Relevant Date: 22nd January 2021
Introduced by: MCA Notification dated 22.01.2021
Effective date: On the date of publication of the said notification in the official Gazette i.e. 22.01.2021.
What is new under said Notification?
1. New Definitions
Expenses incurred by the company for ‘general management and administration’ of CSR functions in the company.
It does not include expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular CSR project or programme;
New definition of CSR
It means the activities undertaken by the corporates/Company subject to section 135 of the Companies Act, 2013 and its rules thereunder.
CSR definition does not include the followings:
1. Activities carried out under the normal course of the business.
Provide that Companies which are engaged in the R&D works of new vaccine, drug and medical devices in their normal course of business may undertake R&D 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 R&D work shall be carried out in collaboration with any institute or organization mentioned in item (ix) of Schedule VII.
b. Details of such activity shall be mentioned in the Annual report on CSR included Board Report.
2. 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;
3. Political Contribution under section 182 of the Income Tax Act.
4. activities benefitting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019
5. activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services;
6. activities carried out for fulfilment of any other statutory obligations under any law in force in India;
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 formulation of the annual action plan;
It means the profits of the company as per its financial Statements subject to section 198 of the Companies Act, 2013.
Net profit excludes the followings-
1. any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise; and
2. any dividend received from other companies in India, which are covered under and complying with the provisions of section 135 of the Act:
Provided that in case of a foreign company covered under these rules, net profit means the net profit of such company as per profit and loss account prepared in terms of clause (a) of sub-section (1) of section 381, read with section 198 of the Companies Act, 2013.
CSR Implementation (Rule-4)
1. The Board shall ensure that the CSR activities are undertaken by the Company itself or through-
a. Section 8 Company, Registered Trust, Registered Society under section 12A, and 80G of Income Tax Act, 1961 established by the Company singly or along with any other Company.
b. Section 8 Company or a registered Trust or registered Society established by the Central Government or State Government; or
c. Any entity registered under the 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 under section 12A and 80G of IT, Act 1961, and having an established track record of at least 3 years in undertaking similar activities.
2. Every entity, covered under rule 4(1), who intends to undertake any CSR activity shall register itself with the Central Government by filling e-form CSR-1 with the Registrar w.e.f 01.04.2021.
The Provision of this sub-rule shall not affect the CSR Project/Programmes approved prior to 01.04.2021.
The form shall be signed and submitted by the company and shall be verified digitally by the PCA/PCS/PCWA.
On submission of the Form CSR-1 on the portal, a unique CSR registration No. shall be generated by the system automatically.
3. A Company may engage international organization for designing, monitoring and evaluation of CSR projects or programmes as per its CSR policy.
4. A company may also collaborate with other companies for undertaking projects or programmes 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 programmes in accordance with these rules.
5. The Board of a company shall satisfy itself that the funds so disbursed have been utilised for the purposes and in the manner as approved by it and the CFO or the person responsible for financial management shall certify to the effect.
6. Board shall monitor the implementation of the Project with reference to the approved timelines and shall be competent to make modifications, if any, for smooth implementation of the project within the overall permissible time period.
CSR Expenditure (Rule-7)
1. The Board shall ensure that the administrative overheads (AO) shall not exceed 5% of total CSR expenditure of the company for financial year.
2. Any surplus arising out of the CSR activities-
a. shall not form part of the business profit of a company,
b. and be ploughed back into the same project and
c. shall be transferred to Unspent CSR account and annual action plan of the Company,
d. transfer such surplus amount to a fund specified in schedule VII,
within a period of 6 Months of the expiry of the financial year.
3. Where a company spends an amount in excess of requirement provided under sub-section 135(5), 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 –
a. 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.
b. the Board of the company shall pass a resolution to that effect.
4. The CSR amount may be spent by a company for creation or acquisition of a capital asset, which shall be held by –
a. Section 8 Company, Registered public trust or registered society having charitable object and CSR registration no.
b. Beneficiaries of said CSR project, in the form of self-help groups, collectives, entities, or
c. A public authority.
Provided that any capital asset created by a company prior to the commencement of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, shall within a period of 180 days from such commencement comply with the requirement of this rule, which may be extended by a further period of not more than 90 days with the approval of the Board based on reasonable justification.
CSR Reporting (Rule-8)
The Board’s Report of a company covered under these rules pertaining to any financial year shall include an annual report on CSR containing particulars specified.
Every company having average CSR obligation of Rs.10 Cr. 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 1 crore rupees or more, and which have been completed not less than one year before undertaking the impact study.
The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR.
A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed 5% of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less.
Display of CSR activities on its website- (Rule-9)
The Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website, if any, for public access.
Transfer of unspent CSR amount- (Rule-10)
Until a fund is specified in Schedule VII for the purposes of subsection (5) and (6) of section 135 of the Act, the unspent CSR amount, if any, shall be transferred by the company to any fund included in schedule VII of the Act.”
Brief of form CSR-1