Unspent CSR: The 30 September 2026 Deadline That Turns a Forgotten ₹10 Lakh Into a Section 135(7) Penalty

By CS Sapna Malpani, Practising Company Secretary, Bangalore  |  Last updated: 31 August 2026

A Bengaluru company spent its year chasing a CSR project that never quite got off the ground. When 31 March arrived, ₹10,24,241 of its Corporate Social Responsibility budget sat unspent. Nobody transferred it. Nobody flagged it. The money finally moved to a Schedule VII fund on 10 March 2025, roughly seventeen months after it was due. The Registrar of Companies read the second proviso to Section 135(5), applied Section 135(7), and imposed penalties running past ₹10 lakh on the company and its continuing directors. The unspent CSR was paid in full. The penalty was for being late. If your company is covered under CSR for FY 2025-26, your version of that 30 September clock is already running.

The problem: unspent CSR is a filing, not a rollover

Most finance teams treat a CSR shortfall the way they treat an under-utilised marketing budget: carry it forward, spend it next year, no harm done. Section 135 does not work that way. Once your company crosses the CSR threshold, the 2% obligation becomes a statutory liability for that year, and any part of it left unspent has a specific place it must go and a specific date by which it must get there.

The law splits unspent CSR into two buckets, and the deadline depends entirely on which bucket the money falls in. Money attached to an ongoing project goes to a separate Unspent CSR Account with a scheduled bank within 30 days of the year ending. Money not attached to any ongoing project, the amount you simply did not deploy, goes to a fund listed in Schedule VII within six months of the year ending. For the year ended 31 March 2026, that six-month window closes on 30 September 2026.

The trap is the second bucket. Teams that ran a genuine multi-year project usually remember the 30-day Unspent CSR Account step. The companies that get penalised are the ones that meant to spend, ran short, and assumed the leftover could wait. It cannot. A leftover with no ongoing project behind it is due at a Schedule VII fund by 30 September, and the Registrar has been treating a late transfer as a completed default even after the company eventually pays.

Are you even covered? The Section 135(1) test

Before the deadline matters, confirm that CSR applies to you at all. Under Section 135(1) of the Companies Act, 2013, a company falls into CSR if, during the immediately preceding financial year, it met any one of these:

• Net worth of ₹500 crore or more, or
• Turnover of ₹1,000 crore or more, or
• Net profit of ₹5 crore or more.

The net profit figure is the one that catches mid-sized private companies off guard. You do not need to be a large listed group. A profitable private limited company that crossed ₹5 crore of net profit in FY 2024-25 is inside the CSR net for FY 2025-26, whether or not anyone in the company thinks of it as a "CSR company". The spend itself is 2% of the average net profit, computed under Section 198, of the three immediately preceding financial years. Miss the applicability test and every downstream deadline in this article applies to you by default.

The FY 2025-26 CSR clock

Here is the sequence of dates that a covered company works against for the year ended 31 March 2026. The 30 September transfer is the one with teeth right now.

What the penalty actually costs

Section 135(7) is unusual because it prices the default off the money you failed to move, not off a flat slab. That design means a company sitting on a large unspent balance faces a much bigger number than one that fell short by a little. The cap protects the largest defaulters at ₹1 crore, but most private companies never reach the cap, they pay double the unspent amount.

On a modest ₹10 lakh shortfall, the company exposure alone is ₹20 lakh, double the amount that was, in every case that reaches adjudication, eventually paid to charity anyway. Directors are named individually. In the Bengaluru order, the officer who ceased before the due date escaped; the directors who were in office when the 30 September window closed did not.

Ongoing vs non-ongoing: the split that sets your deadline

Getting this classification right is the whole game. An ongoing project buys you time: up to three financial years to spend the money, held in an Unspent CSR Account. A non-ongoing shortfall does not; it is due at a Schedule VII fund within six months. Boards sometimes reclassify a shortfall as an "ongoing project" late in the day to buy the longer runway, but an ongoing project has to be a real, board-approved, multi-year commitment recorded before the year end, not a label applied afterwards.

What you must do now: a 7-step September checklist

1. Confirm applicability for FY 2025-26. Check net worth, turnover and net profit for FY 2024-25 against the Section 135(1) thresholds. If any one is crossed, you are covered.
2. Fix your 2% number. Recompute the obligation as 2% of the average net profit (Section 198) of FY 2022-23, 2023-24 and 2024-25. Reconcile it against what was actually spent by 31 March 2026.
3. Isolate the unspent balance. Obligation minus actual spend is your unspent CSR. If it is nil, your only remaining task is disclosure and CSR-2.
4. Split ongoing from non-ongoing. Tie each rupee of the shortfall to a board-approved ongoing project or treat it as non-ongoing. Do not invent an ongoing project to dodge the September date.
5. Transfer the non-ongoing balance before 30 September 2026. Pick a fund from Schedule VII (for example, the PM National Relief Fund or the PM CARES Fund), transfer, and keep the bank confirmation and UTR.
6. Verify the 30-day ongoing transfer already happened. The Unspent CSR Account step was due by 30 April 2026. If it was missed, the same Section 135(7) exposure applies, get it done and document the delay.
7. Feed everything into the Board's Report and CSR-2. The CSR annexure to the Board's Report must reconcile spend, unspent, and transfers. Form CSR-2 then carries the same figures to the MCA.

Then comes Form CSR-2

The transfer closes your exposure on the money. Form CSR-2 closes your exposure on the reporting. Filed under Rule 12(1B) of the Companies (Accounts) Rules, 2014, CSR-2 is the report on CSR that every covered company submits to the MCA. Two things changed recently that finance teams keep getting wrong.

First, the form itself was revised, with the updated e-form CSR-2 in effect from 14 July 2025. Second, the filing sequence changed: from FY 2024-25 onwards, CSR-2 is filed separately on the V3 portal after Form AOC-4 has gone in, not bundled as an AOC-4 addendum the way it once was. For FY 2024-25, that standalone CSR-2 carried a due date of 31 March 2026. For FY 2025-26, plan to file CSR-2 after your AOC-4, and watch for the MCA's due-date notification rather than assuming it rides on the AOC-4 date.

CSR-2 is where the unspent-transfer story gets checked against your own numbers. The form asks for the amount that had to be transferred, the amount actually transferred, the date, and any deficiency. A late 30 September transfer shows up here as a dated field, which is one reason adjudication has become easier for the Registrar and self-reporting has become riskier for the company.

The deeper implication

According to CS Sapna Malpani, the shift over the last two years is that CSR has moved from a disclosure item to an enforcement item. The old assumption, that a company acting in good faith and eventually spending or transferring its CSR would not be pursued, no longer holds. The Registrar's orders now treat the timeline as the offence: the money reaching charity late is still a default, and the penalty is charged on the amount that sat still, not on any loss to the public.

The forward read is that CSR-2's dated transfer fields will keep feeding adjudication. Once the MCA holds a machine-readable record of when each company's unspent amount actually moved, matching it against the 30 September deadline is trivial. Companies that treat the September transfer as a hard close on par with a tax payment will stay clear. Companies that treat it as a soft internal target will keep showing up in the quarterly gist of ROC orders.

Where CSR sits against neighbouring provisions

Two comparisons come up constantly. The first is the Unspent CSR Account versus the Schedule VII fund. They are not interchangeable: the account is an internal holding place for ongoing-project money you still intend to spend; the fund is an external destination for money that has left the company for good. Routing non-ongoing money into an Unspent CSR Account to buy time is itself a defect.

The second is Section 135(7) versus the general penalty under Section 450. CSR carries its own dedicated penalty in 135(7), pegged to the unspent amount, so the residual Section 450 penalty does not apply to the spend-and-transfer default. Late filing of Form AOC-4, on the other hand, runs on its own ₹100-per-day track, which is why a company that misses both the transfer and the filing is exposed on two unrelated meters at once.

Sources and references

• Section 135, Companies Act, 2013, Companies Act Integrated Ready Reckoner (CAIRR)
• Companies (Accounts) Rules, 2014, Rule 12(1B) and revised Form CSR-2 (w.e.f. 14 July 2025), MCA revised e-form CSR-2
• Delay in transferring unspent CSR funds, ROC adjudication under Section 135(6) r/w 135(7), Taxguru
• Gist of ROC & RD adjudication orders (November 2025), ICSI, CS Journal
• ROC enforcement trend, FY 2024-25, MMJC
• Ministry of Corporate Affairs, mca.gov.in

Frequently asked questions

This article is for general information and does not constitute legal or professional advice. CSR facts turn on your company's exact figures and project records. Confirm your position with a Practising Company Secretary before acting. Last updated 31 August 2026.