Regarding penal provisions for csr

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CA Vijeta Verma (Querist)

09 June 2015 Hello dear members,
I want to know which is the section in which penal provision for non compliance of CSR requirement is mentioned?
Thanks in advance

CA Aman Gupta

CA Aman Gupta (Expert)

09 June 2015 There is no penal provision for non compliance of CSR. Here I assume that non-compliance means the company has failed to spend the 2% of Avg Net Profit on CSR activities.

However, disclosure is to be made in the Board's Report as per Sec 134 of the Co's Act, 2013

CA Vijeta Verma

CA Vijeta Verma (Querist)

09 June 2015 Hi!
I got to know penal provisions in various websites.
Extracts
Failure to Comply
While a company is not subject to liability for failing to
spend on CSR, a company and its officers are subject to
liability for not explaining such a failure in the annual
report of the board of directors. There is currently no
guidance as to what constitutes a sufficient or statutorily
valid explanation for failure to spend in the board
report. In addition, a company and its directors are
liable even if they fail to report on CSR activities that
actually were conducted.
Failure to explain is punishable by a fine on the
company of not less than 50,000 rupees (about U.S.
$900) and up to 25 lakh rupees (about U.S. $46,000).
Further, officers who default on the reporting provision
could be subject to up to three years in prison and/or
fines of not less than 50,000 rupees (about U.S. $900)
and as high as 5 lakh rupees (about U.S. $9,200).

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

20 July 2025 You're right to want clarity on this — CSR (Corporate Social Responsibility) compliance under the Companies Act, 2013 has evolved significantly over the years.

Here’s a clear and updated explanation of the penal provisions related to CSR:

📜 Relevant Sections for CSR Compliance and Penalties
✅ Section 135 of the Companies Act, 2013

This is the main section governing CSR provisions, including obligation to spend, composition of CSR Committee, and reporting requirements.

✅ Section 134(3)(o)

This section requires the Board's Report to disclose CSR activities undertaken and, if the company hasn't spent the 2%, the reasons for not spending.

⚠️ Penal Provisions (As per Latest Amendments)
Initially (before 2021), there was no direct penalty for non-spending, only for non-reporting.
However, after the Companies (Amendment) Act, 2020 (made effective in January 2021), non-compliance with CSR obligations now has specific penalties.

🔴 As per current law (post-2021):

If a company fails to spend the CSR amount and also fails to transfer the unspent amount to:

A Fund specified in Schedule VII (for ongoing projects within 6 months), or
Unspent CSR Account (within 30 days for ongoing projects),
then the following penalties apply:

🚨 Penalty on the Company (Section 135(7)):

₹50,000 to ₹25,00,000 (i.e. ₹0.5 lakh to ₹25 lakh)
🚨 Penalty on Every Defaulting Officer:

Fine: ₹50,000 to ₹5,00,000
Imprisonment: No longer applicable post-2021 amendments — earlier drafts had it, but it was removed in the final notification.
📝 Example of CSR Default and Consequence:
If a company is required to spend ₹10 lakh on CSR in FY 2024–25 but:

Doesn’t spend it,
Doesn’t explain it in the Board Report, and
Doesn’t transfer it to the specified funds,
Then:

The company can be fined up to ₹25 lakh.
The officers in default can each be fined up to ₹5 lakh.
✅ Summary Table:
Issue Applicable Section Penalty
Failure to spend CSR amount and failure to transfer Sec 135(5) & (6) Fine: ₹50,000 – ₹25 lakh (Company), ₹50,000 – ₹5 lakh (Officer)
Failure to disclose CSR details in Board Report Section 134(3)(o) & 134(8) Company: Up to ₹3 lakh; Officer: Up to ₹50,000
Earlier threat of imprisonment Old drafts (pre-2020) ❌ Removed in final law

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