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As per the provisions of the Companies Act 2013 (Act), a company liable to spend on Corporate Social Responsibility activities (CSR) as defined under section 135 of the Act, read with Schedule VII and the Companies (Corporate Social Responsibility Policy) Rules, 2014, can implement its CSR policy and spend its funds for CSR activities  by itself or through third party trusts/NGOs.

A brief check list for compliance by the third party trusts/NGOS is given hereunder so as to have proper internal control on their operations and to have the information readily available for the company for which the trust is implementing the CSR activities:

Sr. no. Particulars Reply Yes/No/NA
1 Eligibility criteria:  
In case of a non government trust:
1.1 Whether the trust is:
a company registered under section 8 of the Act
a trust registered under the provisions of a state Act
A trust registered under the Society registration Act
1.2 If yes, whether:
the above entity is also registered under the provisions of the Income Tax Act 1961:
Under section 12 A
Under section 80G
1.3 Whether new registration obtained under section 12A and section 80G for the accounting period starting on on or after 1st April 2021?
1.3 In case the trust is not established by the company i.e. a third party trust, whether it has an established track record of at least three years in undertaking similar activities.
1.4 In case of projects / programmes undertaken after 31st March 2021, whether the trust is:
Registered with the Ministry of Corporate affairs
In case of government trusts:
1.5 Whether the trust is established by any state government or governments or with central Government
1.6 Whether the trust is established by an act of parliament or a state legislature
1.7 In case of projects / programmes undertaken after 31st March 2021, whether the trust is Registered with the Ministry of Corporate affairs:
2 Implementation of CSR activities:  
2.1 Whether the utilisation of funds is made on the items as specifically allowed as per Schedule III?
2.2 Whether the details of financial year wise CSR funds received and spent are maintained by the trust?
2.3 Whether the records for utilised and unutilised CSR funds records are maintained and can be readily available?
2.4 Whether the records can provide the details of extra expenditure incurred over and above the funds received from the company for the financial year
2.5 Whether the records maintained by the trust can provide the balance of the CSR funds available at the year end which has not been spent during the year for each financial year?
3 In case of CSR activities undertaken on behalf of more than one company:
3.1 Whether company wise and financial year wise records are maintained for the CSR funds received and the CSR expenditure incurred on behalf of each company?
3.2 Whether for each company, the amount of CSR funds utilised and funds remaining unutilised can be identified?
3.3 Whether the trust has separate bank accounts for each of the companies for which CSR activities is carried out?
4 Separation of own funds:  
4.1 Whether the Trust has a system to identify its own accounting records other than CSR activities carried out on behalf of the company /companies?
4.2 Whether the trust maintains a separate bank account for its own activities other than CSR activities carried out on behalf of the company /companies?
5 Classification of CSR activities:  
5.1 Whether the trust has classified the CSR activities separately as “ongoing projects” and “One time Projects” ?
5.2 Whether the trust is maintaining a separate bank account for “ongoing projects” and “One time Projects” on behalf of the company/ies?
5.3 Whether the trust communicates and confirms the balances in hand of the CSR funds unspent at the year end with the company/ies classifying separately the amounts in respect of  “ongoing projects” and “One time Projects”
5.4 Whether the revenue and capital expenditure separately identified?
5.5. If there is capital expenditure, whether the asset is transferred in the name of the trust or any other institution as per the direction of the company.
6 Classification of CSR funds received and its recognition:
6.1 Whether the trust recognizes the CSR funds as an income or a liability/obligation until the CSR activities are completed?
6.2 If it recognises the CSR funds received as income, then its income can be taxable in the year when the CSR funds are not spent to the extent of 85% of its income.
Therefore, whether form no. 10 filed online for accumulation of funds/ setting apart the income before the due date of filing the return?
Whether the funds accumulated/set apart invested in specified investments under section 11(5) of the Income Tax Act 1961?
6.3 If it recognises the CSR funds received as a fund liability, then probably the tax liability may not arise as the excess funds can be considered as an obligation, i.e. a liability. In such case, whether the funds have been invested in the manner provided under section 11(5) of the Income Tax Act, 1961?
6.4 Whether there is a communication from the company for contribution to specific CSR fund if the CSR funds are recognised as a liability?


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April 2024