Section 135 after 31 March: where boards get CSR compliance wrong

Companies reported CSR expenditure of ₹34,908.75 crore in FY 2023-24, and ₹1,44,159 crore over the five years from FY 2019-20¹. At that scale, small errors of timing and labelling carry real cost: a project designated too late, a release to an agency booked as spent, a transfer made days after the deadline.

Each of those is a board decision. MCA describes CSR as Board-driven, with no direct role for the Government in approving or implementing projects². This note follows the company's money past 31 March, on the law as it stood on 25 September 2026.

The shortfall is decided at approval

If a company does not spend its obligation, the Board must give the reasons in its report, and the unspent amount follows one of two tracks³.

Money in an Unspent CSR Account must be spent within three financial years of the transfer, with any balance sent to a Schedule VII fund within 30 days after the third year^3,2. A transfer made on time counts as compliance with Section 135(5)².

Three features of this design catch boards out.

The ongoing label is narrow. An ongoing project runs no more than three years beyond the year it commenced; it commences when the work order is issued or the contract awarded, and MCA rules out any extension beyond that limit². The Board monitors each one against its approved timeline and year-wise allocation⁴. The designation, the timeline and each year's allocation therefore belong in the approval minute. A shortfall elsewhere in the programme cannot be re-described as ongoing once the year has closed.

An April catch-up does not cure a shortfall. MCA bars spending the non-ongoing unspent amount on CSR activities during the six months after the year-end; it has to go to the fund².

Released money is not spent money. Disbursal to an implementing agency counts only when the agency uses the funds². Tranches released in March and booked as spent can hide the true shortfall until the transfer deadline has passed.

The account also keeps governance alive. Under the 2022 amendment rules, a company with any balance in an Unspent CSR Account must have a CSR Committee and comply with Section 135(2) to (6)⁵; the book read this proviso from a secondary reproduction of the notification. That reaches a company below every threshold, and one relying on the ₹50-lakh committee exemption in Section 135(9)³. Whether a rule can withdraw an exemption the Act grants is arguable. The author's reading is that the committee should be kept while any balance remains, since it costs far less than a dispute with the Registrar.

Impact assessment: who, when and at what cost

Assessment through an independent agency is mandatory where a company's average CSR obligation over the three preceding financial years is ₹10 crore or more, for projects with an outlay of ₹1 crore or more completed at least a year before the assessment^6,2. It covers projects completed on or after 22 January 2021². Because the test uses an average, a company can move in or out of it from year to year.

The reports go before the Board and are annexed to the annual report on CSR, with an executive summary and web link for each^6,5. The cost may be booked as CSR up to 2% of the year's total CSR expenditure or ₹50 lakh, whichever is higher^5,7. The book took this cap from secondary reproductions of the 2022 rules, so the Gazette text should be checked before relying on it.

Two silences matter more than the thresholds. The CSR Rules do not define "independent agency"⁸. The author's reading is that an assessor lacks independence if it implemented, designed or monitored the project, is the company's implementing agency on any project, or is related to the company or the agency. The Rules also prescribe no method, standard or follow-up; MCA's stated purpose is to help companies take considered decisions before deploying CSR money^6,2. Method is the company's to choose and defend, which argues for outcomes fixed before fieldwork and null findings reported as prominently as positive ones.

What Section 135(7) actually prices

A default under Section 135(5) or (6) exposes the company to a penalty of twice the amount required to be transferred or ₹1 crore, whichever is less, and every officer in default to one-tenth of that amount or ₹2 lakh, whichever is less³. The sub-section was substituted by the Companies (Amendment) Act, 2020⁹, and non-compliance has been a civil wrong since 22 January 2021². Worked through, the officer cap binds once the untransferred amount exceeds ₹20 lakh, and the company cap above ₹50 lakh.

Two consequences follow. The penalty is measured on the transfer, so a company that under-spends, states its reasons and transfers on time has complied. And MCA treats the penalty as over and above the amount to be transferred, so paying it leaves the transfer due².

A reported order shows the effect. In May 2023 the Registrar of Companies, Karnataka, as adjudicating officer, penalised a private company whose FY 2020-21 unspent amount of ₹11,11,871 reached the PMNRF on 20 December 2021, after the 30 September deadline. The reported total penalty was ₹24,46,116¹⁰, consistent with twice the amount on the company and one-tenth on each of two officers. The late transfer did not avert the penalty. The book relies on a secondary report of this order.

MCA monitors compliance through MCA21 filings², so the annual report on CSR and CSR-2 are what put a default before the Registrar. The controls are unglamorous: a dated calendar with a named officer for each transfer, standing bank mandates, and agency agreements that deliver utilisation to 31 March in time to compute the shortfall.

When is a project ready to scale?

Compliance records say little about whether a project deserves more money; on the face of the annual report on CSR, a second-year pilot and a mature programme can look identical. The book offers Programme Readiness Levels: nine rungs from a documented need, through design, partner, running pilot, evaluated pilot, scale-up, full programme and handholding, to outcomes that outlast the funding. The form borrows from NASA's technology readiness levels¹¹. The ladder is practitioner-built and has not been validated. It is a self-assessment instrument for a company's own projects, and should not be used to rate anyone else's.

The decisive gate is the evaluated pilot: scale up, redesign or stop. A decision that alters the action plan goes to the Board on the committee's recommendation with reasons minuted, and changes to an ongoing project's timeline or allocation are the Board's within the permissible period^6,4. The law bites at particular rungs:

• Under-spent pilots. A one-year pilot that under-spends sends its gap to a Schedule VII fund³. A stage likely to straddle a year-end is safer designated as ongoing at approval.
• The clock. An ongoing project cannot run beyond its first year plus three². The author's reading, on a point MCA's FAQs do not address, is that a genuine new phase with its own design, budget and approval may be approved as a new project; relabelling a continuing activity to restart the clock invites scrutiny.
• The late study. A statutory assessment cannot start until a year after completion², so the company's own pilot review has to carry the scale-up decision.

Projects bunched at the pilot stages and renewed each year on activity reports signal a pilot trap. As the book puts it: "a portfolio in which no project has ever stopped is unlikely to be gated at all."

This note draws on The Section 135 Practice Manual: CSR Compliance for Indian Companies (FY 2026-27 Edition) by Harshal Kate, in preparation.

Analysis, not legal advice. Law stated as at 25 September 2026.