Section 135 — Corporate Social Responsibility

(1) Every company having net worth of rupees five hundred
crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more
during 2[the immediately preceding financial year] shall constitute a Corporate Social Responsibility
Committee of the Board consisting of three or more directors, out of which at least one director shall be an
independent director:
3[Provided that where a company is not required to appoint an independent director under sub-section
(4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors.]
(2) The Board's report under sub -section ( 3) of section 134 shall disclo se the composition of the
Corporate Social Responsibility Committee.
(3) The Corporate Social Responsibility Committee shall,—
(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall
indicate the activities to be undertaken by the company 4[in areas or subject, specified in Schedule VII];
(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a);
and
(c) monitor the Corporate Social Responsibility Policy of the company from time to time.
(4) The Board of every company referred to in sub-section (1) shall,—
(a) after taking into account the recommendations made by the Corporate Social Responsibility
Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents
of such Policy in its report and also place it on the company’s website, if any, in such manner as may
be prescribed; and
(b) ensure that the activities as are included in Corporate Social Responsibility Policy of the
company are undertaken by the company.
(5) The Board of every company referred to in sub -section (1), shall ensure that the company spends,
in every financial year, at least two per cent. of the average net profits of the company made during the
three immediately preceding financial years, 5[or where the company has not completed the period of three
financial years since its incorporation, during such immediately preceding financial years,] in pursuance of
its Corporate Social Responsibility Policy:
Provided that the company shall give preference to the local area and areas around it where it operates,
for spending the amount earmarked for Corporate Social Responsibility activities:
Provided further that if the company fails to spend such amount, the Board shall, in its report made
under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount

1. Subs. by Act 29 of 2020, s. 26, for sub-section (8) (w.e.f. 21-12-2020).
2. Subs. by Act 1 of 2018, s. 37, for “any financial year” (w.e.f. 19-9-2018).
3. The proviso ins. by s. 37, ibid., (w.e.f. 19-9-2018).
4. Subs. by s. 37, ibid., for “as specified in Schedule VII” (w.e.f. 19-9-2018).
5. Ins. by Act 22 of 2019, s. 21 (w.e.f. 22-1-2021).

1[and, unless the unspent amount relates to any ongoing project referred to in sub -section (6), transfer
such unspent amount to a Fund spec ified in Schedule VII, within a period of six months of the expiry of
the financial years].
2[Provided also that if the company spends an amount in excess of the requirements provided under this
sub-section, such company may set off such excess amount agai nst the requirement to spend under this
sub-section for such number of succeeding financial years and in such manner, as may be prescribed.]
3[Explanation.—For the purposes of this section “net profit” shall not include such sums as may be
prescribed, and shall be calculated in accordance with the provisions of section 198.]
4[(6) Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, fulfilling
such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate Social
Responsibility Policy, shall be transferred by the company within a period of thirty days from the end of
the financial year to a special account to be opened by the company in that behalf for that financial year in
any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount
shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility
Policy within a period of three financial years from the date of such tr ansfer, failing which, the company
shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of
completion of the third financial year.
5[(7) If a company is in default in complying with the provisions of sub -section (5) or sub-section (6),
the company shall be liable to a penalty of twice the amount required to be transferred by the company to
the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case
may be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be
liable to a penalty of one -tenth of the amount required to be transferred by the company to such Fund
specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or
two lakh rupees, whichever is less.]
(8) The Central Government may give such general or special directions to a company or class of
companies as it considers necessary to ensure compliance of provisions of thi s section and such company
or class of companies shall comply with such directions.]
6[(9) Where the amount to be spent by a company under sub -section (5) does not exceed fifty lakh
rupees, the requirement under sub -section ( 1) for constitution of the Corp orate Social Responsibility