CSR and Social Governance · Social Impact Assessment and CSR Audit

CSR Monitoring and Reporting under Section 135

Updated 11 October 2026 · Fact-checked

CSR monitoring and reporting is how a company checks that its CSR projects follow the approved policy and then discloses the results. The CSR Committee monitors the policy, the Board ensures activities are undertaken, and the Board's report discloses the committee, the policy contents, and reasons for any unspent amount.

Understand CSR Monitoring and Reporting

Section 135 does not stop at asking a company to spend on CSR. It also builds a chain of control. Someone must plan, someone must watch, and someone must tell the public what happened. This topic is about the watching and telling.

The CSR Committee is the first layer. Under Section 135(3), it formulates and recommends the CSR Policy to the Board, recommends the amount of expenditure, and monitors the CSR Policy from time to time. Monitoring is a continuing duty, not a year-end check.

The Board is the second layer. Under Section 135(4), after considering the committee's recommendations, it approves the CSR Policy. It must disclose the contents of the policy in its report and place it on the company's website, if any, in the prescribed manner. It must also ensure that the activities in the policy are actually undertaken by the company.

The third layer is disclosure. Under Section 135(2), the Board's report under Section 134(3) must disclose the composition of the CSR Committee. Under the second proviso to Section 135(5), if the company fails to spend the required amount, the Board's report must give the reasons for not spending it. The Board must also transfer the unspent amount as the Act requires.

The annual action plan, the detailed format of the annual CSR report and the impact assessment rules are set by the CSR Rules made under the Act. They are not in the text of Section 135 itself. In your answer, treat the Section as the base and the Rules as the working detail. Where a company's CSR spend is within the limit in Section 135(9), the Board performs the committee's functions.

Key rules to remember

CSR Committee composition: Minimum 3 directors, at least 1 independent director; Section 135(1). If the company need not appoint an independent director under Section 149(4), it needs 2 or more directors.
Committee's monitoring role: Formulate and recommend policy + recommend amount + monitor policy from time to time; Section 135(3)(a), (b) and (c).
Board's duties: Approve policy + disclose contents in report + place on website, if any + ensure activities are undertaken; Section 135(4)(a) and (b). Website placement is in the manner prescribed.
Board's report disclosures: Committee composition + policy contents + reasons for non-spending; Sections 135(2), 135(4)(a) and the second proviso to 135(5).
Minimum spend: 2% × average net profit of the 3 immediately preceding financial years; Section 135(5). Net profit is calculated under Section 198. For a company not yet three years old, use the immediately preceding years completed.
Committee exemption: Amount to be spent ≤ ₹50,00,000 → no committee; Board discharges its functions; Section 135(9).
Unspent amount for ongoing project: Transfer to Unspent CSR Account within 30 days of financial year end; spend within 3 financial years; Section 135(6). If not spent, transfer to a Schedule VII Fund within 30 days of the end of the third year.
Penalty for default under 135(5) or (6): Company: lesser of 2 × amount not transferred or ₹1 crore. Officer in default: lesser of 1/10 of the amount or ₹2,00,000; Section 135(7).

How to solve CSR Monitoring and Reporting questions

Use this order for any question on CSR monitoring, reporting or disclosure. It keeps the answer in the provision, analysis, conclusion pattern.

1Check applicability first. Test 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.
2Decide who acts. If the CSR amount does not exceed ₹50 lakh, the Board does the committee's work. Otherwise a committee of at least three directors with one independent director is needed.
3Name the duty in the question: policy formulation, monitoring, approval, website disclosure or Board report disclosure. Match it to the sub-section.
4Apply the facts. Compare what the company did with what the Section requires, such as a missing website entry or a missing reason for unspent funds.
5If an unspent amount is involved, decide whether it relates to an ongoing project. Then pick the route: Unspent CSR Account under Section 135(6), or a Schedule VII Fund under Section 135(5).
6Add the consequence, such as the penalty under Section 135(7), and state the practical drafting or compliance step.
7Close with a clear conclusion in one or two sentences.

Quickest way: Who does what, and where it is disclosed

When to use it: Use it for short-answer or case questions where you must quickly assign duties and disclosures.

Write three labels: Committee, Board, Board's report.
Under Committee write: recommend policy, recommend amount, monitor.
Under Board write: approve policy, ensure activities, put policy on website.
Under Board's report write: committee composition, policy contents, reasons for unspent amount.
Check the ₹50 lakh limit and the ongoing project route before concluding.

Common mistakes in CSR Monitoring and Reporting

Saying the CSR Committee approves the CSR Policy.
Students link the committee with all CSR decisions.
Fix: The committee formulates and recommends. The Board approves under Section 135(4)(a).
Treating website disclosure as compulsory for every company.
The words 'if any' in the Section are overlooked.
Fix: The Section says the policy is placed on the company's website, if any, in the prescribed manner.
Mixing the two unspent amount routes.
Both involve transfers and similar periods, so they blur together.
Fix: Ongoing project: Unspent CSR Account within 30 days, spend within 3 years. Otherwise: Schedule VII Fund within six months of the end of the financial year.
Quoting the penalty as a flat ₹1 crore.
Students remember only the cap.
Fix: The company pays the lesser of twice the amount or ₹1 crore. The officer in default pays the lesser of one-tenth of the amount or ₹2 lakh.
Attributing the annual action plan details to Section 135 itself.
Notes mix the Act and the Rules.
Fix: Cite the Section for the duties and say that the plan's contents and report format come from the CSR Rules.
Forgetting the Board performs the committee's functions for small spends.
Section 135(9) is at the end and gets skipped.
Fix: Check the CSR amount against ₹50 lakh in every case on committee composition.

Worked examples

Example 1

Nirmaan Infra Ltd is a company covered by Section 135. Its Board approved a CSR Policy but did not publish it on the company's website, although the company has one. The Board's report also did not mention the committee's members. Advise the Board.

Show the solution

Provision: Section 135(4)(a) requires the Board to disclose the policy contents in its report and place the policy on the company's website, if any, in the prescribed manner.
Provision: Section 135(2) requires the Board's report under Section 134(3) to disclose the composition of the CSR Committee.
Analysis: Nirmaan has a website, so website placement applies. The policy was not placed there, which is a lapse.
Analysis: The report omitted the committee's composition, which is another lapse.
Conclusion and action: The Board should upload the policy in the prescribed manner, include the policy contents and committee composition in the report, and record the corrections in the minutes.

Answer: Nirmaan Infra has breached Sections 135(4)(a) and 135(2). It should place the policy on its website, and disclose the policy contents and committee composition in the Board's report.

Example 2

Sagar Foods Ltd has a CSR obligation of ₹80 lakh for the year. It spent ₹50 lakh on completed activities. The remaining ₹30 lakh is for a multi-year project that is an ongoing project meeting the prescribed conditions. Explain the treatment and the Board's reporting duty.

Show the solution

Provision: Section 135(5) requires the Board to ensure the minimum spend. The second proviso requires reasons for non-spending in the Board's report.
Analysis: The unspent ₹30 lakh relates to an ongoing project, so Section 135(6) applies instead of a transfer to a Fund.
Action: Transfer ₹30 lakh to a special Unspent CSR Account in a scheduled bank within 30 days from the end of the financial year.
Action: Spend it within three financial years from the date of transfer.
Failure route: If it is not spent, transfer it to a Schedule VII Fund within 30 days from the completion of the third financial year.
Reporting: The Board's report should specify the reasons for the unspent amount.
Consequence: Default attracts a penalty under Section 135(7).

Answer: Sagar Foods must transfer ₹30 lakh to the Unspent CSR Account within 30 days of the year end and spend it within three financial years. Any balance then goes to a Schedule VII Fund. The Board's report must give the reasons for the unspent amount.

Exam tips

Structure answers as provision, analysis and conclusion, citing the exact sub-section such as 135(4)(a).
Draw the line between recommending (Committee) and approving (Board) in every answer.
Keep the Act and the Rules apart. Say 'as prescribed in the CSR Rules' for the action plan and report format.
Learn the two unspent amount routes with their time limits as a pair.
For case questions, add a practical compliance step such as a Board resolution, website upload or minute entry.

Practice questions from Social Impact Assessment and CSR Audit

CSR Monitoring 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.

CSR Monitoring and Reporting: frequently asked questions

Who monitors CSR under Section 135?

The CSR Committee monitors the CSR Policy from time to time under Section 135(3)(c). The Board ensures the policy's activities are undertaken under Section 135(4)(b).

What must the Board's report say about CSR?

It must disclose the composition of the CSR Committee and the contents of the CSR Policy. If the company has not spent the required amount, it must state the reasons.

Is the CSR Policy always placed on the website?

Section 135(4)(a) requires it on the company's website, if any, in the prescribed manner. If a company has no website, this requirement does not arise.

Do small CSR spenders need a CSR Committee?

Not if the amount to be spent under Section 135(5) does not exceed ₹50 lakh. The Board then discharges the committee's functions under Section 135(9).

Where is the annual action plan set out?

Its contents and the approval process are laid down in the CSR Rules, not in the text of Section 135. Cite the Rules in your answer when discussing the plan.