CSR applicability FY 2026-27 — net worth, turnover and profit thresholds

INTRODUCTION

Corporate Social Responsibility (CSR) has become an integral part of corporate governance in India. Introduced under Section 135 of the Companies Act, 2013, CSR requires eligible companies to spend a portion of their profits on activities that contribute to social, environmental, and economic development.

For FY 2026-27, companies must first determine whether CSR provisions are applicable based on the financial position of the immediately preceding financial year. Understanding the eligibility thresholds, spending requirements, and compliance obligations helps companies avoid non-compliance and maintain proper corporate governance. :contentReference[oaicite:0]{index=0}

WHAT IS CORPORATE SOCIAL RESPONSIBILITY (CSR)?

Corporate Social Responsibility (CSR) refers to a company’s responsibility to contribute towards social welfare through activities specified under Schedule VII of the Companies Act, 2013.

CSR activities may include initiatives relating to:

Environmental sustainability

Education and skill development

Healthcare and sanitation

Women empowerment

Rural development

Promotion of education and livelihood

Companies cannot spend CSR funds on activities outside the scope of Schedule VII merely because they benefit society. :contentReference[oaicite:1]{index=1}

CSR APPLICABILITY FOR FY 2026-27

A company is required to comply with CSR provisions if it satisfies any one of the following criteria during the immediately preceding financial year:

Net Worth of ₹500 Crore or more

Turnover of ₹1,000 Crore or more

Net Profit of ₹5 Crore or more

Meeting even one of the above thresholds makes the company liable to comply with Section 135 of the Companies Act, 2013. It is not necessary to satisfy all three conditions. These thresholds continue to apply for FY 2026-27. :contentReference[oaicite:2]{index=2}

HOW MUCH CSR SPENDING IS REQUIRED?

Once CSR becomes applicable, the company is generally required to spend:

• At least 2% of the average net profits of the three immediately preceding financial years.

The average net profit is calculated in accordance with Section 198 of the Companies Act, 2013 and not merely based on the Profit After Tax (PAT) shown in the financial statements. Companies should therefore compute the CSR obligation carefully before finalising the amount to be spent. :contentReference[oaicite:3]{index=3}

CSR COMMITTEE REQUIREMENTS

Eligible companies are generally required to constitute a CSR Committee of the Board, unless exempted under the applicable provisions.

The CSR Committee is responsible for:

• Recommending the CSR Policy.
• Recommending the amount of CSR expenditure.
• Monitoring CSR projects and implementation.
• Reporting CSR activities to the Board.

The Board of Directors remains responsible for ensuring compliance with CSR provisions and making the required disclosures in the Board’s Report. :contentReference[oaicite:4]{index=4}

IMPORTANT CSR COMPLIANCES

Once CSR becomes applicable, companies should ensure timely compliance with the following:

• Constitute the CSR Committee wherever required.
• Prepare and approve the CSR Policy.
• Compute the CSR obligation correctly.
• Spend the prescribed CSR amount during the financial year or comply with the provisions relating to unspent CSR amounts.
• Make appropriate disclosures in the Board’s Report.
• File Form CSR-2 along with the applicable annual filing requirements. :contentReference[oaicite:5]{index=5}

COMMON MISTAKES TO AVOID

Many companies face compliance issues due to simple errors.

• Assuming CSR applies only to public companies.
• Calculating the 2% spending based on Profit After Tax instead of the prescribed method.
• Spending CSR funds on activities not covered under Schedule VII.
• Missing disclosures in the Board’s Report.
• Delaying transfer of unspent CSR amounts wherever applicable.

Proper planning and periodic review help companies avoid these common mistakes. :contentReference[oaicite:6]{index=6}

PRACTICAL COMPLIANCE CHECKLIST

Before closing the financial year, companies should verify:

• Whether any of the CSR applicability thresholds have been crossed.
• Whether the CSR obligation has been correctly calculated.
• Whether eligible CSR projects have been approved.
• Whether the required CSR expenditure has been incurred or appropriate action has been taken for unspent amounts.
• Whether all disclosures and filings have been completed within the prescribed timelines.

CONCLUSION

Corporate Social Responsibility is more than a statutory obligation—it reflects a company’s commitment towards sustainable and inclusive growth. Companies crossing the prescribed thresholds of net worth, turnover, or net profit should evaluate their CSR applicability at the beginning of every financial year and ensure timely compliance with Section 135 of the Companies Act, 2013.

Maintaining proper documentation, accurately computing the CSR obligation, and completing the required disclosures and filings help companies remain compliant while making a meaningful contribution to society.

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