Key Takeaways: - Formulation of annual action plan - Introduction of CSR form - CSR expenditure - CSR expenditure in India

1. Companies (CSR Policy)
Amendment Rules, 2021
CS Meenakshi Jayaraman

2. Legends Used
BOD Board of Directors
CARES Citizen Assistance and Relief in Emergency
Situations
CSR Corporate Social Responsibility
FY Financial Year
PM Prime Minister
UT Union Territory
w.e.f. with effect from

3. Presentation Schema
Definitions introduced in CSR
Amendment Rules, 2021
Annual Action Plan Set off of CSR Expenditure
Utilisation of CSR Surplus
Creation / acquisition of
capital asset
Statistics

4. CSR

5. Corporate Social Responsibility
CSR Applicability:
Companies having net worth of Rs.500 crore or more or
Turnover of Rs.1000 crore or more or
Net profit or Rs.5 crore or more
CSR Expenditure:
At least 2% of the average net profits of the Company made during the 3
immediately preceding financial years
CSR Committee:
Not required to be constituted for the FY, in which the CSR spend does not
exceeds Rs.50 lakhs. In that case, activities relating to CSR will be carried by
the BOD of the Company
Rationale of CSR Rules: To remove the ambiguity and for clear understanding of CSR provisions,
Companies (CSR Policy) Amendment Rules, 2021 has been introduced

6. Definitions

7. Administrative
overheads
Includes: general management and
administration of CSR functions in the
company
Excludes: expenses directly incurred for
the designing, implementation, monitoring
and evaluation of a particular CSR project
or programme
Clarity for Administrative overheads
+
Expenditure incurred by the
company for building CSR
capacities of their own
personnel as well as those of
their implementing agencies
through institutions with
established track record of at
least 3 FYs
shall not exceed 5% of
total CSR expenditure
of the company in 1 FY

8. CSR Activity
(excludes)
Any activity
undertaken outside
India except for
Indian sports person
representing state /
UT / Country
Activities benefitting
employees of the
Company as defined
in Code on Wages,
2019
Activities supported
by the companies on
sponsorship basis for
deriving marketing
benefits for its
products / services
Activities carried out
for fulfilment of any
other statutory
obligations under
any law in force in
India
Additional activities not covered under CSR
Illustration: Amount spent towards
higher education in abroad for a
group of students:
1. Is promotion of Education a
Schedule VII activity? - Yes
2. But, will the expenditure incurred
for a student being an Indian
resident be covered under CSR if it is
spent abroad ?– No
Thus, it will not form part of CSR
Expenditure
The definition of
employees, excludes
apprentice and Armed
forces of the Union

9. Annual Action Plan

10. Introduction of annual action plan
Additional duty of CSR Committee
Annual
action plan
List of approved
CSR projects /
programmes
that are
Manner of
execution of
such projects /
programmes
Modalities of
utilisation of
funds and
implementation
schedules
Monitoring and
reporting
mechanism
Details of need
and impact
assessment
• Impact Assessment applicability: Every company having average CSR obligation of Rs.10 crores or more, in
the 3 immediately preceding FYs
• To undertake the assessment through an independent agency, of their CSR projects having outlays of Rs.1
crore or more and which have been completed not less than 1 year before undertaking the impact study
• Impact assessment reports shall be placed before the Board and annexed to the annual report on CSR
• This can be treated as CSR expenditure for that FY (Limit: not exceeding 5% of the total CSR expenditure for
that financial year or Rs.50 lakhs, whichever is less)

11. • Earlier provision:
• CSR activities can be implemented by the Companies either by itself or
through Section 8 Company or registered trust or registered society
• After amendment:
• CSR activities can be implemented by the Companies either by itself or
through Section 8 Company or registered public trust or registered society
under sections 12A and 80G of the Income Tax Act, 1961
Analysis: If the CSR activity of the Company is implemented through trust or society
other than the ones established by Central Government / State Government, then it has
to be a registered public trust and a registered society with registrations under Sections
12A and 80G of the Income Tax Act, 1961
CSR Implementation

12. Introduction of CSR form
• Before amendment:
• Form: Reply_to_call_for_information_on_CSR – This was the only e-form
introduced relating to CSR activities.
• Purpose of the Form: This Form has to be filed when notice for Call for Information
on CSR is sent to the companies subject to CSR expenditure but failed to spend the
money as earmarked
• After amendment:
• Form CSR-1 – Every entity covered under Rule 4 (1), who intends to undertake CSR
activity has to register with Central Government by filing this form w.e.f. 1st April,
2021
• Filing of this form shall not affect the CSR projects or programmes approved prior to
this date

13. Set off of CSR Expenditure

14. Classification of CSR Projects
Ongoing project Other than ongoing project
• Multi-year project undertaken for a period
not exceeding 3 years excluding the FY in
which it was commenced
• Not expressly defined in the CSR Rules but
based on the definition of Ongoing projects
following can be treated as other than
ongoing project:
• Projects undertaken for that particular
financial year alone
• Any project which was initially not
approved as multi-year project, but its
duration extended more than a year by the
BOD based on reasonable justification
• Projects with duration exceeding 3 years
excluding the year of commencement
Rationale for the classification: Manner of dealing with unspent CSR Expenditure

15. Unspent CSR Amount
Particulars Ongoing project Other than ongoing project
Manner of dealing I - Transfer to Unspent CSR account
opened in a Scheduled bank and
utilize the same towards CSR policy
within 3 FYs from the date of transfer
II- Transfer to the Fund specified in
Schedule VII, in case of failure to
spend the amount transferred to
Unspent CSR account within 3 FYs
Transfer to the Fund specified
in Schedule VII
Time limit I - Within a period of 30 days from
the end of FY
II – Within a period of 30 days from
the end of 3rd FY
Within a period of 6 months
from the end of FY
Funds specified in Schedule VII – Clean Ganga Fund, PM National relief fund, PM CARES Fund and any
other fund set up by the Central Government for socio economic development and relief and welfare of
the schedule caste, tribes, other backward classes, minorities and women

16. Utilisation of CSR Surplus

17. CSR Surplus
It will not form part of business profits of the Company and it cannot be used for
set off of CSR expenditure
Such amount can be further used for the same CSR project or
Shall be transferred to Unspent CSR amount and as per CSR policy or
Transfer such surplus amount to the funds specified in Schedule VII within a
period of 6 months of the expiry of the FY

18. Creation / Acquisition of Capital
Asset

19. Creation / Acquisition of Capital Asset
Company established under section 8 of the Act / a Registered Public Trust /
Registered Society, having charitable objects and CSR Registration Number
Beneficiaries of the said CSR project, in the form of self-help groups,
collectives, entities
A public authority
Capital asset created prior to the amendment: Comply with the above provision
within 180 days after the commencement of the Rules (extension of 90 days with
the approval of Board)
CSR amount may be spent by a company for creation / acquisition of capital asset,
which shall be held by-

20. • Companies may engage even international organisations (notified by the
Central Government under United Nations (Privileges and Immunities) Act,
1947)
• for designing, monitoring and evaluation of the CSR projects / programmes
as per its CSR policy as well as for capacity building of their own personnel
for CSR
• Chief Financial Officer of the Company / any person responsible for financial
management shall certify
• that the funds so disbursed are utilized for the purposes of CSR
Miscellaneous provisions

21. CSR expenditure in India

22. No. of companies vs. CSR spent
Source: National CSR Data Portal
• CSR amount spent by the
companies in India
• As of now, majority of the
companies are spending in the
CSR contributions up to a sum
of Rs.50 lakhs

23. Top 10 states in India basis CSR Spent FY 19-20
Haryana
Rs.
143 Cr.
Source: National CSR Data Portal
• 365 companies in Maharashtra
carry on CSR activities in 19 out
of 36 districts

24. Contribution towards CSR
Source: National CSR Data Portal
Contribution towards CSR during
FY 19-20
Limit No. of companies
Exact amount as
prescribed
108
Less than prescribed 248
More than prescribed 621
Zero spent
companies
98
Though, there are companies which have
not spent on CSR and less spent
companies, 57% of the total companies
covered under CSR provisions are spending
more than the amount as prescribed under
the Act / Rules.

25. Contribution towards CSR
Source: National CSR Data Portal
Top 3 sectors of CSR spending:
1st - Education, differently abled, livelihood
2nd – Health, eradicating hunger, poverty and malnutrition, safe drinking water, sanitation
3rd – Rural development

26. • CSR activity has become mandatory from voluntary for the development of society
• Statistics of CSR spend in India depicts the voluntary contribution of various
companies
• Amendment has clarified certain ambiguities in CSR spend
Conclusion

27. Thank You!
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