Section 135 of the Companies Act, 2013, requires qualifying companies to spend at least 2% of average net profits of the preceding three financial years on Corporate Social Responsibility activities — subject to prescribed computation rules and permitted activity schedules.
Compliance failures increasingly arise not from failure to spend but from deficient utilisation documentation, incorrect administrative expense allocation, and independent practitioner certifications that do not meet MCA and ICAI standards.
This article covers the certification workflow, common errors, and how boards and CA firms should structure CSR governance.
I. CSR framework essentials
- CSR Committee constitution and meeting minutes
- CSR policy disclosure on website and in Board's Report
- Annual action plan aligned with Schedule VII activities
- Unspent CSR amount transfer to specified funds where spending lags
II. Utilisation certification and UDIN
Independent practitioners certify CSR spend utilisation for specified companies. Certification requires traceable vouchers, beneficiary identification where applicable, and segregation of administrative overheads within permitted caps.
III. Common errors to avoid
- Activities outside Schedule VII or not aligned with stated policy
- One-time donations without impact documentation where assessment applies
- Nil CSR spend without proper explanation in Board's Report
- Missing UDIN on practitioner certification filed with MCA
Key takeaways
- CSR compliance is documentation-heavy — certification quality depends on project-level records.
- Administrative expense caps must be monitored throughout the year.
- CSR Committee and Board oversight should precede certification — not follow it.
- UDIN and practitioner standards are enforceable MCA compliance points.
Conclusion
CSR under Section 135 is a governance obligation, not a philanthropic afterthought. Companies that treat utilisation certification as an annual discipline reduce director liability and audit committee exposure.
Important disclaimer
CSR applicability thresholds and rules evolve with MCA notifications. Confirm applicability for your company's net profit and net worth profile.