Corporate Social Responsibility under Section 135 of the Companies Act, 2013, has moved well beyond a year-end spend exercise. Today, it is a structured governance obligation that spans planning, approvals, execution, fund tracking, and statutory disclosures. For companies subject to this framework, a reliable CSR compliance calendar is no longer optional; it is the foundation of defensible, audit-ready compliance.
This document consolidates the key governance actions, deadlines, and MCA filing requirements for FY2026-27 into a single, practical reference.
Who Does Section 135 Apply To in FY2026-27?
Applicability for FY2026-27 is determined based on FY2025-26 financials. A company must comply with Section 135 if, in the immediately preceding financial year, it meets any one of the following thresholds:
- Net worth of Rs. 500 crore or more, or
- Turnover of Rs. 1,000 crore or more, or
- Net profit of Rs. 5 crore or more.
Key Components of the Section 135 Framework
CSR Committee and Board Responsibilities
The CSR Committee is responsible for formulating and recommending the CSR policy, the annual action plan, allocating the budget, and monitoring implementation. The Board approves these decisions and is ultimately accountable for disclosures in the Board’s Report.
Where companies engage external implementing agencies, those entities must hold a valid MCA Form CSR-1 – Registration of Entities for undertaking CSR Activities. Verifying this registration before fund transfer is a basic but often skipped compliance step.
Ongoing vs. Other-Than-Ongoing Projects
This classification governs how unspent CSR amounts are treated at year-end. Ongoing projects allow multi-year implementation within approved timelines. Amounts unspent under such projects must be transferred to a separate Unspent CSR Account within 30 days of the financial year-end. For all other projects, unspent amounts must be transferred to a Schedule VII-specified fund within six months of year-end. Misclassification of projects is a recurring compliance gap and directly affects reporting accuracy.
The 2% CSR Spend Requirement
Companies are required to spend at least 2% of the average net profits of the three immediately preceding financial years, or where the company has not completed three financial years since incorporation, 2% of the average net profits of such immediately preceding financial years on eligible CSR activities. Where actual spending falls short, the reasons must be formally documented and disclosed in the Board’s Report. Non-compliance attracts penalties under the Companies Act, 2013, making in-year expenditure tracking and monitoring a critical governance activity rather than a post-year-end reconciliation exercise.
Section 135 Compliance Calendar: FY2026-27 Timeline
April to June 2026: Governance Setup and Planning
The financial year opens with governance and budgeting priorities. Key actions include:
Confirming CSR applicability based on FY2025-26 financials and constituting or reconstituting the CSR Committee as required. The Board must approve the annual CSR action plan, which outlines projects, execution modalities, budgets, and monitoring timelines. Implementing agencies must be identified and their Form CSR-1 registration validated. For companies with multi-year ongoing projects, prior-year balances must be brought forward and reconciled against approved project timelines.
Completing these steps in April itself reduces execution and documentation risk later in the year.
July to December 2026: Monitoring and Mid-Year Reviews
This phase is focused on implementation oversight. CSR Committees should conduct periodic reviews, aligned with the company’s internal governance calendar, to assess utilisation progress against approved project milestones.
Key activities during this phase include tracking fund disbursements, reviewing project completion status, and ensuring that any scope adjustments are documented with appropriate approvals. Maintaining continuous documentation and traceability during this phase is critical for year-end disclosures and for demonstrating compliance during any regulatory verification.
January to March 2027: Year-End Closure
The final quarter is the most consequential stage in the compliance cycle. Companies must assess whether the 2% spend requirement has been met and identify any unspent balances.
At this stage, companies should also finalise their Board’s Report disclosures, classify all projects as ongoing or other-than-ongoing, and prepare draft CSR disclosures consistent with financial statements. Inconsistencies between utilisation records and disclosures remain one of the most frequently observed gaps in CSR compliance in India.
Post-Year Filings: April to September 2027
Following the financial year, companies complete their statutory filings and fund transfers.
Form CSR-2, which captures detailed information on CSR activities, must be filed with the MCA as an addendum to AOC-4. CSR disclosures in the Board’s Report and financial statements must be consistent and cross-verified before submission.
Key Deadlines Snapshot: FY2026-27
- April 2026: Board approval of annual CSR action plan and project allocations
- During the year: Periodic CSR Committee reviews and fund utilisation tracking
- 31 March 2027: Completion of 2% spend or identification of unspent amount
- 30 April 2027: Transfer of unspent amounts to Unspent CSR Account (ongoing projects)
- 30 September 2027: Transfer to Schedule VII-specified funds (other-than-ongoing projects)
- Post-year: Filing of Form CSR-2 linked with AOC-4
Common Compliance Gaps to Watch
The following gaps are consistently observed across companies managing CSR compliance under Section 135:
- Delayed CSR Committee constitution – Committees are often formed late in the year, compressing the time available for project identification and approval.
- Misclassification of projects – Projects incorrectly tagged as “ongoing” when they do not meet the regulatory criteria, leading to improper treatment of unspent amounts.
- Weak documentation – Inadequate records of fund utilisation and project milestones,creating risk during Board’s Report preparation or regulatory review.
- Reporting Inconsistencies – Variances between amounts disclosed in the Board’s Report and those reflected in the financial statements.
- Absence of monitoring mechanism – Lack of structured oversight results in end-loaded spending and poor impact outcomes.
Effective compliance management requires that these risks be identified and addressed during the year, not after disclosures are filed. Proactive monitoring and documentation are essential to ensure CSR obligations translate into measurable impact rather than post‑fact corrections.
Integrating CSR Compliance into Broader Governance
CSR compliance does not operate in isolation. For many companies, it intersects with internal controls frameworks, financial reporting processes, and board governance structures. Embedding CSR tracking into existing governance cycles, whether through internal audit reviews or finance-led monitoring, significantly reduces the risk of year-end surprises.
Pierag’s Business Risk Advisory team works with companies to strengthen compliance frameworks, including governance readiness for Section 135 obligations. Our Assurance practice also supports companies in ensuring that CSR disclosures are consistent, accurate, and audit-ready.
Frequently Asked Questions
Q1. When is CSR applicability determined for FY2026-27?
Applicability is based on the financials of the immediately preceding year, which is FY2025-26.
Q2. What happens if unspent CSR funds are not transferred on time?
Non-transfer within prescribed timelines attracts penalties under the Companies Act, 2013, and must be disclosed in the Board’s Report.
Q3. What is Form CSR-1, and when is it required?
Form CSR-1 is the MCA-prescribed registration form through which implementing agencies must register with the Central Government to undertake CSR activities. Companies must verify this registration before transferring CSR funds to any external entity.
Q4. Is the CSR annual action plan mandatory?
Yes. The annual CSR action plan, approved by the Board, is a regulatory requirement under the CSR Rules and must include project details, timelines, budgets, and monitoring mechanisms.
