CSR Expenditure 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.
Rule 7 governs how a company spends and accounts for its CSR money: the cap on administrative overheads, what happens to surplus, the set-off of excess spending against later years and who may hold a capital asset created from CSR funds. Rule 9 requires website disclosure and carries a transfer provision for unspent amounts. This article is as amended up to G.S.R. 415(E) dated 27 May 2026 per the MCA e-book. Later amendments should be checked before you rely on it. For help with CSR spending and records, see our compliance advisory service.
Administrative overheads must not exceed five per cent of total CSR expenditure for the financial year. Surplus from CSR activities is not business profit and must be ploughed back, moved to the Unspent CSR Account or transferred to a Schedule VII fund within six months of the year-end. Excess spending can be set off for up to the immediate succeeding three financial years with a Board resolution. A capital asset must be held by a registered section 8 company, trust or society with a CSR Registration Number, by beneficiaries or by a public authority.
Rule 7(1): the overheads cap
The Board must ensure that administrative overheads do not exceed five per cent of the total CSR expenditure of the company for the financial year. Administrative overheads, as defined in rule 2(1)(b), are expenses for general management and administration of CSR functions, not the costs directly incurred in designing, implementing, monitoring and evaluating a particular project. Our article on administrative overheads and the five per cent cap covers this in depth.
Rule 7(2): surplus
Any surplus arising out of CSR activities does not form part of the business profit of the company. It must be: (a) ploughed back into the same project; or (b) transferred to the Unspent CSR Account and spent under the CSR policy and annual action plan; or (c) transferred to a Fund specified in Schedule VII, within six months of the expiry of the financial year. The rule's wording ties the six months to the transfer.
Rule 7(3): set-off of excess spending
Where a company spends more than required under section 135(5) of the Act, the excess may be set off against the requirement to spend under section 135(5) for up to the immediate succeeding three financial years, subject to two conditions:
- the excess available for set-off does not include surplus arising out of CSR activities under rule 7(2); and
- the Board passes a resolution to that effect.
Our post on offsetting excess CSR spend against a later year shows an earlier-year case; the rule as printed is the guide.
Rule 7(4): capital assets
The CSR amount may be spent for creation or acquisition of a capital asset, which must be held by:
| Clause | Holder |
|---|---|
| (a) | A section 8 company, a Registered Public Trust or a Registered Society, having charitable objects and a CSR Registration Number under rule 4(2) |
| (b) | Beneficiaries of the CSR project, in the form of self-help groups, collectives or entities |
| (c) | A public authority |
A proviso covers assets created before the commencement of the Amendment Rules, 2021: they had to comply within one hundred and eighty days of that commencement, extendable by not more than ninety days with Board approval based on reasonable justification. That window has long closed. For the CSR-1 registration number, see our article on rules 3 and 4.
Rule 9: display on the website
The Board of Directors must mandatorily disclose on the company's website, if any, for public access: the composition of the CSR Committee, the CSR Policy and the projects approved by the Board. The printed range of rule 9 also carries a provision numbered 10, "Transfer of unspent CSR amount": until a fund is specified in Schedule VII for the purposes of section 135(5) and (6), the unspent CSR amount, if any, shall be transferred by the company to any fund included in Schedule VII of the Act. For unspent amounts and ongoing projects, see our article on ongoing CSR projects, the unspent CSR account and the three-year rule.
The numbers in one table
| Item | Printed figure or period |
|---|---|
| Overheads cap | Five per cent of total CSR expenditure for the financial year |
| Surplus: ploughing back or transfer | Within six months of the expiry of the financial year |
| Set-off of excess spending | Up to the immediate succeeding three financial years, with a Board resolution |
| Legacy capital assets | One hundred and eighty days, extendable by not more than ninety days |
A worked example
Nova Steels Limited spends rupees ten crore on CSR in a year. Administrative overheads may not exceed five per cent of that, that is, rupees fifty lakh. One project earns a surplus of rupees five lakh, which is not business profit; the company ploughs it back into the same project within six months of the year-end. In the same year, its total spending is rupees one crore above its section 135(5) requirement. The surplus of rupees five lakh cannot be part of the excess, so the available excess is rupees ninety-five lakh, and with a Board resolution it can be set off against the requirement for up to the next three financial years. The company also funds a school building held by a registered trust with a CSR Registration Number, which satisfies rule 7(4)(a). The website shows the committee, policy and approved projects.
Need help with CSR spending and records?
Overhead caps, surplus tracking, set-off resolutions and asset-holding conditions are easy to miss in a busy year. Our compliance advisory team can set up the CSR ledger, prepare the Board resolutions and review your website disclosure. See also our article on rule 8, impact assessment and the Annexures.
Key takeaways
- Administrative overheads are capped at five per cent of total CSR expenditure.
- Surplus is not business profit and must be ploughed back or moved within six months of the year-end.
- Excess spending can be set off for up to three succeeding financial years, with a Board resolution, excluding surplus.
- Capital assets must be held by a registered body with a CSR Registration Number, the beneficiaries or a public authority.
- The website must show the CSR Committee, the CSR Policy and approved projects.
Read next
- Rule 8 and Annexures I and II: CSR reporting and impact assessment
- Rules 4A and 5: zero coupon zero principal instruments, committee, action plan
- Administrative overheads under rule 7: the five per cent cap
- Ongoing CSR projects, the unspent CSR account and the three-year rule
Disclaimer: Based on the Companies Act, 2013 rules (and the Companies (Auditor's Report) Order, 2020) named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.