Run Through Changes: Corporate Social Responsibility

The Indian Government recently introduced Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 amending the previous rules. The same became effective from 22nd January 2021.

CSR Defined Exclusively In New Rule:

In Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 the definition of CSR is exclusive definition and according to it the following activities will not be considered as CSR Activity:

  • Activitiesundertaken in pursuance of the normal course of business of the company (except COVID 19 related Research& Development up to the financial year 2022‐23, subject to certain conditions).
  • Any activity is undertaken by the company outside India (except for training of Indian sports personnel representing any Union territory or State at a national level or India at an international level).
  • Direct or Indirect contribution of any amount to a political party within section 182 of the Act.
  • Activities that purposefully benefit company’s employee as mentioned in section 2(k) of the Code on Wages, 2019.
  • Activities are supported by the companies on a sponsorship basis for getting the marketing benefits for their products or service.;
  • Activities carried for the accomplishment of any other statutory commitment under any law in force in India.

Whether Every Company Which Fall In Above Limit Have To Constitute CSR Committee

YesNo CSR Committee to be constituted, if the CSR amount to be sent by a company does not exceed fifty lakh rupees. And in this case,the Board will discharge all the functions.

Whether The CSR Spending Is Mandatory?

Before the amendment CSR spending was voluntary under section 135. But in non-compliance and found guilty of fraud then liable under section 447CSR Spending is mandatory and a non-compliance company is liable to pay a penalty twice the default or Rs. 1 Cr., whichever is less. Every officer liable to pay penalty @ 10% of default or Rs. 2 Lacs, whichever is less.

Accounting For CSR Expenditure?


 The company has to disclose the unspent amount in the board report and the same will be added to the amount, to be spent next year.Unspent amount not related to ongoing Projects:

Financial Year 2020-2021: For remaining unspent amount (other than ongoing projects) shall be transferred to Schedule VII by 30/09/2021  
General Provision: Along with the disclosure of the amount in the Board Report, the company has to transfer the amount (doesn’t relate to any ongoing project & failure to spend) to fund specified in Schedule VII within 6 Months of close of the financial year.  

The unspent amount relating to ongoing projects:   General Provision: The company shall transfer the amount within 30 days from the end of the financial year to a special account (Unspent corporate social Responsibility Account) to be opened by the company in any scheduled bank.  

Financial Year 2020-2021: Company shall transfer the amount in the Unspent corporate social Responsibility Account by 30/04/2021.  

Extended time for the spending of unspent amount related to the ongoing project (which is transferred to UCSRA)  

General Provision: Such amount shall be spent within a period of 3 FY from the date amount is transferred, if failing to do the same then the company has to transfer the amount to fund specified in Schedule VII within 30 days from the end of 3rd Financial year.  

Financial Year 2020-2021: Amount transferred to UCSRA has to be utilized for the project upto FY 2023-2024, otherwise transfer to fund specified in Schedule VII.    


No set-off was allowedAn excess amount may be set-offby the company against the requirement to spend under section 135(5) upto immediately succeeding 3 FY.   But such amount shall not include the surplus arising from the CSR Activities (if any).   The company board shall pass a board resolution to that effect.  

Implementing Agency

Companies are allowed to expand the CSR amount either on their own or through Implementing agency.

Implementing Agency can be one of the following:

  • Companies Registered under Section 8
  • Registered Public trust
  • Registered Society
  • A company with an established track record of atleast 3 years.
The registration of such agencies was not mandatory, and no registration number was allotted to them.Now the registration of Implementing agency is necessary with the effect from 01/04/2021 and for registration, the entities have to file Form CSR 1 with a unique CRN Registration No shall be generated.   The implementing Agency has to register under section 12A & 80 G of the Income-tax act

International Organizations: The company can engage international organizations (which are notified by the Central government) for CSR. Its main function will be designing, monitoring, and evaluating the CSR projects or programsas per the CSR policy and it also includes capacity building of personnel for CSR.

Annual Action Plan

The Annual action plan is recommended and formulated by the CSR Committee to the board for pursuing the company’s CSR policy.

 Annual action plan formulated by the Committee shall include the following:

  • List of approved CSRs Projects and programs, these projects must be within the scope of Schedule VII of the Act.
  • Manner of execution of projects and programs specified in the plan.
  • the modes of the utilization of funds and implementation schedules for the projects or programs
  • Monitoring of the projects and programs and reporting of the same.

The Board may alter the Annual action plan suggested by the CSR Committee.

  • Capital Assets

The Capital assets for CSR can be held by

  • Section 8 Company
  • Registered public trust
  • Registered society

which are having their CSR registered number.

The CSR Assets created before rules are required to comply with the provision of the rules within 180 days and the board may extend the same by 90 days.

  • Treatment of surplus arising out of CSR Activities

Any amount/surplus arising out of CSR activities shall not form the part of business profit and the same shall be either.

  • Reinvest into the same projects; or
  • Shall transfer such surplus amount to unspent CSR Account and spent in accordance with CSR policy/ annual action plan.
  • Transfer to fund specified in Schedule VII of the act.

Impact Assessment

This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by: CA Neetu Saini

AKGVG & Associates

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