Summary of Changes in CSR Rules vide Companies (CSR Policy) Amendment Rules, 2021 Notified vide Notification No. G.S.R. 40(E) Dated-22/01/2021 –
1. Definition of Administrative Overhead included in the Rules.
‘Administrative overheads” means the expenses incurred by the company for general management and administration’ of Corporate Social Responsibility functions in the company but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or programme’
2. Definition of CSR modified. It also includes certain line items of General Circular No. 21/2014 which was issued as a clarification to CSR Activities.
“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 in accordance with the provisions contained in these rules, but shall not include the following, namely:-
(i) activities undertaken in pursuance of normal course of business of the company: 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;
(ii) 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;
(iii) contribution of any amount directly or indirectly to any political party under section 182 of the Act;
(iv) activities benefitting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019);
(v) activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services;
(vi) activities carried out for fulfilment of any other statutory obligations under any law in force in India”
3. Definition of Ongoing Project included in Rule 2.
“Ongoing Project” means a m “multi-year project undertaken by a Company in fulfilment 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”
4. Rule 4 i.e. ‘CSR Activities’ is replaced by a new Rule 4 i.e. ‘CSR Implementation’. It mandates all CSR Implementing Agencies to register themselves with MCA and obtain a unique CSR Registration Number. A new Form CSR 1 is available in Rules and it has to be certified by a Professional (CS/CA/ICWA).
Further a requirement of placing ‘CFO certificate’ certify utilisation of CSR funds as per CSR Policy, is also included in the Rule.
5. Rule 5, ‘CSR Committee’ is amended and now it mandates CSR Committee to recommend a detailed ‘Annual CSR Plan’ to Board.
6. ‘Rule 6 : CSR Policy’ is deleted as its contents are already included in definition part and certain other rules.
7. ‘Rule 7 : CSR Expenditure’ is substituted. CSR amount can be spent on creation or acquisition of a capital assets. If Company spends an amount more than the requirement, the excess amount can be set off in the immediate succeeding three financial years.
8. ‘Rule 8 : CSR Reporting’ is substituted. Compulsory impact assessment of CSR projects having outlays of one crore rupees or more if average CSR obligation of the Company is ten crore rupees or more in the three immediately preceding financial years. Expenditure on Impact Assessment can be included in CSR expenditure provided it shall not exceed five percent of the total CSR expenditure or fifty lakh rupees, whichever is less.
9. Website to disclose composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website,
10. Until a fund is specified in Schedule VII for the purposes transferring the unspent CSR amount, the unspent amount, if any, shall be transferred by the company to any fund included in schedule VII of the Act.”.