CSR funding for private limited companies

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PARDEEP KAPIL (Querist)
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04 April 2025 Dear Sirs : One of my client (private limited company) crossed net profit of five crores for financial year ending 31-03-2024. Three years CSR fund at 2 % of average profit for 21-22 , 22-23, 23-24 comes to Rs.7 lakhs. No provisions for CSR funds is made for year ending 31-03-2024. Kindly help me by providing a rule / circular that states that : CSR fund of Rs.7 lakhs to be applicable and to be consumed after 01-04-2024 ... Regards

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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12 August 2025 CSR Applicability for Private Limited Company — Summary
Key points:

As per Section 135 of the Companies Act, 2013, every company having:

Net profit of ₹5 crore or more,

Turnover of ₹100 crore or more, or

Net worth of ₹500 crore or more,

during the immediately preceding financial year, is required to spend at least 2% of its average net profits of the last 3 financial years on CSR activities.

Your client crossed the net profit threshold of ₹5 crore for FY 2023-24.

Therefore, CSR applicability arises from FY 2023-24 profits, meaning CSR spending must be calculated on average profits of FY 21-22, 22-23, and 23-24.

Relevant Rule / Circular
MCA Notification dated 22 January 2014, which introduced the Companies (Corporate Social Responsibility Policy) Rules, 2014:

Rule 3 (Calculation of average net profit for CSR):

"Average net profit shall be calculated in accordance with the provisions of section 198 of the Companies Act, 2013 and shall not include profits arising from any overseas branch or dividend received from such branch."

The CSR expenditure is to be spent within the financial year following the one in which the company meets the threshold.

If no CSR provision was made for FY 2023-24, the company should start applying CSR spending from FY 2024-25 onward.

Clarification on timing of CSR expenditure
The company is required to prepare a CSR Policy and disclose the CSR activities and spending in the Annual Report for FY 2023-24.

However, actual CSR expenditure can be incurred and utilized from 1st April 2024 (FY 2024-25) onwards.

It is common practice that no retrospective spending or provisioning for CSR is mandatory for the previous year where threshold is crossed, but compliance applies prospectively from the next financial year.

Useful references:
Section 135, Companies Act, 2013 — CSR applicability and spending rules

Companies (Corporate Social Responsibility Policy) Rules, 2014 — especially Rule 3 on calculation of average net profits

MCA FAQs and clarifications on CSR (available on MCA website)

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