The amendments to the CSR provisions brought by the Companies (Amendment) Act, 2020, (‘CAA, 2020’) have finally been made effective by MCA, vide its notification dated January 22, 2021. Along with this, MCA has notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021


Corporate Social Responsibility(CSR)

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 but does not include the following:

Normal Course of Business: Activities undertaken by the company in pursuance of the normal course of business: Provided that any company which is engaged in research and development activity of new vaccine, drugs, 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 F.Y. 2020-21, 2021-22, 2022-23 subject to following conditions-

a. Such R & D activities shall be carried out in collaboration with any of the institutes or organizations 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 report.

Outside India Activity: Any activity undertaken by the company outside India (except for the training of the Indian sports personnel representing any State or Union territory at the national level or India at the International level)

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

The benefit of Employee: Activities that significantly benefit the employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019)

The benefit to its product: Activities supported by the companies on a sponsorship basis for deriving marketing benefits for its products or services.

Other obligation in Law: Activities carried out for the fulfillment of any other statutory obligations under any law in force in India.

2. CSR Policy: CSR Policy to include:

  • Approach and direction are given by the Board of the Company, taking into account the recommendations of its CSR Committee;
  • Guiding principles for the selection, implementation, and monitoring of the activities as well as the formulation of the annual action plan

3. Ongoing Project: “Ongoing Project” means a multi-¬‐year project having timelines not exceeding three years excluding the financial year in which it was

  • Project that was initially not approved as a multi-¬‐ year project can be made ongoing by extending the duration beyond one year by the board based on reasonable
  • At appears that CSR Project’s duration cannot be more than three.

4. Net Profit: Net profit as per its financial statement with the applicable provisions of the Act, but doesn’t include:

• Any profit arising from any overseas branch or branches of the Company, whether operated as a separate company or otherwise; and

• Any dividend received from other companies in India, which are covered under and complying with the provisions of Section 135 of the Act.


Every entity who is covered under these rules, who intends to undertake any CSR activity, shall register itself with the CG by filing the e-form CSR-1 with the ROC w.e.f. 01 April 2021. On the filing of CSR -1, one ‘Unique CSR Registration Number’ shall be generated by the system automatically.

From 1st April 2021, it is mandatory for every implementing agency to register itself with the ROC by filing the e-form CSR-1. If any implementing agency fails to file CSR-1, they shall not be eligible to continue as the Implementing Agency.


  •  A company established under Section 8 of the Act; or
  • A Registered Public Trust; or (amended as only registered public trust)
  • A Registered society
  • Either singly or along with the other Company; or
  •  Above entity established by the Central Government or State Government; or
  • Any of the above entity having a track record of at least 3 years in undertaking similar activities; or
  • Any of the above entity established under an Act of parliament or a State Legislature.


• Registration under Section 12A and 80G of the Income Tax Act, 1961 become mandatory.

• Registration of such entity shall be mandatory by filing form CSR 1.

Note: A Company may also collaborate with other companies for undertaking the projects or programs or CSR activities subject to the conditions.


Companies on which provisions of Section 135 are applicable need to spend 2% of the average net profit of the previous three financial years on the CSR Activity.

if Company spent excess amount in any financial year?

As per the Amendment Rules, 2021, Rule 7 sub-rule 3:

If a Company spent on CSR in excess of the requirement (i.e. 2%), such excess amount may be set off against the requirement of the CSR Spending u/s 135(5) up to the immediate succeeding 3 financial years subject to the conditions that:

      • 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 these rules.
      • The Board of Directors shall pass a resolution to that effect.
      • The Board of Directors shall is required to satisfy itself that the funds disbursed have been utilized for the purpose and manner approved by the Chief Financial Officer or another person responsible for financial management need to certify to the effect.

What is a Utilization Certificate?

The Board of Directors shall is required to satisfy itself that the funds disbursed have been utilized for the purpose and manner.
A Utilization Certificate must now be presented by the CFO to the Board, certifying that all the funds allocated by the Board have been utilized in a manner approved by the board.

  • In case of an ongoing project, the board shall monitor the implementation of the project with reference to the approved timelines and year-wise allocation and shall be competent to make modifications, if any required.

♦ Treatment of Surplus arising out of CSR amount: (Rule 7(2)):

Any surplus income being generated through a company’s CSR activities can not form part of the company’s profit. The surplus shall be reinvested into the same project or shall be transferred to the Unspent CSR Account within a period of 6 months of the expiry of the financial year

    • Ploughed back into the same project.
    • Transferred to the Unspent CSR Account; and
  • Spent in pursuance of the CSR policy and the annual action plan of policy.


  •  If the Company fails to spend the CSR obligation then the Board shall specify the reasons for the same and:
  • Analyse the “unspent” amount:
  • If and to the extent, it pertains to “ongoing project” – transfer the unspent amount in a separate bank account [unspent CSR account] –within 30 days of the end of Financial Year and this fund shall be utilized for the project up to FY 2023-24.
  •  If Company Fails to spend in 3 years, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year
  • Or else, transfer the unspent amount to National Unspent Fund, within 6 months of the end of the financial year.

What fund in Schedule VII are they referring to for transfer the unspent CSR amount?

  • Clean Ganga Fund set up by the Central Government for the rejuvenation of the river Ganga
  • Prime Minister’s National Relief Fund
  •  Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) such other funds as may be described in Schedule VII.

Administration Over Head:

The administration overhead shall not exceed 5% of the total CSR expenditure of the Company for the financial year.

Definition of administration overhead added Rule 2(b): Means the expenses incurred by the Company for ‘general management and administration of CSR functions in the Company. It does not include:

  • The expenses directly incurred for the designing, implementation, monitoring, ad evaluation of a particular CSR project or program.

Spending on Capital Assets:

CSR funds may be spent on creating or acquiring capital assets. Although, these capital assets can not be held by the company. They must be held by any one of the following entities:

1. A Section 8 company

2. A registered public Trust or Society having charitable objects

3. Beneficiaries of said projects

4. Public authorities Note: Any CSR asset created prior to these Rules, required to comply within a period of 180 days (Board may extend by 90 days)


Directors Report:

The Company shall annex with its Board Report an annual report on CSR in the format of Annexure-I (for f.y. 2020-21) or in Annexure-II (w.e.f. F.Y. 2021-22).

Website Disclosure: (Rule 9): The Board of Directors of the Company shall mandatorily disclose the followings on its website (if any):

    • Composition of CSR Committee
    • CSR Policy
    • Projects approved by the Board on their website.

Impact Assessment:

Impact assessment is only mandatory for companies with CSR obligations of INR10 crore or more of any and all projects with outlays of INR1 crore or more and which have been completed not less than one year before undertaking the impact study. These Impact assessments must be undertaken by an independent agency

The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR. Impact assessment expenditure for a financial year shall not exceed five percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less.

CSR COMMITTEE: (Rule 5(2)- Committee shall formulate and recommend to the Board, an annual action plan in pursuance of its CSR Policy, which shall include the following:

    •  The list of CSR projects or programs that are approved to be undertaken in the area of Schedule VII
    • Manner of the execution of such projects
    • Modalities of the utilization of funds and implementation of schedule for the projects
    • Monitoring and reporting mechanism for the projects or programs; and
    • Details of need and impact assessment, if any, for the project undertaken by the Company.
    • In case of an ongoing project, the board shall monitor the implementation of the project with reference to the approved timelines and year-wise allocation and shall be competent to make modifications, if any required.


1. List of CSR projects that are approved to be undertaken

2. The manner of execution of such projects

3. The details of utilization of funds for the projects

4. Implementation schedules for the projects

5. Monitoring and reporting mechanism for the projects

6. Details of impact assessment, if any, for the projects undertaken by the company


For Company: In case of Company failed to spend the CSR amount then Company shall be liable for a penalty up to twice the amount required to be transferred to fund specified in Schedule VII of unspent CSR amount Or Rs. 1 Crore (whichever is lower);

For Officer in default: Officer in default shall be liable for a penalty of 1/10th of the amount required to be transferred to the fund specified in Schedule VII or Unspent CSR account or Rs. 2 lakhs (whichever is lower)


Disclaimer: The contents of this article are solely for informational purposes. The author assumes no responsibility for the consequences of the use of such information.

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Qualification: CS
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Location: MUZAFFARNAGAR, Uttar Pradesh, India
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May 2021