MCA clarifies CSR impact assessment and unspent account treatment
General Circular addresses impact assessment thresholds, admissibility of assessment cost, and the transfer of unspent amounts for ongoing projects.
The Ministry of Corporate Affairs has issued a circular clarifying several recurring questions on corporate social responsibility obligations under Section 135 of the Companies Act.
The clarifications
Impact assessment threshold. Companies with average CSR obligation of ₹10 crore or more in the three preceding financial years must undertake impact assessment for projects of ₹1 crore or more that have completed at least one year. The circular confirms the threshold is assessed per project, not per programme.
Admissibility of assessment cost. Impact assessment expenditure is admissible as CSR expenditure, capped at two percent of total CSR expenditure or ₹50 lakh, whichever is higher.
Unspent transfer for ongoing projects. Unspent amounts relating to ongoing projects transfer to the Unspent CSR Account within thirty days of the financial year end and must be spent within three financial years. The circular confirms that the three-year clock runs from the transfer, not from project commencement.
Why the thirty-day window causes trouble
Thirty days from year end is inside the audit close. The determination of what is unspent, and of which unspent amounts relate to ongoing projects rather than to unallocated obligation, has to be made before the accounts are finalised.
Companies that determine CSR spend during the audit close routinely miss the transfer window, and the failure is a Section 135 contravention attracting penalty on the company and on every officer in default.
The control is to run the CSR spend determination on a monthly basis through the year, so the year-end position is known on day one of the new year rather than discovered in week six.
The ongoing project classification
Whether a project is ongoing determines whether unspent funds transfer to the Unspent CSR Account, recoverable for the project, or to a Schedule VII fund, permanently gone.
The classification must be made by the board on defined criteria and recorded. Companies that classify at year end under time pressure, without a documented basis, are making a decision with real financial consequence on inadequate footing.
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This analysis is provided for information only and does not constitute legal advice. Read it alongside the primary source it cites. Where a source reference is given (MCA General Circular 06/2026), that is the authoritative text.