1. Brief Background

a) The Company law in India mandates certain category of companies to carry out Corporate Social Responsibility (CSR) activities mandatorily. Section 135 of the Companies Act, 2013 enlists the companies which are mandatorily required to comply with the CSR requirements, which are:

i. Net worth of Rs. 500 crore or more,

ii. Turnover of Rs. 1000 crore or more,

iii. Net profit of Rs. 5 crore or more

during the immediately preceding Financial Year

b) Such companies will have to spend at least 2% of the average net profit of the Company made during the three immediately preceding Financial Years (or where the Company has not completed the period of three Financial Years since its incorporation, during such immediately preceding Financial Years) earned by the Company towards CSR

2. Effective date: 22.01.2021 (The Central Government vide Gazette notification dated 22nd January 2021 has introduced Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 amending Companies (Corporate Social Responsibility Policy) Rules, 2014)

3. Important Definitions as per the (Corporate Social Responsibility Policy) Amendment Rules, 2021:

a) “Administrative overheads” means the expenses incurred by the Company for ‘general management and administration’ of Corporate Social Responsibility functions in the Company but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or programme

b) “Corporate Social Responsibility (CSR)” means the activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in these rules, but shall not include the following, namely:-

i. activities undertaken in pursuance of normal course of business of the Company

Provided that any Company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions that

(a) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act

(b) details of such activity shall be disclosed separately in the Annual report on CSR included in the Board’s Report

ii. any activity undertaken by the Company outside India except for training of Indian sports personnel representing any State or Union territory at national level or India at international level

iii. contribution of any amount directly or indirectly to any political party under section 182 of the Act

iv. activities benefitting employees of the Company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019)

v. activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services

vi. activities carried out for fulfilment of any other statutory obligations under any law in force in India

c) “Net profit” means the net profit of a Company as per its financial statement prepared in accordance with the applicable provisions of the Act, but shall not include the following, namely: –

i. any profit arising from any overseas branch or branches of the Company, whether operated as a separate Company or otherwise and

ii. any dividend received from other companies in India, which are covered under and complying with the provisions of section 135 of the Act

Provided that in case of a foreign Company covered under these rules, net profit means the net profit of such Company as per profit and loss account prepared in terms of clause (a) of sub-section (1) of section 381, read with section 198 of the Act;

d) “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 shall include such project that was initially not approved as a multi- year project but whose duration has been extended beyond one year by the board based on reasonable justification

4. Analysis on amendment under  Companies (Amendment) Act, 2020

Existing provisions under Companies Act, 2013 Amendments under Companies (Amendment) Act, 2019 Amendments under Companies (Amendment) Act, 2020 Section

135(9) of the Companies Act,2013

Comply or Explain principle (COREX) Comply or pay fine principle (COPF) Comply or pay penalty principle (COPP)
No penalty on Company Disclosure of not spending to be explained in Annual Report. Company- Fine of min Rs, 50,000 & max Rs. 25 lakhs Company- Penalty upto twice the amount required to be transferred to fund specified in Schedule VII or Unspent CSR account Rs. 1 Crore (whichever is lower)
No penalty on Officers in default Officers in default- Imprisonment of max 3 yrs Fine of min Rs. 50,000 & max Rs. 5 lakhs or both Officers in default– Penalty of 1/10th of amount required to be transferred to fund specified in Schedule VII or Unspent CSR account Rs. 2 lakhs (whichever is lower)

5. Analysis on amended legal provisions as per  (Corporate Social Responsibility Policy) Amendment Rules, 2021

Sr. No. Particulars Addition/Change
1 Rule 4 CSR Implementation:


Rule 4 is fully substituted


The CSR Spending can now be met by the Company itself or through:

a) A Section 8 Company, a registered public trust or a registered society, each of which are registered under Section 12A and 80G of the Income Tax Act, 1961 established by the Company undertaking CSR activities either singly or along with any other Company or

b) A Section 8 Company, a registered trust or a registered society established by the Central or State Government or

c) Any entity established under an Act of Parliament or a State legislature.

d) A Section 8 Company, a registered public trust or a registered society, each of which are registered under Section 12A and 80G of the Income Tax Act, 1961 and that does not fall within the above three categories, but such entity must have an established track record of at least three years in undertaking similar programs or projects or


Thus, not-for profit entities established by the corporate (singly or jointly with others) or independently established entities are mandatorily required to have their registrations under Section 12A and Section 80G of the Income Tax Act.

2 Rule 4: Registration Requirements a) With effect from April 1, 2021 every entity intending to undertake CSR implementation on behalf of eligible entities is required to mandatorily register itself with the Ministry of Corporate Affairs. Such entities are required to apply in the Form CSR-1 and thereafter obtain the unique CSR Registration Number.


Provided that the provisions of this sub-rule shall not affect the CSR projects or programmes approved prior to the 01st day of April,2021

3 Rule5: Duties of CSR Committee

Sub rule 2 substituted

a) If a Company CSR spend is less than ₹50,00,000 (Rupees Fifty Lakhs only), then such Company is not required to create a CSR Committee. The board of directors will perform the functions of the CSR Committee in such a case.

b) Erstwhile Rule 5(2) contained that CSR Committee shall institute a transparent monitoring mechanism for implementation of the CSR initiatives by the Company.

This is now amended to include the below:

c) Formulation and Recommendation of Annual Action Plan which must include:

i. List of CSR Projects/ Programmes

ii. Manner of Execution of such projects or programme as specified in sub-rule (1) of rule 4 i.e CSR Implementation.

iii. Utilization of funds and timeline of Implementation

iv. Monitoring and Reporting Process

v. Need Impact Assessment done, if any.

However, the Board may alter them with reasonable justification.

4 Rule 6: Omitted
5 Rule 7: CSR Expenditure


Fully substituted

Earlier rule is fully replaced.

New Rule 7 covers the following:

a) It will be the duty of the Board of Directors to ensure that Administrative Overheads do not exceed 5% of the total CSR Expenditure of the Company.

b) Also, any profits out of CSR Activities shall not be treated as Business Profits and such surplus shall be transferred to Unspent CSR Account within six months from the end of Financial Year and utilized towards the Annual Action Plan formulated by CSR Committee.

c) In case any excess amount is spent towards CSR Activities, such amount shall be available for Set-off in the upcoming three Financial Years after authorization from the Board. However, surplus from CSR Activities shall not be considered while calculating the same.

d) As a part of the CSR spend Companies can now create/ acquire any Capital Asset to be held by:

i. A Section 8 Company, Registered Trust or Society with Charitable objectives having a CSR Registration Number,

ii. Beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities.

iii. A public Authority

e) Capital Asset acquired for the same purpose must meet the above requirements within 180 days from 22nd January 2021 and can be extended for further 90 days by the Board of Directors of the Company on the basis of reasonable justification.

6 Rule 8 and Rule 9 CSR Reporting Requirements

Fully substituted

a) The Board report shall additionally include a Report on CSR along with the Board Report containing prescribed details.

b) Impact Assessment is mandated for companies having average CSR Obligation of ₹10 crores Rupees or more in the three immediately preceding Financial Years shall undertake impact assessment of their CSR project outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.

The composition of CSR Committee has to be displayed on the website of the Company if any including the Policy and Projects approved by the Board.

7 Rule 10 Transfer of unspent CSR Amount

Newly inserted Rule

a) If unspent amount not relating to an ongoing project

i. The Board shall, in its report, shall specify the reasons for not spending the amount; and

ii. unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year

IMPACT: Amount remaining unspent for the F.Y 2020-21 shall be transferred to Schedule VII fund latest by September 30, 2021.

b) If unspent amount relating to an ongoing project

i. be transferred within a period of thirty days The amount from the end of the financial year to a special account to be opened by the Company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account (UCSRA).

IMPACT: Amount remaining unspent for the F.Y 2020-21 shall be transferred to any scheduled bank to be called the Unspent Corporate Social Responsibility Account (UCSRA) latest by April 30, 2021.

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  1. Naveen Saini says:

    what will be the treatment of the unspent CSR expenditure up to the FY 2019-20?

    Will the company be liable to transfer the same amount to Schedule VII fund ?

    Also if the CSR provisions are not applicable for the FY 2020-21 then what will be the treatment of unspent CSR expenditure provision outstanding in the books of accounts?.

    1. suneel Kumar Gaur says:

      amendments only applicable from 2020-21
      1. Unspent amount if lies at the FY ending 2020-21, it should be transferred to the same project or the activities as defined in Schedule VII latest by Sept. 30, 2021
      2. If the funds lying at the FY ending 21 related to on-going project, the funds unspent be transferred to Unspent account latest by April 30, 2021 and be utilised in succeeding 3 FYs.

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February 2021