For many companies, the CSR conversation becomes urgent only when the financial year is almost over.
The project is approved. The budget is allocated. An implementing partner has been identified. Then procurement takes longer than expected, a programme launch moves to the next quarter, or the planned expenditure simply does not happen at the pace originally anticipated.
By March, money remains unspent.
That does not necessarily mean the CSR programme has failed. But it does mean the company needs to understand what kind of unspent amount it is dealing with, what the law requires, and what must happen next.
For companies planning their CSR calendar for the financial year 2026–27, 31 March 2027 is not just the year-end accounting date. It is the point from which specific statutory timelines begin to matter.
The treatment of unspent CSR funds depends significantly on whether the amount relates to an ongoing project or an amount that does not relate to an ongoing project. Section 135 of the Companies Act, 2013 creates different routes for each situation.
This distinction is at the centre of responsible CSR compliance in India in 2026.
Important: This article is for general educational information. CSR law, rules, MCA forms and regulatory interpretations can change. Companies should verify the provisions applicable to their circumstances with qualified legal, company-secretarial, finance or tax professionals before taking compliance decisions.
Why 31 March should not be the first CSR review
A common mistake is treating CSR spending as something to reconcile after the financial year closes.
A stronger approach is to conduct a CSR mid-year review and then another review several months before 31 March.
Why?
Because an unspent amount can result from very different situations.
A project may genuinely be progressing but require expenditure over multiple financial years.
Another project may have been approved but never started. An implementing agency may have received money but not yet utilised it.
A company may have changed its project priorities during the year. Or the original budget may simply have been larger than what could realistically be deployed.
These situations should not be treated as identical.
The Ministry of Corporate Affairs has clarified that merely disbursing funds to an implementing agency does not, by itself, mean the CSR obligation has been spent.
The implementing agency must utilise the funds, and the company's Board must satisfy itself that the funds were utilised for the approved purpose and manner.
That makes an internal review before year-end especially important.
Instead of asking in March, "How much CSR money is still left?", companies should be asking much earlier:
Which projects are on track?
Which projects qualify as ongoing projects?
What expenditure has actually occurred?
What funds have been transferred but remain unused?
Are implementation milestones realistic?
Does the project documentation support its status?
What amount, if any, may need to be transferred after 31 March 2027?
That is the difference between year-end firefighting and planned CSR governance.
First, understand what "unspent CSR" actually means
Companies covered by Section 135 are generally required to spend at least 2% of the average net profits of the three immediately preceding financial years on eligible CSR activities, subject to the provisions of the law.
If the required amount is not spent during the financial year, the next step depends on the nature of the unspent amount.
The law makes an important distinction:
Unspent amount relating to an ongoing project can follow the Unspent CSR Account route.
Unspent amount that does not relate to an ongoing project follows the transfer route to a fund specified in Schedule VII within the prescribed period.
This is why simply calling every balance "unspent CSR" is not enough.
The Board, CSR team, finance team and company secretary need to understand why the amount is unspent and how the underlying project is classified.
What happens to an ongoing project?
An ongoing project is treated differently because the law recognises that some CSR projects are not designed to be completed within a single financial year.
For an eligible ongoing project, the unspent amount must be transferred within 30 days from the end of the financial year to a special bank account called the Unspent Corporate Social Responsibility Account.
Section 135(6) provides that the amount must then be spent on the CSR obligation within three financial years from the date of transfer.
For a company with an unspent amount from FY 2026–27, the immediate date to remember is therefore:
31 March 2027 → financial year closes
Within 30 days → transfer the eligible ongoing-project amount to the Unspent CSR Account
The account is not a convenient parking place for unused CSR money.
It exists for the specific statutory purpose of continuing the eligible ongoing project.
If the amount is not spent within the permitted three-financial-year period, the remaining amount must subsequently be transferred to a fund specified in Schedule VII within 30 days from the completion of the third financial year.
In other words, an ongoing project provides additional time for implementation. It does not eliminate the company's obligation to use or transfer the money according to law.
What if the unspent amount is not for an ongoing project?
This is where companies need to be particularly careful.
Where the unspent CSR amount does not relate to an ongoing project, Section 135 requires the company to transfer the unspent amount to a Fund specified in Schedule VII within six months from the end of the financial year.
For FY 2026–27, the financial year ends on 31 March 2027.
That means the six-month statutory window runs from the end of that financial year.
The important point is that the company cannot simply keep the money available and decide later how to use it for another CSR activity.
MCA guidance specifically states that an unspent amount, other than the amount relating to ongoing projects, cannot simply be spent on another CSR activity during the intervening six-month period. It has to be transferred as required.
This is one reason unspent CSR funds rules should be reviewed before year-end rather than after the accounts are closed.
The timeline companies should build into FY 2026–27
A practical CSR calendar could look like this.
April to September 2026: establish the baseline
At the beginning of the financial year, companies should confirm their CSR obligation, approved projects, budgets, implementing arrangements and expected expenditure schedule.
This is also a good point to examine whether the annual action plan is realistic.
A project that requires a long procurement process, community mobilisation or multiple implementation stages should not be budgeted as though the entire amount will necessarily be spent immediately.
October to December 2026: conduct the CSR mid-year review
This is the stage where the finance and CSR teams should move beyond budget-versus-actual reporting.
Ask:
Is the project actually moving?
A project can be financially "on budget" while being operationally delayed.
Review implementation milestones, utilisation, documentation, project timelines and any changes that may affect spending before 31 March.
This is also the right time to identify projects that may qualify as ongoing projects under the applicable rules rather than waiting until the final month.
January to February 2027: resolve the gaps
By this stage, companies should have a reasonably clear picture of what can realistically be spent by 31 March.
If a project is delayed, the answer should not automatically be to rush expenditure simply to make the accounts look complete.
CSR spending should remain connected to eligible activities and the approved framework.
Where appropriate, companies should instead prepare for the statutory treatment of any genuine unspent amount.
31 March 2027: close the financial year carefully
The year-end review should establish:
CSR obligation for the year
Amount actually spent
Amount remaining unspent
Whether the unspent amount relates to an eligible ongoing project
Amount requiring transfer to the Unspent CSR Account
Amount requiring transfer to a Schedule VII fund
Documentation supporting the treatment
Board and reporting requirements
The quality of this exercise can determine whether the company enters the new financial year with a clear compliance position or a problem that becomes harder to resolve.
CSR fund transfer rules: the mistake companies should avoid
One of the most important points in the MCA's CSR guidance is that transferring money to an implementing agency is not automatically the same as spending it.
The Ministry's FAQ states that mere disbursal of funds does not amount to CSR spending unless the implementing agency utilises the whole amount. It also notes that the Board must satisfy itself regarding utilisation, while the CFO or person responsible for financial management is required to provide the relevant certification.
That has a practical implication for companies.
A CSR team should not look only at:
"₹50 lakh was transferred."
It should also ask:
"How much was actually utilised for the approved CSR project, and what evidence supports that utilisation?"
This becomes especially important when a company is approaching year-end and considering whether an amount should be treated as spent or transferred.
Good CSR governance therefore connects finance records, project records and implementation evidence.
What companies should document before making a transfer
Documentation should tell the story of the money.
A company should maintain appropriate records relating to:
The CSR obligation
Board-approved CSR policy and projects
Annual action plan
Project approvals
Agreements with implementing agencies
Payment records
Utilisation information
Project progress
Amount actually spent
Unspent amount
Reason for the unspent balance
Classification of the project where relevant
Transfer details
Board-level disclosures and CSR reporting
MCA's prescribed reporting framework specifically captures details relating to amounts unspent, amounts transferred to the Unspent CSR Account, amounts transferred to Schedule VII funds and reasons for failure to spend the required amount.
That means documentation is not simply an internal administrative exercise. It feeds into the company's formal CSR reporting.
Don't confuse CSR compliance with charitable giving
This distinction is particularly important when companies work with NGOs.
A company may make a charitable donation that qualifies for tax treatment under applicable provisions. But that does not automatically make it CSR expenditure.
Similarly, CSR spending should not be structured simply around obtaining a tax deduction.
The existing Paavai Foundation guidance on Section 80G and donations to NGOs explains this distinction:
Section 80G operates under income-tax provisions, while CSR obligations arise under Section 135 of the Companies Act and the applicable CSR framework.
For companies, therefore, there are two separate questions:
Does this contribution qualify as CSR expenditure?
and
Does this contribution receive any applicable tax treatment?
Those questions should not be answered as though they are the same.
Where an NGO partnership can make a difference
For companies with unspent CSR budgets, the answer should not be to find an organisation at the last minute simply because funds need to move.
A stronger approach is to build a CSR partnership before the pressure of the financial year-end.
A suitable CSR partner should be able to explain:
What social problem the programme addresses
How the project will be implemented
What activities the funding supports
What documentation will be maintained
How progress will be monitored
What outcomes can reasonably be measured
How reporting will work
What due diligence information the company can review
The existing Paavai material similarly recommends checking an NGO's legal status, applicable tax registrations, CSR eligibility, programme design, governance, financial information, documentation and impact reporting before entering a corporate partnership.
That is much more useful than choosing an organisation based only on how quickly it can accept a transfer.
What a good CSR partnership should look like
A meaningful CSR partnership with an NGO is not simply a financial transaction.
The company brings resources, governance expectations, professional expertise and accountability.
The implementation partner brings community relationships, programme knowledge and on-ground experience.
When these strengths are combined properly, a corporate NGO partnership for successful CSR programs can create something more durable than a year-end expenditure entry.
For example, a company interested in child development might consider programmes involving education, healthcare, nutrition, disability inclusion or community development, provided the proposed activity meets the applicable CSR requirements.
The company should then establish clear expectations around implementation, documentation and reporting.
That creates a healthier model of corporate social responsibility: one where compliance is necessary, but impact remains the reason for doing the work.
What happens if a company gets it wrong?
Companies should not treat an unspent CSR balance as a minor accounting difference.
Section 135 contains consequences for non-compliance with the spending and transfer provisions. The current text of the Companies Act provides for a monetary penalty linked to the amount required to be transferred, subject to the statutory cap, along with a separate penalty framework for officers in default.
The exact application should be reviewed against the law and facts applicable to the company.
The broader lesson is more straightforward:
CSR compliance should be planned, not repaired.
A company that reviews its projects in September or October has options.
A company that discovers the problem in the final week of March has fewer.
A practical checklist before 31 March 2027
Before closing FY 2026–27, CSR and finance teams can ask:
1. What is our CSR obligation?
Confirm the amount applicable for the financial year.
2. What has actually been spent?
Do not rely only on amounts sanctioned or transferred.
3. What remains unspent?
Reconcile the financial records with project-level utilisation.
4. Is the project genuinely ongoing?
Document the basis for the classification under the applicable CSR rules.
5. What transfer route applies?
Determine whether the amount belongs in the Unspent CSR Account or requires transfer to a Schedule VII fund.
6. Are the timelines diarised?
For an eligible ongoing-project amount, the 30-day transfer timeline matters. For non-ongoing unspent amounts, the six-month transfer requirement matters.
7. Is the documentation complete?
Make sure agreements, utilisation information, approvals and transfer records are available.
8. Is the Board properly informed?
CSR compliance is not only an operational responsibility. Governance and reporting matter.
9. Are we relying on an implementing agency?
Confirm actual utilisation rather than assuming transfer equals spend.
10. Can next year's CSR planning begin earlier?
A strong CSR programme should not depend on the final month of the financial year.
CSR should be more than a year-end deadline
The most useful way to think about unspent CSR is not as a problem that appears on 31 March.
It is a signal that the company's CSR planning, implementation and monitoring need attention.
A well-managed CSR programme has a clear purpose before money is allocated. It has realistic timelines before implementation begins. It has monitoring during the year. It has documentation when money moves. And it has a clear compliance pathway when circumstances change.
For companies planning their FY 2026–27 CSR commitments, the opportunity is therefore bigger than simply avoiding a compliance issue.
It is an opportunity to move from CSR spending to responsible social investment.
That can mean working with communities over a longer period, choosing programmes that align with the company's social priorities, building credible corporate social responsibility partnerships, measuring outcomes and giving implementing organisations enough time to do meaningful work.
At Paavai Foundation, corporate partnerships are described as one of the ways companies can support child development, education, healthcare, inclusion and community welfare.
The Foundation's existing material also emphasises that corporate engagement can include more than funding, including employee volunteering, professional expertise and community participation.
For a company looking beyond a last-minute CSR transfer, that distinction matters.
The goal should not be to spend money before the clock runs out.
The goal should be to put resources where they can be responsibly implemented, properly documented and meaningfully connected to community needs.
If your company is reviewing its CSR portfolio for FY 2026–27 and exploring a structured CSR NGO partnership, you can book a CSR partnership call to discuss potential areas of collaboration.
FAQs
What are the unspent CSR funds rules in India?
Under Section 135, the treatment depends on whether the unspent amount relates to an ongoing project.
Eligible ongoing-project amounts must be transferred to an Unspent CSR Account within 30 days from the end of the financial year and used within the permitted three-financial-year period.
Unspent amounts not relating to ongoing projects generally have to be transferred to a Schedule VII fund within six months of the financial year-end.
What is a CSR unspent account under Section 135?
The Unspent CSR Account is a special bank account used for eligible unspent amounts relating to ongoing CSR projects. The amount must be transferred within 30 days from the end of the relevant financial year and used within three financial years from the date of transfer.
What is a CSR mid-year review?
A CSR mid-year review is an internal assessment of project progress, spending, utilisation, timelines, implementation risks and documentation before the financial year closes. It helps companies identify potential unspent amounts early enough to manage them properly.
What are the CSR fund transfer rules for an ongoing project?
For an eligible ongoing project, the unspent amount must be transferred to the Unspent CSR Account within 30 days from the end of the financial year. It must then be spent within three financial years from the date of transfer, failing which the remaining amount must be transferred to a Schedule VII fund within the prescribed 30-day period.
Does transferring money to an NGO count as CSR spending?
Not automatically. MCA guidance states that mere disbursal of funds to an implementing agency does not amount to spending unless the implementing agency utilises the amount. The company must also satisfy itself regarding utilisation and maintain appropriate records.
Can an unspent CSR amount be used for another CSR project during the six-month period?
For an unspent amount that does not relate to an ongoing project, MCA guidance states that the company cannot simply spend that amount on another CSR activity during the six-month period after the financial year. The amount is required to be transferred to a fund specified in Schedule VII.
Why should companies start CSR planning before March?
Starting early gives the company time to identify implementation delays, review utilisation, resolve documentation gaps and determine the correct statutory treatment of any amount likely to remain unspent. It also gives an NGO or implementing partner enough time to plan a meaningful programme instead of receiving a rushed year-end allocation.
