CSR applicability for FY 2026–27 defines which companies in India are legally required to undertake and report Corporate Social Responsibility activities under Section 135 of the Companies Act, 2013. It is based on prescribed financial thresholds for net worth, turnover, and net profit, assessed each financial year. Companies that fall within these thresholds must budget, spend and disclose CSR activities in line with updated CSR rules and the Corporate Laws (Amendment) Bill, 2026. Many organisations also rely on Corporate Advisory Services and Virtual CFO Services to assess their CSR obligations and maintain ongoing regulatory compliance.
What Is CSR Applicability and Who Must Comply in FY 2026–27?
CSR applicability for FY 2026–27 refers to the financial criteria that trigger mandatory CSR obligations under Section 135. In simple terms, if your company crosses any one prescribed threshold in the immediately preceding financial year, CSR becomes compulsory for you in the next year.
CSR applicability criteria (base law – Section 135):
A company must comply with CSR provisions if, in the immediately preceding financial year, it meets any one of the following thresholds:
- Net worth of ₹500 crore or more
- Turnover of ₹1,000 crore or more
- Net profit of ₹5 crore or more
Once a company crosses any of these limits, it must constitute a CSR committee (where applicable), frame a CSR policy, spend the prescribed amount, and make statutory disclosures in the Board’s Report and annual filings.
Many businesses use Corporate Advisory Services and Virtual CFO Services to review their financials annually, evaluate CSR applicability for FY 2026–27, and ensure statutory compliance, especially when profit or net worth is near the prescribed thresholds. These services are often supported by KNM India while structuring annual compliance planning for companies.
CSR Amendment Rules 2026 and Social Stock Exchange Alignment
The CSR Amendment Rules 2026 strengthen CSR governance and link CSR spending more closely with measurable social impact. A key development is the formal alignment with the Social Stock Exchange (SSE) in India.
Key regulatory updates:
- Clearer definitions and methods for calculating net profit and turnover for CSR applicability.
- Enhanced reporting requirements for CSR projects, outcomes and unspent amounts.
- Permission for companies to route CSR funds to eligible social enterprises registered on the Social Stock Exchange India, improving transparency and impact measurement.
For companies, this creates an additional channel to deploy CSR budgets into curated, monitored social impact projects while maintaining compliance and audit-ready documentation. Corporate Advisory Services are often engaged to interpret these regulatory updates and implement compliant CSR frameworks.
Companies (CSR Policy) Amendment Rules, 2026 – What Changed on 27 May 2026?
The Companies (CSR Policy) Amendment Rules, 2026, notified on 27 May 2026, introduced important clarifications that directly affect CSR applicability and compliance for FY 2026–27.
Key changes:
- CSR threshold net profit is now computed using an average over the previous three financial years, instead of a single year, to smooth volatility.
- Reporting formats have been updated to require more granular, itemised disclosure of CSR spending, nature of projects, implementation mode, and impact linkage.
- Entities registered on the Social Stock Exchange India have been recognised as eligible recipients of CSR funding, alongside existing eligible trusts, societies and Section 8 companies.
These changes push companies to adopt robust internal processes for monitoring CSR eligibility year-on-year, documenting project selection, and tracking both spending and impact. Businesses often leverage Virtual CFO Services for structured reporting, budgeting accuracy, and governance discipline.
Corporate Laws (Amendment) Bill, 2026 – Impact on CSR Thresholds
The Corporate Laws (Amendment) Bill, 2026 proposes further refinements to CSR applicability thresholds and profit definitions to better target companies with higher financial capacity.
Indicative focus of the bill (to be checked against final law when notified):
- Adjusting thresholds for net worth, turnover and net profit so that CSR applies to companies with substantial scale and profitability.
- Clarifying the computation of “net profit” for CSR, generally emphasising profit after tax, before dividend, and including certain profits of subsidiaries and joint ventures, to reduce ambiguity.
- Tightening disclosure, impact reporting and audit requirements for CSR, including closer alignment with the SSE framework.
Companies should track the progress of the bill and consult Corporate Advisory Services and Virtual CFO Services to align CSR planning, board processes, financial reporting, and statutory disclosures with the final enacted thresholds. KNM India often assists companies in structuring this alignment during regulatory transitions.
How to Calculate Your CSR Obligation for FY 2026–27
Once your company meets CSR applicability criteria, it must spend a minimum prescribed percentage of average net profits on CSR activities in the current year.
CSR obligation formula:
CSR Obligation = 2% × Average Net Profit of the last 3 financial years
If the company has not completed three financial years since incorporation, you use the average of the available years.
Important points for calculation:
- Net profit for CSR is calculated in accordance with Section 198 of the Companies Act, after making specified adjustments (such as excluding certain capital profits or extraordinary items).
- Loss-making years are included in the average, which can reduce or neutralise CSR obligation in borderline cases.
- CSR obligation must be computed on the basis of audited and approved financial statements.
- Detailed working papers should be maintained to support the calculation in case of scrutiny or audit.
Virtual CFO Services often build templates and calculators so management can accurately estimate CSR budgets and ensure compliance readiness during financial closure.
CSR Implementation Agencies – New Registration Requirements (July 2025 Onwards)
From July 2025, the registration norms for CSR implementation agencies became stricter to improve accountability and outcome quality.
Revised eligibility criteria for agencies:
- Must be registered in India as a trust, society, or Section 8 company.
- Must have a minimum three-year track record in handling similar social or developmental projects.
- Must comply with enhanced documentation, governance, and disclosure norms as prescribed under the CSR rules.
Agencies connected with listed companies or seeking to raise funds via the Social Stock Exchange India must also comply with additional SSE guidelines on disclosure, impact reporting, and governance.
Mandatory documentation for agencies typically includes:
- Audited financial statements for the last three financial years.
- Registration certificates, PAN, and key statutory registrations.
- Details of completed CSR or social projects, locations, and beneficiaries.
- Disclosure of board members, key management personnel, and primary funding sources.
These requirements help companies select credible implementation partners and support audit-ready CSR reporting.
Penalties for CSR Non-Compliance in FY 2026–27
CSR provisions under Section 135 are backed by penalty clauses that apply when companies fail to spend, transfer, or disclose as required.
Possible consequences for non-compliance include:
- Monetary penalties on the company for failing to spend the required amount, not transferring unspent CSR funds as mandated, or omitting disclosures.
- Additional fines on officers in default, including directors and key management personnel.
- In serious or repeated cases, enhanced regulatory scrutiny, reputational risk, and potential action under broader company law provisions.
The exact penalty scale depends on the nature and extent of default, including whether there was wilful non-compliance or mere technical delay.
How to Avoid CSR Penalties and Maintain Compliance
To avoid penalties and maintain good governance, companies should treat CSR as a structured compliance area, not just a charitable activity.
Best practices include:
- Reviewing CSR applicability every year based on audited financials and documented thresholds.
- Ensuring timely constitution of the CSR committee (where required) and board approval of the CSR policy and annual action plan.
- Planning CSR spending early in the year to avoid last‑minute rush and unspent balances.
- Maintaining complete documentation: calculations, approvals, MoUs with implementation agencies, Board notes, utilisation certificates, and impact assessments where required.
- Making accurate, timely disclosures in the Board’s Report, financial statements, and applicable e‑forms.
Corporate Advisory, Secretarial, and Virtual CFO Services can design internal checklists and trackers to ensure nothing is missed during the year.
How KNM India Helps Companies with CSR Compliance
KNM India supports companies across the full lifecycle of CSR compliance for FY 2026–27 – from applicability assessment to reporting and audit preparation.
Corporate Advisory Services
- Review your net worth, turnover and net profit to confirm CSR applicability under Section 135 and the latest rules.
- Interpret the CSR Amendment Rules 2026 and Corporate Laws (Amendment) Bill, 2026 for your specific business model.
- Design or update your CSR policy and annual action plan in line with current law and board priorities.
Post Incorporation and Secretarial Services
- Draft CSR‑related board resolutions, committee charters and policy documents.
- Maintain statutory registers and minutes capturing CSR decisions and approvals.
- Prepare and file CSR‑related disclosures in the Board’s Report and statutory returns with the Registrar of Companies.
Virtual CFO Services
- Build CSR budget models and 2% obligation calculators based on Section 198 net profit.
- Set up processes to track CSR commitments, actual spending, and unspent amounts.
- Support impact‑linked financial reporting, especially where CSR funds are channelled through Social Stock Exchange entities or multiple implementation agencies.
“Not sure if CSR is applicable to your company for FY 2026–27?
Get a quick CSR eligibility and compliance review from KNM India – book a consultation today.”
FAQ – CSR Applicability FY 2026–27
Q1. What is CSR applicability for FY 2026–27?
CSR applicability for FY 2026–27 refers to whether a company crosses the prescribed net worth, turnover, or net profit thresholds during the immediately preceding financial year, triggering CSR obligations under Section 135.
Q2. Which companies must comply with CSR provisions?
Companies with net worth of at least ₹500 crore, or turnover of at least ₹1,000 crore, or net profit of at least ₹5 crore in the immediately preceding financial year must comply with CSR provisions unless modified by later amendments.
Q3. How is the CSR obligation calculated?
CSR obligation is at least 2% of the average net profits of the company made during the three immediately preceding financial years, calculated as per Section 198.
Q4. What are CSR implementation agencies?
These are registered trusts, societies or Section 8 companies with a minimum prescribed track record that execute CSR projects on behalf of companies.
Q5. What happens in case of CSR non-compliance?
Companies and responsible officers may face monetary penalties and regulatory actions if they fail to spend, transfer, or disclose CSR amounts as required by law.
Q6. How does the Social Stock Exchange affect CSR?
Companies can route CSR spending to eligible entities registered on the SSE, gaining better transparency, standardised impact reporting, and access to curated social projects.
Q7. How does KNM India support companies with CSR compliance for FY 2026-27?
KNM India offers Corporate Advisory Services, post incorporation, Secretarial, and Virtual CFO Services to guide companies through legal requirements, documentation, financial planning, and reporting.
