CSR Applicability Calculator

Any One Threshold Triggers It

CSR applicability under Section 135 isn't an "all three" test — meeting just one of the three thresholds (net worth, turnover, or net profit) in the immediately preceding financial year makes CSR provisions applicable, including forming a CSR committee and spending at least 2% of average net profit. A company can be well below the turnover and net worth thresholds and still be covered purely on net profit alone.

Worked Example

A company with ₹600 crore net worth, ₹800 crore turnover, ₹3 crore net profit, and ₹25 crore average net profit (last 3 years):

Even though turnover and net profit are both below their individual thresholds, crossing the net worth threshold alone is enough to trigger full CSR applicability.

The 2% Is on Average Profit, Not Current-Year Profit

The mandatory spend is 2% of the average net profit over the three immediately preceding financial years — not 2% of the current year's profit. This smooths out the required spend across a company's fluctuating profitability, but also means a company can owe a CSR spend based on average profit even in a year where current profit is lower (or even a loss), as long as the trailing average is positive and one of the applicability thresholds is met.

Worked Example: A Non-Applicable Company

Contrast the qualifying example above with a mid-sized manufacturing company that has ₹300 crore net worth, ₹700 crore turnover, and ₹4 crore net profit in the immediately preceding financial year:

Because all three figures fall short of their respective thresholds, this company has no CSR obligation for the year, even though ₹4 crore net profit and ₹700 crore turnover are both substantial numbers in absolute terms. Section 135 applicability is a threshold test against these three specific figures, not a general assessment of company size.

What Counts Toward the 2% Spend

Not every socially beneficial expense a company incurs counts as CSR spend for Section 135 purposes. Eligible activities generally need to fall within the areas listed in Schedule VII of the Companies Act (covering areas like education, health, poverty eradication, environmental sustainability, and several others), and certain categories are specifically excluded — activities undertaken in the normal course of business, contributions to political parties, and activities that benefit only the company's own employees are common examples of spend that does not qualify as CSR even if it has some social benefit.

Administrative overheads related to CSR implementation are also capped as a proportion of total CSR expenditure rather than being fully includible without limit. Because the qualifying-activity rules carry real detail and have been refined by rules and clarifications over time, treat this calculator as an applicability and budget estimator only — confirm which specific activities and overheads count before finalizing a CSR spend plan.

The CSR Committee Requirement

A company to which Section 135 applies must generally constitute a CSR Committee of the Board to formulate and recommend a CSR policy and monitor its implementation. As the calculator above notes, companies with a required CSR spend under a specified threshold (commonly cited as ₹50 lakh) are exempted from forming a separate committee — the Board itself can directly perform the committee's functions. This is a relief on governance overhead, not a relief on the underlying obligation to spend the required amount or report on it.

Holding, Subsidiary, and Foreign Companies

CSR applicability is assessed at the level of each company individually based on its own net worth, turnover, and net profit — a subsidiary doesn't automatically inherit CSR applicability just because its holding company crosses a threshold, and vice versa. Foreign companies with a branch or project office in India can also fall within the scope of Section 135 if their India-sourced income and other figures meet the prescribed thresholds, computed under rules specific to how foreign companies' financials are measured for this purpose. Group-level CSR planning still requires checking each entity's own numbers against the thresholds separately.

Carrying Forward Excess CSR Spend

CSR compliance isn't strictly a use-it-or-lose-it exercise year to year. If a company spends more than the mandatory 2% figure in a given financial year, the excess can generally be set off against the required spend in a specified number of immediately succeeding financial years, subject to conditions and board approval. This gives a company some flexibility to front-load CSR spending in a good year rather than being forced to spend exactly 2% annually regardless of project timing.

Conversely, amounts earmarked for an ongoing multi-year project don't need to be spent in full within the year they're allocated — they can be carried in a designated unspent CSR account and drawn down as the project progresses, provided the transfer to that account and the subsequent utilization both happen within the prescribed timelines. Missing those timelines is treated differently from a genuine ongoing project and can trigger the stricter transfer-to-fund requirement instead.

Reporting the CSR Spend

A company to which Section 135 applies must disclose its CSR activities, amount spent, and any shortfall (with reasons) in its Board's report for the year, along with the composition of the CSR Committee where one is required. Larger companies crossing specified CSR-spend thresholds may also face additional disclosure or impact-assessment requirements for their larger projects. Because the specific disclosure formats and any impact-assessment thresholds have been refined through rules issued after the original Section 135 provision, confirm the current reporting format applicable to your company's spend level with your company secretary or consultant rather than assuming the basic disclosure alone is sufficient.

CSR Through Implementing Agencies

Companies rarely run every CSR project entirely in-house. Section 135 permits CSR activities to be undertaken directly, or through a registered trust, society, or Section 8 company, including one set up by the company itself or by a group of companies acting jointly. Where an external implementing agency is used, it generally needs to be registered with the government authority in the manner prescribed, and the company remains responsible for satisfying itself that funds transferred are actually utilized for the approved CSR activity. Routing CSR spend through an unregistered or informally structured entity is a common compliance pitfall — before transferring any CSR budget to an external partner, confirm that partner's registration status is current rather than assuming a longstanding relationship is automatically compliant under the current rules.

Penalties for Non-Compliance

Section 135 non-compliance — whether failing to spend the required amount without a valid transfer to the specified fund, or failing to disclose CSR activities properly in the Board's report — can attract monetary penalties on the company and on the officers responsible for the default, in addition to the reputational cost of an enforcement action becoming a matter of public record. Because the penalty framework for CSR defaults has been amended since the original 2013 provision to introduce specific monetary penalties (moving away from an earlier framework centered mainly on disclosure of reasons for shortfall), confirm the current penalty structure with your company secretary or consultant rather than assuming an older, lighter-touch regime still applies if your company has an unresolved CSR shortfall from a prior year. Boards are generally better served treating a shortfall as a matter to resolve promptly, given how compliance expectations in this area have tightened over time.