The Ministry of Corporate Affairs (MCA) issued a clarificatory notification on 22 May 2025 addressing compliance requirements for corporate social responsibility (CSR) spending under Section 135 of the Companies Act, 2013 for financial year 2024-25. The notification reiterates that companies with unspent CSR amounts must transfer such funds to specified government funds within six months of the close of the financial year.
Background
Section 135 of the Companies Act, 2013 requires companies meeting prescribed thresholds of net worth, turnover, or net profit to spend at least two per cent of their average net profits of the preceding three financial years on CSR activities. Where a company fails to spend the requisite amount during the financial year, the unspent amount must be transferred to a Fund specified in Schedule VII within six months — that is, by 30 September for the financial year ending 31 March.
Persistent confusion among corporates regarding the treatment of ongoing CSR projects, the distinction between unspent amounts relating to ongoing projects and other unspent amounts, and the compliance consequences of shortfalls prompted the MCA to issue this clarification. The notification is particularly relevant as FY 2024-25 compliance deadlines approach, with the six-month transfer window closing on 30 September 2025.
Key Provisions
The MCA notification clarifies the following:
Unspent CSR — ongoing projects: Where a company has identified an ongoing project but has not spent the earmarked CSR amount, the unspent sum must be transferred to a separate Unspent CSR Account opened with a scheduled bank within thirty days of the financial year end (i.e., by 30 April 2025 for FY 2024-25). This amount must be spent within three financial years.
Unspent CSR — no ongoing project: Where unspent CSR amounts do not relate to any ongoing project, the company must transfer such amounts to a Fund specified in Schedule VII of the Act — such as the Prime Minister's National Relief Fund or the PM CARES Fund — within six months (by 30 September 2025).
Board disclosure requirements: The Board of Directors must disclose in the annual CSR report the reasons for any shortfall in CSR spending, the amount transferred to the Unspent CSR Account or Schedule VII Fund, and the timeline for utilisation of ongoing project funds.
Penalty for non-compliance: Non-transfer of unspent CSR amounts within the prescribed timelines attracts penalties under Section 135(7), including a fine of up to one crore rupees on the company and up to two lakh rupees on every defaulting officer.
Implications for Practitioners
Corporate counsel and company secretaries must treat the approaching 30 September 2025 deadline as non-negotiable. The MCA's clarification eliminates any argument that ongoing project identification alone satisfies the spending requirement — the Unspent CSR Account transfer must still occur within thirty days of the financial year end.
For companies that have not yet opened an Unspent CSR Account, the thirty-day window for FY 2024-25 has already lapsed. Practitioners should assess whether such companies face penalty exposure and consider voluntary disclosure to the Registrar of Companies as a mitigating step.
The practical challenge for boards is distinguishing between genuinely ongoing projects and projects that have stalled. Where a project has not progressed meaningfully, reclassifying the amount as non-ongoing and transferring it to a Schedule VII Fund may be the lower-risk compliance strategy rather than defending the ongoing-project classification during a regulatory inquiry.