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Ministry of Corporate Affairs (MCA) have ruled out the forbearance, which was there in requirements regarding corporate social responsibility (CSR). MCA has issued Companies (Corporate Social Responsibility Policy) Amendment rules, 2021 (rules) and notified Section 21 of the Companies (Amendment) Act, 2019 on 22 January 2021. Comparison of the overhauling brought in by the aforesaid rules are compared in the table below:



Prior to notification of the rules

After notification of the rules

Mandatory Registration Earlier, no requirement of Mandatory registration was required to be taken by entities carrying out CSR activities From 1 April 2021, Entities carrying out CSR activities are required to file with  the Central government, an e-form namely CSR -1 to generate Unique registration number.
Mandatory disclosure of CSR committee and Composition Earlier, no such mandatory requirement to disclose the projects on the website existed. In order to ensure transparency, 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
Impact assessment through independent agency Earlier, no requirement of impact assessment by any independent agencies were there. Every company having average CSR obligation of ten crore rupees or more 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.

Carry forward and set off the CSR expenditure Carry forward and/or set off in case expenditure more than 2% in any financial  year was not allowed Proviso 3 to Sub section 5  read with rules now allows carry forward and set off such excess amount against the requirement to spend for immediately succeeding three financial years
Limit of administrative overhead Limit of administrative expenditure in overall outlay was not defined The board shall ensure that the administrative overheads shall not exceed 5% of total CSR expenditure of the company for the financial year.
Restriction of Holding on Capital Asset created No restriction was placed prior to the amendment brought in by the rules The CSR amount may be spent by a company for creation or acquisition of a capital asset, which can be held by following 3 entities only:

(a) a company established under section 8 of the Act, or a Registered Public Trust or Registered Society,

having charitable objects and CSR Registration Number; or

(b) beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities; or

(c) a public authority

Mandatory Transfer of unspent CSR amount. Unspent amount was not required to be transferred to any fund Mandatory transfer of unspent CSR amount is required.

In Addition to the above stated structured steps  in order  increase supervision and vigilance towards CSR expenditure, the penal provisions that has been notified by The Companies (Amendment) Bill, 2020 has become effective through Notification No. S.O. 325(E)  on 22 January 2021.


The scenario is illustrated below in order to understand the  impact of change brought in by the rules read with notification of Section 21 of the Companies (Amendment) Act, 2019.

For example: XYZ ltd Company is required to spend INR 80 crores in any financial year on CSR activities. Suppose, XYZ ltd has spent INR 50 Crores as at the end of the financial year. As a result, the Company has an unspent CSR expenditure INR 30 Crores.

Scenario Prior to the amendments:

Earlier Since second proviso Section 135(5) required the Board of directors of the Company to specify the reasons for not spending the amount in their report only.

Scenario after the notification of the amendments:

After the notification of Section 21 of the Companies (Amendment) Act, 2019, the time limits to either spend the unspent amount or transfer such unspent amount to a Fund specified in Schedule VII has been specified.

Further Sub section 7 to section 135 is inserted through notification of Section 21 of the Companies (Amendment) Act, 2019   that laid down the penal provisions in case of non-compliance with the provisions of sub-section (5) or sub-section (6).

Therefore, the Company will be either required to make the outflow of INR 30 Crores with the below specified time limits:

-If  unspent amount pertains to ongoing project, within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account ;

-If unspent amount relates to any ongoing project, transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.


-The Company and every officer of the company who is in default shall face penal consequences as per section 135(7) of the Companies Act.

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May 2024