Does CSR apply to your company? Working out the 2% step by step

April 2026. The FY26 numbers are in, and the company secretary has left a sticky note on Sameer's laptop. It says "CSR?" and nothing else.

Step one, the three yes-or-no checks

Look back one year

Section 135 asks about the immediately preceding financial year. For the year Sameer Chai is in now, FY27, that means FY26. Answer three questions about FY26, using the company's own (standalone) accounts.

The rule is "or", not "and". One yes is enough. Sameer Chai is in.

Which "net profit" counts

This is the trap in check 3. The CSR net profit isn't the profit after tax at the bottom of the P&L. It's worked out under Section 198, which starts from the company's profit and does not deduct income tax, with some other adjustments. So it sits much closer to profit before tax.

For Sameer Chai, this guide uses profit before tax as the Section 198 figure: ₹12 crore for FY26, not the ₹9 crore after tax. The real calculation is done by the finance team with the auditor and can differ a little.

Here's what the two lines look like on a real P&L.

Step two, working out the 2%

Five lines of arithmetic

The law asks the board to spend, every year, at least 2% of the average net profit of the three immediately preceding financial years.

That ₹20 lakh is the minimum for FY27, the year from 1 April 2026 to 31 March 2027.

Here's a real company doing the same sum at a much bigger scale. Note the two lines: what the law required, and what it actually spent.

Step three, board or committee

The ₹50 lakh switch

A company in Section 135 normally needs a CSR committee of at least three directors, one of them independent. But if the 2% comes to ₹50 lakh or less, it can skip the committee and the board does the job itself.

Sameer Chai's ₹20 lakh is well under. So the board picks the projects.

Either way, the result goes in the Board's report: the CSR policy, what was spent and, if money wasn't spent, why not. That last part is where shareholders look first.

Step four, if the money isn't spent

Two roads

The board backs the night school near the first stall, because education is on the Schedule VII list of approved activities. But projects slip. What happens to money not spent by 31 March 2027 depends on one question: is it tied to an "ongoing project", a multi-year project that meets the conditions in the CSR Rules?

It works the other way too. If a company spends more than its 2%, the excess can be set off against what it must spend in the next three financial years, as long as the board passes a resolution. Any surplus earned from the CSR projects themselves doesn't count towards the excess.

Step five, the rule that might change

Proposed, not law

The Corporate Laws (Amendment) Bill, 2026 was introduced in the Lok Sabha on 23 March 2026 and sent to a Joint Parliamentary Committee, which reported on 3 August 2026. As of 10 November 2026 we haven't found that Parliament has passed it, so the ₹5 crore line above still applies.

What it proposes for CSR:

• Raise the net-profit trigger in check 3 from ₹5 crore to ₹10 crore.
• Let the government exempt classes of companies that meet conditions it prescribes. The committee called this too open-ended.

Rerun check 3 under the proposal. FY26 profit was ₹12 crore, still above ₹10 crore, so Sameer Chai would stay in for FY27 and the ₹20 lakh wouldn't change. But one year earlier, FY24's ₹8 crore would have failed a ₹10 crore test. A company growing through that band could fall out of CSR one year and back in the next.

CSR is not the BRSR

People mix up the CSR spend with the sustainability report. CSR is money spent. The BRSR is a report on how the whole business behaves, covering energy, waste, workers and more, and it's mandatory only for the top 1,000 listed companies by market cap. At ₹270 crore, Sameer Chai spends on CSR but doesn't have to file a BRSR yet.