♦ Section 135 r/w Schedule VII of the Companies Act, 2013 (2013 Act) introduces the concept of Corporate Social Responsibility (CSR) as a statutory obligation of companies. Further, Companies (Corporate Social Responsibility Policy) Rules, 2014 (CSR Rules 2014) deal with the CSR norms in detail. Vide notifications and/or amendments, more activities have been added to the list of CSR activities (Schedule VII of 2013 Act), from time to time.

♦ The following amendments to the 2013 Act (relating to CSR) and CSR Rules 2014, have come into force with effect from January 22, 2021:

♦ Pursuant to the abovementioned amendments, the key changes are as follows:

  • A negative list of what would not be considered as CSR has been provided.
  • Implementation agencies/partners for CSR activities to be registered with the Central Government/MCA.
  • Enhanced obligations of the Board & CSR Committee.
  • Introduction of Administrative overheads with prescribed 5% cap on such expenses.
  • Mandatory impact assessment of CSR projects by companies satisfying the Rs. 10 Crores threshold.
  • Transfer of unspent CSR amount to a separate account.
  • Setting off excess spending on CSR activities in the succeeding financial years.
  • Companies which have CSR spending obligation up to Rs. 50 Lakhs shall not be required to constitute the CSR Committee.

♦ In light of the above, for CSR activities undertaken by any company, the following compliance checklist may be considered:

Sr. No. Provision Particulars Compliance Requirement
1. Rule 2(1)(d)

Definition of CSR

  • The Amended CSR Rules have substituted Rule 2 (Definitions) of the CSR Rules 2014.
  • Prescribes activities which are specified in Schedule VII of the 2013 and provides for a negative list of activities which are as follows:
    • Activities undertaken in pursuance of normal course of business of the company.
    • Activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services.
    • Activities carried out for fulfilment of any other statutory obligations.
    • Activities benefitting employees of the company.
    • Contribution of any amount directly or indirectly to any political party.
    • 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.
To check whether the activities are covered under Schedule VII and check the activities against the negative list.
2. Rule 4

Implementing Partner

  • Either the company can itself implement the CSR activity or do it through a Section 8 company, registered public trust, registered society (“Implementing Partner”)
  • With effect from April 1, 2021, every entity appointed as an Implementing Partner must register with the Central Government/MCA.
Request the Implementing Partner to share the copy of the Registration Certificate.
3. Rule 5(2)

Annual Plan

  • The CSR Committee must prepare an Annual Action Plan in pursuance of the CSR Policy. The plan should include the following:
    • List of approved CSR projects
    • Manner of execution of CSR projects
    • Implementation schedules and modalities for fund utilization
    • Monitoring & reporting mechanism
    • Impact assessment
To formulate an Annual Action Plan and get it approved by the CSR Committee of the Board.


4. Rules 4(5) and 4(6) r/w Rule 5(2)


Enhanced monitoring power of the Board

  • The CSR Committee and the Board have an enhanced monitoring role in ensuring that CSR activities are undertaken in accordance with the CSR Policy and Annual Action Plan.
  • The monitoring/ evaluation obligations must be complied with even when the CSR projects are undertaken directly by the Implementing Partners and these obligations cannot be evaded by disbursing CSR grants.
To create a monitoring framework to track the progress of the CSR activities undertaken by the Implementing Partners.
5. Rule 7(1) r/w Rule 2(1)(b)

Administrative Overheads

  • The Board to ensure that expenses falling within the ambit of administrative overheads* do not exceed 5% of the total CSR expenditure for a financial year.
  • Administrative Overheads is defined under Rule 2(1)(b):
    • Includes general management and administration of CSR functions.
    • Excludes expenses directly incurred for designing, implementation, monitoring, and evaluation of a CSR project.
While making the budget for the CSR activities, company must bear in mind that the administrative overheads (general management and administration function) do not exceed 5% of the total CSR expenditure.
6. Rule 7(2)

Unspent CSR Funds

  • Surplus from CSR activities or unspent amount can be treated as follows:
    • To be ploughed back in the project
    • Transfer to Unspent CSR Account
    • Transfer to any Funds specified in Schedule VII
In case of unspent amount, company to opt for any of the prescribed routes within a period of 6 months of the expiry of the financial year.
7. Section 135(5) r/w Rule 7(3)

Set-off of Excess CSR Spending

  • A company can set-off the excess CSR amount spent during a financial year within the next three immediately succeeding financial years subject to two pre-conditions:
    • The excess CSR amount should not include any surplus generated out of CSR activities.
    • The Board should pass a resolution permitting the set-off.
In the event company spends more than the statutory obligation, it can avail the set off in the succeeding 3 years if it satisfies the pre-conditions.
8. Rule 8(1)

CSR Reporting

The Board’s Report of a company pertaining to any financial year shall include an annual report on CSR. The Board’s Report to include the annual report on CSR as per the format specified in Annexure I (up to FY 2020-21) or II (from FY 2021-22 onwards)
9. Rule 8(3)

Impact Assessment

A company which is obligated spend a minimum CSR amount of INR 10 Crore and above, should undertake impact assessment (through an independent agency) for those CSR projects that have outlays of INR 1 crore and above. If applicable, company to undertake impact assessment through an independent organization.
10. Rule 9

Reporting of CSR activities on Website

  • If the company has its website, then the following must be disclosed:
  • Composition of the CSR Committee
  • CSR Policy
  • Projects approved by the Board
Upload the requisite information on the website.

Author Bio

Qualification: LL.B / Advocate
Company: Tata Industries
Location: Mumbai, Maharashtra, India
Member Since: 15 May 2020 | Total Posts: 15
Madhavi Lakhotia is a corporate lawyer. She is ‘Junior Corporate Counsel & Secretarial’ at Tata Industries Limited. Madhavi has a wide experience in handling cross-border and domestic transactions, complex commercial contracts, strategizing and managing litigations and supporting technology View Full Profile

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One Comment

  1. CA Rakesh Soni says:

    Kindly clarify about the status of unspent amount of earlier years.Whether these are requred to be deposited to funds specified in schedule VII within 6 months of the close of F. Y. 2021 or left unspent for ever.

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April 2021