Ongoing CSR Projects explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
If a company covered by section 135 does not spend its whole CSR amount in a year, what happens next depends on whether the unspent money relates to an ongoing project. Ongoing-project money goes to a special bank account within thirty days of the year end and has three financial years to be spent; all other unspent money goes to a Schedule VII fund within six months. This guide sets out the periods, as per the Companies Act, 2013 in the Ministry's consolidated text (last updated 29 July 2022) and the Rules as consolidated in the Ministry's e-book, consulted on 3 October 2026. Later amendments should be checked.
Under section 135(6), unspent CSR money relating to an ongoing project is transferred within thirty days from the end of the financial year to the Unspent Corporate Social Responsibility Account in a scheduled bank, and must be spent within three financial years from the date of the transfer; if not, it goes to a Fund specified in Schedule VII within thirty days from the date of completion of the third financial year. Other unspent money goes to a Schedule VII Fund within six months of the expiry of the financial year (section 135(5), second proviso). The penalty in section 135(7) is twice the amount or one crore rupees, whichever is less.
The spending duty and the unspent amount
Section 135(5) requires the Board of a company covered by section 135(1) to ensure it spends, in every financial year, at least two per cent of the average net profits of the three immediately preceding financial years (or of the years since incorporation where fewer than three have been completed) in pursuance of its CSR Policy. Preference is to be given to the local area. The second proviso (the one that follows the local area proviso) says that if the company fails to spend, the Board shall specify the reasons in its report and, unless the unspent amount relates to an ongoing project referred to in section 135(6), transfer the unspent amount to a Fund specified in Schedule VII within six months of the expiry of the financial year. The next proviso lets excess spending be set off against the requirement of succeeding years in the prescribed manner.
Section 135(9) says that where the amount to be spent under section 135(5) does not exceed fifty lakh rupees, the requirement to constitute a CSR Committee does not apply and the Board discharges the Committee's functions. Rule 3's second proviso, as the e-book prints it, says a company with any amount in its Unspent Corporate Social Responsibility Account shall constitute a CSR Committee and comply with sub-sections (2) to (6) of the section.
Our complete guide to section 135 covers applicability. For a CSR plan and annual report, see our compliance advisory service.
What is an "ongoing project"
Rule 2(1)(i) of the CSR Policy Rules: "Ongoing Project" means a multi-year project undertaken by a company in fulfilment of its CSR obligation having timelines not exceeding three years excluding the financial year in which it was commenced, and includes a project that was not initially approved as multi-year but whose duration has been extended beyond one year by the Board based on reasonable justification.
Section 135(6) refers to an ongoing project "fulfilling such conditions as may be prescribed", so the definition is the starting point, and the Board's approval and the timelines are what make a project qualify.
The section 135(6) sequence
- End of the financial year. Amount remains unspent for the ongoing project.
- Within thirty days from the end of the financial year: transfer the amount to a special account opened for that financial year in a scheduled bank, called the Unspent Corporate Social Responsibility Account.
- Within three financial years from the date of the transfer: spend the amount in pursuance of the CSR Policy.
- If not spent: transfer to a Fund specified in Schedule VII within thirty days from the date of completion of the third financial year.
The section says the account is opened "for that financial year", so each year's unspent amount has its own account.
Other unspent amounts and surplus
- Not an ongoing project: transfer to a Schedule VII Fund within six months of the expiry of the financial year (section 135(5), second proviso).
- Surplus from CSR activities: rule 7(2): not part of business profit; ploughed back into the same project, or transferred to the Unspent CSR Account and spent under the CSR policy and annual action plan, or transferred to a Schedule VII Fund within six months of the expiry of the financial year.
- Excess spending: rule 7(3) lets excess be set off for up to the immediate succeeding three financial years, if the excess does not include surplus and the Board passes a resolution.
- Capital assets: rule 7(4) lists who holds a capital asset created from CSR money.
Schedule VII lists the Funds and the activity areas; our guide on CSR disclosures under clauses (j) and (m) explains the disclosure side.
The Board's duties on an ongoing project
Rule 4(5): the Board satisfies itself that funds disbursed have been used for the approved purposes and in the approved manner, and the CFO or the person responsible for financial management certifies. Rule 4(6): for an ongoing project, the Board monitors implementation against approved timelines and year-wise allocation and may make modifications for smooth implementation within the overall permissible time period.
Reporting: Annexure II
The CSR report in Annexure II (see our Annual Report on CSR format) carries a table for amount spent on CSR projects, both ongoing projects and other than ongoing projects, the total transferred to the Unspent CSR Account under section 135(6), and the details of the unspent amount for the preceding three financial years, with the balance in the Unspent CSR Account.
Penalty
Section 135(7): if a company is in default in complying with section 135(5) or (6), it is liable to a penalty of twice the amount required to be transferred to the Fund or the Unspent CSR Account, as the case may be, or one crore rupees, whichever is less. Every officer in default is liable to one-tenth of the amount required to be transferred or two lakh rupees, whichever is less.
Worked example (invented figures)
Rho Energy Limited's CSR obligation for the year ended 31 March 2026 is Rs 50,00,000. It spends Rs 20,00,000 on a one-year project and commits Rs 30,00,000 to a three-year school project (an ongoing project) that has spent nothing yet.
- Unspent: 50,00,000 - 20,00,000 = Rs 30,00,000, all relating to the ongoing project.
- Transfer to the Unspent CSR Account within thirty days from 31 March 2026, that is by 30 April 2026.
- Spend within three financial years from the date of transfer. The text says "from the date of such transfer" and does not say whether the year in which the transfer is made counts as the first. If it does (FY 2026-27 first), the third year ends on 31 March 2029 and any balance moves to the Schedule VII Fund within thirty days, by 30 April 2029. If it does not, each date moves a year later. Take advice on the reading.
- If the Rs 30,00,000 had been unspent on a project that is not an ongoing project, it would go to a Schedule VII Fund within six months of 31 March 2026, by 30 September 2026.
- If the company defaulted on a Rs 30,00,000 transfer: twice the amount is Rs 60,00,000, which is less than one crore rupees, so the penalty on the company would be Rs 60,00,000.
Common mistakes
- Treating any unspent money as eligible for the Unspent CSR Account.
- Missing the thirty-day transfer.
- Not documenting the Board's justification where a project's duration is extended.
- Counting the three financial years without checking the date of transfer.
- Forgetting a CSR Committee where the Unspent CSR Account has a balance.
Need help with CSR compliance?
We can plan CSR spending, open and track the Unspent CSR Account, prepare the Board's report and handle the filings. See our compliance advisory service.
Key takeaways
- Ongoing-project unspent money: Unspent CSR Account within thirty days of the year end.
- Spend within three financial years from the transfer, else Schedule VII Fund within thirty days.
- Other unspent money: Schedule VII Fund within six months.
- Penalty up to twice the amount or one crore rupees, whichever is less.
- The Board monitors ongoing projects against timelines.
Read next
- Annual Report on CSR Activities: Annexure II Format
- Companies Act Thresholds in One Table
- CSR Under Section 135: Complete Guide
- CSR Disclosures Under Clauses (j) and (m)
Disclaimer: Based on the Companies Act, 2013 in the Ministry of Corporate Affairs consolidated text (last updated 29 July 2022), the Rules as consolidated in the Ministry's e-book and the other official texts named in this article, as consulted on 3 October 2026. Later amendments, notifications, circulars, forms and fees should be checked. Formats are general drafts to be adapted to the company's articles and facts. This article is general information, not legal advice; check the official text before acting.