The Companies Act, 2013 (the Act) introduced the mandatory provisions of CSR and accordingly Section 135 of the Act and the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022 [“CSR Rules”] framed thereunder govern CSR in India.
Quick Comparison of Amendment to CSR Rules made applicable w.e.f, 20th September 2022:
| As per Companies (Corporate Social Responsibility Policy) Rules 2014 | As per Companies (Corporate Social Responsibility Policy) Amended Rules 2022 | Explanation & Views Expressed |
| 3. Corporate Social Responsibility.
(1) Every company including its holding or subsidiary, and a foreign company defined under clause (42) of section 2 of the Act having its branch office or project office in India, which fulfills the criteria specified in sub-section (I) of section 135 of the Act shall comply with the provisions of section 135 of the Act and these rules: Provided that net worth, turnover or net profit. of a foreign company of the Act shall be computed in accordance with balance sheet and Profit and loss account of such company prepared in accordance with the provisions of clause (a) of sub-section (1) of section 381 and section 198 of the Act (2) Every company which ceases to be a company covered under subsection (1) of section 135 of the Act for three consecutive financial years shall not be required to — (a) constitute a CSR Committee; and (b) comply with the provisions contained in 1[sub-section (2) to (6)] of the said section, till such time it meets the criteria specified in sub-section (1) of section 135. |
3. Corporate Social Responsibility.
(1) Every company including its holding or subsidiary, and a foreign company defined under clause (42) of section 2 of the Act having its branch office or project office in India, which fulfills the criteria specified in sub-section (I) of section 135 of the Act shall comply with the provisions of section 135 of the Act and these rules: Provided that net worth, turnover or net profit of a foreign company of the Act shall be computed in accordance with balance sheet and Profit and loss account of such company prepared in accordance with the provisions of clause (a) of sub-section (1) of section 381 and section 198 of the Act “Provided further that a company having any amount in its Unspent Corporate Social Responsibility Account as per sub-section (6) of section 135 shall constitute a CSR Committee and comply with the provisions contained in sub-sections (2) to (6) of the said section.” sub-rule (2) omitted. |
1. By inserting the second proviso it has made mandatory for the Company to ensure the Constitution of CSR Committee and compliance of sub-section (2) to (6) of Section 135 to ensure that the Company complies with CSR initiative w.r.t to the unspent Amount.
2. By omitting sub-rule 2, it further clarifies that it becomes mandatory until the lifetime of the Company to comply with the provisions of Section 135 when the criteria of CSR from the time it becomes applicable for the 1st time. |
| 4. CSR Implementation. – (1) The Board shall ensure that the CSR activities are undertaken by the company itself or through –
(a) a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80 G of the Income Tax Act, 1961 (43 of 1961), established by the company, either singly or along with any other company, or (b) a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government; or (c) any entity established under an Act of Parliament or a State legislature; or (d) a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities. |
4. CSR Implementation. – (1)
The Board shall ensure that the CSR activities are undertaken by the company itself or through, – (a) a company established under section 8 of the Act, or a registered public trust or a registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 or registered under section 12A and approved under 80 G of the Income Tax Act, 1961 (43 of 1961), established by the company, either singly or along with any other company; or (b) a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government; or (c) any entity established under an Act of Parliament or a State legislature; or (d) a company established under section 8 of the Act, or a registered public trust or a registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 or registered under section 12A and approved under 80 G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities. Explanation: For the purpose of clause (c), the term “entity” shall mean a statutory body constituted under an Act of Parliament or State legislature to undertake activities covered in Schedule VII of the Act.’ |
By inserting the said clause it has widen the scope of the entities which can help the Companies in the implementation of the CSR obligation. |
| 8. CSR Reporting (3) (a) Every company having average CSR obligation of ten crore rupees or more in pursuance of subsection (5) of section 135 of the Act, in the three immediately preceding financial years, shall undertake impact assessment, through an independent agency, of their CSR projects having outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.
(b) The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR. (c) A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed five percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less.] |
8. CSR Reporting (3) (a) Every company having average CSR obligation of ten crore rupees or more in pursuance of subsection (5) of section 135 of the Act, in the three immediately preceding financial years, shall undertake impact assessment, through an independent agency, of their CSR projects having outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.
(b) The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR. (C) A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed two percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is higher.] |
1. It has reduced the % of expense allowed to be booked by the Company towards Corporate Social Responsibility for that financial year from 5% to 2% or 50 Lakhs of the total CSR expenditure for that financial year but overall criteria have been made beneficial by adding whichever is “higher” instead of whichever is “less” which allows company to book minimum 50 Lakhs even if its 2% criteria is lesser on the side. |
| “ANNEXURE -II” | The format of Annexure-II for CSR-2 is modified to bring it in consistent with the recent amendments made through Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 dated 22nd January 2021, The Companies (Amendment) Act, 2020 dated 22nd January 2021 and the Companies (Accounts) Amendment Rules, 2022 dated 11th February, 2022 and is replica of the Web-based Form CSR-2. |
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