The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 notified on and effective from 22nd January 2021 has brought major changes in the corporate social responsibility activities. Certain new definition has been added and a criterion has been prescribed for implementation and monitoring of CSR activities.
Highlights of amendments are given below:
Rule 2: New/Modified Definition
| 1 | 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 | Corporate Social Responsibility |
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; (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 | International Organisation |
means an organisation notified by the Central Government as an international organisation under section 3 of the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), to which the provisions of the Schedule to the said Act apply; |
| 5 | Ongoing Project |
means a 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; |
| 6 | Public Authority |
means ‘Public Authority’ as defined in clause (h) of section 2 of the Right to Information Act, 2005 (22 of 2005) |
Rule 4: CSR Implementation
- Prior to the amendment, CSR activities can be undertaken by the company itself or through –
A company established under section 8 of the Act, or a trust or a registered society established by the company, either singly or along with any other company or any company established under section 8 of the Act, or a registered trust or a registered society, and having an established track record of at least three years in undertaking similar activities.
Now as per amendment, Trust should be Public and other section 8 companies, societies should be registered under section 12A and 80G of the Income Tax Act, 1961.
- Every entity who intends to undertake any CSR activity, shall register itself with the Central Government by filing the form CSR-1 with the Registrar, with effect from the 01st day of April 2021. A unique CSR Registration Number shall be generated by the system automatically
- CFO Certificate: 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 Chief Financial Officer or the person responsible for financial management shall certify to the effect
Rule 5: CSR Committee (Modified)
The CSR Committee shall formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy, which shall include the following, namely:-
- list of CSR projects or programmes
- the manner of execution
- the modalities of utilisation of funds
- monitoring and reporting mechanism
- details of need and impact assessment,
Rule 7: CSR Expenditure (Replaced with old)
- Admin Overhead not exceed 5% of total CSR expenditure for the financial year
- Surplus from CSR will not be part of profit:
- It should be invest in same project
- transferred to unspent CSR A/c
- transfer to fund in schedule VII
within 6 months of the expiry of the financial year
- Set of excess expenditure up to immediate succeeding three financial years after passing BR
- CSR amount may spent on creation or acquisition of capital asset held by:
- Section 8, Registered public trust, Registered society with CSR Reg.number
- Beneficiary of are self help group
- Public authority
- Board report disclosure in new format
- If average CSR obligation if more than 10 crore : Impact assessment through Independent agency ,annexed with annual report
- Expenditure by company undertaking Impact assessment
- Composition of CSR
- CSR Policy
Rule 8: CSR Reporting (Replaced with old)
Rule 9 :Display of CSR activities on its website. (Replaced with old)
Website should display:
Rule 10: Transfer of unspent CSR amount. (New)
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.
Above said modifications and insertions regarding CSR activity, implementation, reporting and monitoring intends to remove the loopholes, where the law was not clear and to put a mechanism in place whereby Government can monitor CSR activities. For example, now entities which are intended to undertake CSR has to submit form with the Registrar, this will provide a database to Government to regulate such entities.
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