee? Its average net profit of the last three years under section 198 is ₹30 crore.

Show the solution

Provision: section 135(1) applies if net worth is ₹500 crore or more, or turnover is ₹1,000 crore or more, or net profit is ₹5 crore or more.
Analysis: net worth ₹320 crore is below ₹500 crore. Turnover ₹1,150 crore is above ₹1,000 crore. Net profit ₹4 crore is below ₹5 crore.
One test is met, which is enough.
CSR amount: 2% × ₹30 crore = ₹0.60 crore = ₹60 lakh.
₹60 lakh exceeds ₹50 lakh, so the relief in section 135(9) does not apply.

Answer: Yes. The turnover test is met, and the amount to be spent is ₹60 lakh, which exceeds ₹50 lakh. The company must constitute a CSR Committee of at least three directors including one independent director, unless section 149(4) does not require it to appoint an independent director, in which case two directors suffice.

Example 2

Kaveri Foods Ltd must spend ₹42 lakh on CSR this year. The Board asks whether it must form a CSR Committee and who approves the CSR policy.

Show the solution

Provision: under section 135(9), where the amount to be spent under section 135(5) does not exceed ₹50 lakh, the Committee requirement in section 135(1) does not apply.
Analysis: ₹42 lakh is below ₹50 lakh.
The functions of the Committee are then discharged by the Board: formulating and recommending the policy, recommending the expenditure and monitoring the policy.
The Board still has its own duties: approve the policy, disclose its contents in its report, place it on the website if any, and ensure the activities are undertaken and the amount is spent.

Answer: No Committee is needed. The Board performs the Committee's functions and also approves the CSR policy. It must still disclose the policy, ensure the activities are carried out, and meet the 2% spend requirement.

Exam tips

Write the section number with each point: 135(1) for applicability and composition, 135(3) for Committee functions, 135(4) for Board approval, 135(5) for spend, 135(9) for small spend.
In case questions, show the figures against each threshold in a short list before concluding.
Draw the line between Committee and Board in one sentence: Committee recommends and monitors, Board approves and ensures.
Mention disclosure in the Board's report and on the website. Many answers miss these marks.
Mention the penalty under section 135(7) only when the facts show a default, and state it correctly: for the company, twice the amount to be transferred or ₹1 crore, whichever is less.

Practice questions from Guidelines on CSR

CSR Committee and Board Responsibilities in other exams

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

CSR Committee and Board Responsibilities: frequently asked questions

Who can be a member of the CSR Committee?

The Committee must have at least three directors, including one independent director. Where the company is not required to appoint an independent director under section 149(4), two or more directors are enough.

Is a CSR Committee required if the CSR spend is below ₹50 lakh?

No. Where the amount to be spent under section 135(5) does not exceed ₹50 lakh, the Committee requirement does not apply. The Board discharges the Committee's functions.

What does the Board have to do with the CSR policy?

After taking the Committee's recommendations into account, the Board approves the policy. It discloses the policy's contents in its report and places it on the company's website, if any. It must also ensure the activities in the policy are undertaken.

Does the CSR Committee have to disclose anything?

The Committee's composition must be disclosed in the Board's report under section 134(3). The policy contents are disclosed by the Board in its report.