CSR Policy & Provisions

(Under the Companies Act 2013)

Recent Changes & Amendments 2021

Corporate Social Responsibility (CSR)

The concept of CSR rests on the ideology of GIVE AND TAKE’

CSR is a concept whereby companies not only consider their profitability and growth, but also the interest of society and the environment by taking the responsibility for the impact of their activities on stakeholders, environment, consumers, employees, communities, and all other members of the public sphere. The basic premise is that when the corporates get bigger in size, apart from the economic responsibility of earning profits, there are many other responsibilities attached to them that are more of a non-financial /social nature 

CSR In India & Its Legal Framework

India is the first country in the world to make corporate social responsibility (CSR) mandatory for corporates and CSR has become an integral part of business philosophy after its introduction as a statutory obligation under Section 135 of the Companies Act, 2013.

Through Corporate Social Responsibility (CSR) has been a key area for various corporates in India, it formally became a part of Corporate Governance in 2013.

Ministry of Corporate Affairs has notified Section 135 and Schedule VII of the Companies Act as well as the provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014 (CRS Rules) which have come into effect from 1 April 2014.

The Companies Act, 2013 requires companies with

  • A net worth of Rs. 500 Cr or more, OR
  • An annual turnover of Rs. 1000 Cr or more, OR
  • Net profit of Rs. 5 Crore or more,

Spend at least 2% of their three-year annual net profit towards CSR activities (specified in SCH VII) in a financial year


Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to:

i.) Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.

ii.) Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects.

iii.) Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.

iv.) Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water [including contribution to the Clean Ganga Fund]

v.) Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional art and handicrafts;

vi.) Measures for the benefit of armed forces veterans, war widows and their dependents, Central Armed Police Forces (CAPF) and Central Para Military Forces (CPMF) veterans, and their dependents including widows

vii.) Training to promote rural sports, nationally recognised sports, paralympic sports and Olympic sports

viii.) Contribution to the prime minister’s national relief fund or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund)] or any other fund set up by the central govt. for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women;

ix.) (a) Contribution to incubators or research and development projects in the field of science, technology, engineering and medicine, funded by the Central Government or State Government or Public Sector Undertaking or any agency of the Central Government or State Government; and

(b) Contributions to public funded Universities; Indian Institute of Technology (IITs); National Laboratories and autonomous bodies established under Department of Atomic Energy (DAE); Department of Biotechnology (DBT); Department of Science and Technology (DST); Department of Pharmaceuticals; Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH); Ministry of Electronics and Information Technology and other bodies, namely Defense Research and Development Organization (DRDO); Indian Council of Agricultural Research (ICAR); Indian Council of Medical Research (ICMR) and Council of Scientific and Industrial Research (CSIR), engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).]

x.) Rural development projects

xi.) Slum area development.

xii.) Disaster management, including relief, rehabilitation and reconstruction activities.

Activities are NOT COVERED under CSR

  • The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities.
  • One-off events such as marathons/ awards/ charitable contribution/advertisement/sponsorships of TV programs etc. would not be qualified as part of CSR expenditure.
  • Expenses incurred by companies for the fulfillment of any Act/ Statute of regulations (such as Lab our Laws, Land Acquisition Act, etc.) would not count as CSR expenditure.
  • Contribution of any amount directly or indirectly to any political party shall not be considered as a CSR activity.
  • 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
  •  Activities are undertaken by the company in pursuance of its normal course of business
    • 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.



Some of the amendments will actually be relevant from 1st April, 2021, some of them will have immediate compliance implications

 Changes in Definition:

Certain changes came out in the Companies (CSR Policy), amendment rules, 2021

Rule 2(1) (b)

Now it clearly incorporated in the revised definition of ‘Administration overhead’ It is clearly mentioned that administration overhead means the expenses incurred for general management and administration of CSR functions in the company and explicitly excludes any expenses incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project

Rule 2(1) (d)

Earlier the definition defined what includes under CSR in reference to SCH VII, but the amended definition changed the concept from included to exclude. (Revised definition has provided the list of exclusion from CSR, there are 6 exclusion mentioned in revised rules.)

Rule 2(1) (f)

The amended rules defined the CSR policy means a statement containing the approach and direction given by the board of a company, taking into account the recommendations of its CSR Committee and includes guiding principles for selection, implementation, and monitoring of activities as well as the formulation of the annual action plan

 Rule 2(1) (g)

International Organization in the framework of India’s CSR. It allows corporates to take a call on the appointment of any outside organization for designing, monitoring, and evaluating their CSR projects and in assisting them with capacity building of their personnel under Rule 4(3) of New Rules.

Rule 2(1) (i)

This amendment defined the term ‘Ongoing Project” means a multi-year project undertaken by a Company in fulfillment 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;

(No clarity on the projects whose implementation extend beyond 4 years)

Amendments in Rule-4

CSR implementation

There are 3 Modes of CSR Implementation available

  • Self-implementation
  • Joint implementation with one or more companies
  • Implementation through agencies

Allowed agencies

  • Own Agencies: Section-8 Company, Public Trust, Reg. Society established by the company itself either singly or jointly
  • Agencies: Section-8 Company, Public Trust, Reg. Society established by the central government or state government 
  • Statutory Bodies: Entity established under an act of parliament or state legislature
  • Public Agencies: Section-8 Company, Public Trust, Reg. Society having registration under 12A & 80G of the Income Tax Act 1961 and having track record of minimum 3 years in undertaking similar activities.

W.e.f 01.04.2021, Agency who intends to undertake the any CSR Activity, shall register itself with Central Government by filing FORM CSR-1 electronically with ROC

FORM CSR-1 electronically with ROC

Other implementation points

  • A company may engage international organizations for designing, monitoring, and evaluation of CSR projects or programs as per its CSR Policy as well as for the capacity building of their own personnel for CSR.
  • A company may also collaborate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programs under these rules.
  • The Board of a company shall satisfy itself that the funds so disbursed have been utilized for the purposes and in the manner as approved by it and the Chief Financial Officer or the person responsible for financial management shall certify to the effect
  • In case of an ongoing project, the Board of a Company shall monitor the implementation of the project regarding the approved timelines and year-wise allocation and shall be competent to make modifications, if any, for smooth implementation of the project within the overall permissible period.”.

 Amendment in the role of CSR Committee under Rule 5

Now the CSR committee is required to formulate and recommend to the Board a detailed action plan covering entire CSR policies and projects to be undertaken by the company. The detailed mention of the inclusions in the action plan removes the vagueness of Rule 5 in earlier CSR Rules, 2014 which only said about the institution of a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company.

Amendment in Rule 6 CSR Policy

Rules 6 Omitted in Company (CSR Policy) Amendments 2021.

Amendment in CSR Expenditure under Rule 7 

1) The board shall ensure that the administrative overheads shall not exceed 5% of the total CSR expenditure of the company for the financial year. [Definition of administration overhead provided in section 2 (1)(b)] 

2) Any surplus arising out of the CSR activities shall not form part of the business profit of a company and shall be ploughed back into the same project or shall be transferred to the Unspent CSR Account and spent in pursuance of CSR policy and annual action plan of the company or transfer such surplus amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.

3) Where a company spends an amount above requirement provided under sub-section (5) of section 135, such excess amount may be set off against the requirement to spend under sub-section (5) of section 135 up to immediate succeeding three financial years subject to the conditions that –

i. the excess amount available for set-off shall not include the surplus arising out of the CSR activities, if any, in pursuance of sub-rule (2) of this rule.

ii. the Board of the company shall pass a resolution to that effect

4) The CSR amount may be spent by a company for the creation or acquisition of a capital asset, which shall be held by –

i. Implementing agency having charitable objects and CSR Registration Number under sub-rule (2) of rule 4; or

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

iii. a public authority

(Provided that any capital asset created by a company before the commencement of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, shall within a period of one hundred and eighty days from such commencement comply with the requirement of this rule, which may be extended by a further period of not more than ninety days with the approval of the Board based on reasonable justification) 

Amendment in CSR Reporting under Rule 8 

1) The Board’s Report of a company covered under these rules about any financial year shall include an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable.

2) In the case of a foreign company, the balance sheet filed under clause (b) of sub-section (1) of section 381 of the Act, shall contain an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable.

3) (a) Every company having an 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.”.

Amendment in a display of CSR activities on the website under Rule 9

Mandatory disclosure of CSR projects approved by the Board is to be placed on the website of the company. This will ensure greater accountability of companies and a closer check on the compliance of rules.

Amendment in the transfer of unspent amount under Rule 10

Since the provisions are applicable from January 22, 2021, any amount that remains unspent on an ongoing project in FY 2020-21 will have to be transferred to any separate account already mentioned under Schedule VII till “the Fund” referred to in Section 135(5) and 135(6) of Companies Act, 2013 is created or specified.


Penal Provisions (Earlier Vs New)

Earlier New Companies (Amendment) Act, 2020 & 2021
Sub-section (7) to section 135 provided for penal provisions for Non-Compliances of the provisions

  • Fine on company

Min. Rs. 50 Thousand

Max. Rs. 25 Lakh

  • Fine to Office in default

Min. Rs. 50 Thousand

Max. Rs. 5 Lakh

Imprisonment-Max 3 years

Sub-section (7) substituted in Companies (Amendment) Act, 2020 and amended the penal provision as

  • Fine on company
    • Up to twice the amount required to be transferred to fund specified in Schedule VII or Unspent CSR A/c OR
    • Rs. 1crore

(whichever is lower)

  • Penalty on Office in default
  • 1/10 of the amount required to be transferred to fund specified in Schedule VII or Unspent CSR A/c


  • Rs. 2 lakhs

(whichever is lower)

Earlier corporates had the chance to avoid the fine by explaining the reason of not spending the CSR fund within the stipulated time frame with expanding the same by that time.

In other terms, we can say corporates had a chance to avoid the fine.

After amendments to Rules 2020 &2021, it was shifted from explanation to pay the penalty.

The Penalty mentioned in sec. 135 (7) is payable Not only for failure to spend the target CSR amount but also for failure to transfer the money to Unspent CSR Account within the stipulated time limit.

Mandatory Spending & its consequences of not spending

Second proviso to sec. 135 (5), read with sec. 135 (6), elaborates the mandatory spending requirement in the particular financial year.

 If the company fails to spend the CSR target

  • The board shall still explain the reasons for the same
  • If not spend and it pertains to ‘Ongoing project’, Transfer the fund to ‘Unspent CSR Account’ within 30 days of the end of FY
  • If any other reason, transfer the unspent amount National Unspent Fund, within 6 months from the end of FY.

CARO 2020 provides that Auditors Report shall include a statement on whether the company has transferred any unspent amount to an Unspent Fund / Unspent CSR account, as the case may be’

CSR Reporting in the Annual Report

The Board report should report following in the annual report for the financial year commencing on or after 1st April 2020


  • Brief Details of CSR Policy for the year
  • Details of CSR Committee (Members, Meeting & Attendances)
  • Website link of CSR Policy, CSR Committee & CSR Projects, etc.
  • CSR Amount (Average net profit of last 3 years & CSR expenditure)

Newly inserted

  • Impact assessment report of CSR projects (If applicable) *
  • Amount Available for Set off and the amount required for set off for the year
  • Surplus arising out of CSR Projects of the previous years
  • Details of the amount spent & unspent for the year along with the name of the fund in which amount has been transferred.
  • CSR Amount spent for On-Going Project and other than On-Going Projects for the year
  • Expenses Amount for Administrative overhead
  • Details of Unspent CSR Amount for last 3 years
  • Details of Capital Assets created or acquired through CSR Spent in year
  • Reason for not spending the CSR Amount.

*Impact assessment is mandatory for companies whose CSR obligation is Rs. 10 Crore or more in each of the 3 preceding financial years & carried by an independent agency.


After 22 Jan 2021, the governments cleared their intention on CSR policy that do for society or ready to pay the fine along with CSR amount. The whole concept of CSR provisions shifted from ‘Give the explanations for not spending the CSR & now do the CSR’ to ‘Pay the fine for not spending the CSR & transfer the fund into National fund’.  Basically, in this CSR Companies (CSR Policy) Amendment Rules, 2021, so many changes came into effect such as,

  • Change in the definition of CSR
  • Shifting from direction to mandatory CSR obligation
  • Mandatorily Registration of CSR Agency / NGO/ Trust
  • Change in board responsibilities
  • Analysis of Impact on Society by Impact Assessment
  • Introduction of ‘Ongoing Project’
  • Comment on Spent & Unspent CSR fund by the statutory auditor

After seeing these amended provisions of CSR, corporates have to take special care that giving the donation to agency/ NGO/ Trust will not fulfill your CSR obligation. It is the responsibility of board to comply all the provisions under these rules.

Disclaimer and Confirmation:

This article/ presentation is based on the concept of Corporate Social Responsibility (CSR) under section 135 of The Companies Act 2013 & its amendments, Rules, Sub-rules etc. Some changes / modification has been done to easily understand the concept, so kindly ignore if any discrepancy with original rules. Also confirming that some content may be taken from other articles, books, etc. This article prepared & complied by Pankaj Kannaujiya for private circulation only.

Further, the author confirms that

  • No part of this article /presentation is intended to be solicitation of professional assignment.
  • This article /presentation is only for academic purposes; this is not intended to be a professional advice or opinion. Anyone relying on this does so at one’s own discretion.

Please do consult your professional consultant for any matter covered by this presentation.

  • No circulation, publication, or unauthorized use of the presentation in any form is allowed, except with our prior written permission


For further information please contact: Pankaj Kannaujiya at pankaj.csr@gmail.com.

Author Bio

Qualification: CMA
Company: PLUS 1 Consulting Pvt. Ltd.
Location: SURAT, Gujarat, India
Member Since: 03 Jul 2019 | Total Posts: 12
Pankaj Kannaujiya is the Director of Plus 1 Consulting Private Limited. Mr. Kannaujiya is a fellow member of The Institute of Cost Accountants of India and a Qualified Registered Valuer under the Insolvency and Bankruptcy Board of India (IBBI) for the 'Securities & Financial Assets' class. He View Full Profile

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