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Environmental, Social and Governance (ESG) - Principles and Practice · Board Committees

CSR Committee under Section 135: Applicability, Composition and Role

Updated 11 October 2026 · Fact-checked

The CSR Committee is a Board committee that a company must constitute under Section 135 when it crosses the net worth, turnover or net profit limits. It has three or more directors, including one independent director. It recommends the CSR policy and spending, and monitors the policy. Answer questions by applying provision, facts, conclusion.

Understand CSR Committee

Corporate Social Responsibility (CSR) is a legal duty for larger companies in India. Section 135 of the Companies Act, 2013 requires them to plan and spend on social causes. The Board cannot do all the detailed work, so the law asks for a specialised committee.

The CSR Committee is a committee of the Board. It exists to design the company's CSR approach, suggest how much to spend, and keep watch over the policy. The Board then approves the policy and makes sure the activities are carried out. The Committee recommends. The Board decides.

A company needs the Committee only if, during the immediately preceding financial year, it had any one of three things: net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more. Meeting any one limit is enough. You do not need all three.

The Committee must have at least three directors, and at least one must be an independent director. If the company is not required to appoint an independent director under Section 149(4), it needs two or more directors on the Committee. The Board's report must disclose the Committee's composition.

There is a relief for small CSR obligations. If the amount the company must spend under Section 135(5) does not exceed ₹50 lakh, the Committee need not be constituted. The Board of Directors then performs the Committee's functions itself.

Key rules to remember

Applicability thresholds (Section 135(1))
Net worth ≥ ₹500 crore OR Turnover ≥ ₹1,000 crore OR Net profit ≥ ₹5 crore (in the immediately preceding financial year)
Any one limit triggers the Committee. Test is on the immediately preceding financial year.
Composition (Section 135(1))
Minimum 3 directors, including at least 1 independent director
If the company need not appoint an independent director under Section 149(4), the minimum is 2 or more directors.
Committee functions (Section 135(3))
(a) formulate and recommend CSR Policy; (b) recommend expenditure amount; (c) monitor the CSR Policy from time to time
The policy must indicate activities in areas or subjects specified in Schedule VII.
Board duties (Section 135(4))
Approve CSR Policy after considering Committee recommendations; disclose policy contents in report and on website; ensure activities are undertaken
The Board approves. The Committee only recommends.
Minimum spend (Section 135(5))
Minimum CSR spend = 2% × average net profit of the 3 immediately preceding financial years
Net profit is calculated as per Section 198. For a company not yet three years old, use the immediately preceding years completed.
Exemption from Committee (Section 135(9))
If amount to be spent under Section 135(5) ≤ ₹50 lakh, no Committee; Board discharges its functions
The duty to spend remains. Only the Committee requirement falls away.

How to solve CSR Committee questions

Use this method for any question on the CSR Committee. Write it in the order provision, facts, conclusion.

  1. 1Identify what is asked: applicability, composition, functions, or the Board's role.
  2. 2Test applicability on the immediately preceding financial year. Check net worth, turnover and net profit separately. One limit met is enough.
  3. 3Compute the CSR obligation if needed: 2% of the average net profit of the three preceding years. Compare it with ₹50 lakh to see if the Board can replace the Committee.
  4. 4Check composition: count the directors, confirm at least one independent director, and note the two-director rule where no independent director is required.
  5. 5List the Committee's three functions: formulate and recommend the policy, recommend the spend, monitor the policy.
  6. 6Separate the Board's role: approve the policy, disclose it in the report and on the website, and ensure activities are undertaken.
  7. 7State the disclosure point: the Board's report must show the Committee's composition.
  8. 8Write a clear conclusion that applies the rule to the facts given.

Quickest way: Three-check shortcut

When to use it: Use this for short-answer or case facts where you must decide quickly whether a Committee is needed and whether it is valid.

  1. Check the thresholds: ₹500 crore net worth, ₹1,000 crore turnover, ₹5 crore net profit. Any one is enough.
  2. Compute 2% of the three-year average net profit. If it is ₹50 lakh or less, the Board acts as the Committee.
  3. If a Committee is needed, check three or more directors with one independent director.
  4. Write: Committee recommends policy and spend, monitors. Board approves and ensures implementation.

Common mistakes in CSR Committee

  • Saying all three thresholds must be met before the Committee is required.

    Students read the list as cumulative.

    Fix: The text says net worth, or turnover, or net profit. Any one is enough.

  • Saying the Committee approves the CSR policy.

    Students mix up the recommending body with the approving body.

    Fix: The Committee formulates and recommends. The Board approves the policy after considering the recommendations.

  • Testing applicability on the current year or the three-year average.

    The three-year average appears in the spending rule, so it gets applied everywhere.

    Fix: Applicability uses the immediately preceding financial year. The three-year average is only for the 2% spend.

  • Thinking a company with CSR spend up to ₹50 lakh need not do CSR at all.

    Students over-read the exemption.

    Fix: Only the Committee is dispensed with. The Board discharges its functions and the spending duty continues.

  • Requiring three independent directors, or ignoring the independent director rule.

    Students recall 'three directors' and 'independent' and merge them.

    Fix: Three or more directors, of whom at least one is independent. Two or more directors where no independent director is required.

  • Forgetting to mention the Board's report disclosure.

    Students focus only on functions.

    Fix: Add that the Board's report must disclose the Committee's composition, and the policy must be disclosed and placed on the website.

Worked examples

Example 1

Sundaram Textiles Ltd had, in the immediately preceding financial year, net worth of ₹320 crore, turnover of ₹870 crore and net profit of ₹6 crore. Is it required to constitute a CSR Committee? Its average net profit of the last three years is ₹4 crore.

Show the solution
  1. 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 in the immediately preceding financial year.
  2. Facts: Net worth ₹320 crore is below ₹500 crore. Turnover ₹870 crore is below ₹1,000 crore. Net profit ₹6 crore is at least ₹5 crore, so one limit is met.
  3. Section 135 therefore applies.
  4. CSR spend: 2% of ₹4 crore = ₹8 lakh.
  5. Since ₹8 lakh does not exceed ₹50 lakh, Section 135(9) says the Committee requirement does not apply.

Answer: Section 135 applies because net profit is above ₹5 crore. The minimum CSR spend is ₹8 lakh. As this is within ₹50 lakh, the company need not constitute a CSR Committee. Its Board of Directors discharges the Committee's functions.

Example 2

The Board of Kaveri Industries Ltd, a company covered by Section 135 with a CSR obligation above ₹50 lakh, has formed a CSR Committee of two directors, both executive. The Committee has itself approved the CSR policy. Advise the company.

Show the solution
  1. Provision: Section 135(1) requires three or more directors, with at least one independent director. The two-director rule applies only where the company is not required to appoint an independent director under Section 149(4).
  2. Facts: The Committee has two directors, both executive. No independent director is on it. Nothing says the company is exempt from appointing independent directors.
  3. Conclusion on composition: the Committee is improperly constituted. It needs at least three directors, including an independent director.
  4. Provision on policy: under Section 135(3) the Committee formulates and recommends the policy. Under Section 135(4) the Board approves it after considering the recommendations.
  5. Facts: the Committee itself approved the policy. This is not valid approval.
  6. Further: the Board must disclose the policy contents in its report and on the company's website, and the Board's report must disclose the Committee's composition.

Answer: The Committee must be reconstituted with at least three directors, one of them independent. The Committee can only recommend the CSR policy. The Board must approve it, then disclose it in its report and on the website.

Exam tips

  • Begin every answer with the Section 135(1) thresholds and say that any one is enough.
  • Keep the two roles separate in your answer: the Committee recommends and monitors, the Board approves and ensures implementation.
  • In numerical cases, work out 2% of the three-year average net profit before deciding on the ₹50 lakh exemption.
  • Quote the exact words where you can, such as 'immediately preceding financial year' and 'three or more directors'.
  • End with a short conclusion that applies the rule to the facts. Add a drafting or compliance point such as Board's report disclosure.

Practice questions from Board Committees

CSR Committee 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: frequently asked questions

When is a CSR Committee mandatory for a company?

It is required when, in the immediately preceding financial year, the company had net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more. Meeting any one limit is enough. The exception is where the CSR amount does not exceed ₹50 lakh.

What is the composition of the CSR Committee?

It must have three or more directors, with at least one independent director. Where a company is not required to appoint an independent director under Section 149(4), it needs two or more directors on the Committee. The Board's report must disclose the composition.

What are the functions of the CSR Committee?

It formulates and recommends the CSR policy to the Board, indicating activities in areas specified in Schedule VII. It recommends the amount to be spent on those activities. It also monitors the CSR policy from time to time.

Who approves the CSR policy, the Committee or the Board?

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

Does a company with CSR spend below ₹50 lakh still have to do CSR?

Yes. If the amount to be spent under Section 135(5) does not exceed ₹50 lakh, only the Committee requirement is waived. The Board of Directors performs the Committee's functions, and the spending duty continues.