Under section 135(5) of the Companies Act, 2013, the Board of every company to which the corporate…

Section 135 of the Companies Act, 2013 makes CSR mandatory for every company that meets the net worth, turnover or net profit thresholds in section 135(1); the Companies Act, 1956 contained no such obligation. Under section 135(5), the Board must ensure that the company spends, in every financial year, at least two per cent of its average net profits made during the three immediately preceding financial years (or, for a company that has not completed three financial years, during the immediately preceding financial years) in pursuance of its CSR Policy. Unspent amounts must be transferred to a fund specified in Schedule VII or, for ongoing projects, to an Unspent CSR Account, and non-compliance attracts a penalty under section 135(7). 1%, 5% and 10% are not the prescribed rate.