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As on 22nd January, 2021, Ministry of Corporate Affairs issued Gazette Notification, to amend the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, which is notified with immediate effect. Though it’s not effective retrospective or retroactive it affects on CSR spending for the year 2020-21 and also affects the projects undertaken in earlier years.


1. Rule 2: Definition of “Corporate Social Responsibility” and List of Activities not covered under CSR
Now exclusive definition clearly specified the activities which is not considered as CSR. CSR means activity undertaken by the Company u/s 135 read with these rules, but shall not include the following:
a.Activities undertaken in pursuance of normal course of business of the company. However, company engaged in research & development activity of new vaccine drugs and medical devices related to COVID 19 for financial year 20-21, 21-22, and 22-23 exempted subject to certain conditions.
*{MCA on 28th March, 2014 vide an affidavit clarified that CSR activities which is core part of its business also can be undertaken if it is not done with profit motive. In general normal course of business refers to something that a company does ordinarily to conduct its business activities. So, in general company males sells or provide with or without profit is not considered as CSR activities.
b.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;
c. Contribution of any amount directly or indirectly to any political party under section 182 of the Act;
d.Activities benefitting employees of the company as defined in section 2(k) of the Code on Wages, 2019 (29 of 2019). 
*{projects, programs or activities that benefit ONLY the employees of the company and their families shall not be considered as CSR, however, programs or activities that are for the generic benefit or good, but which also cover some employees or their families will still be considered as CSR as long as such benefits are not exclusively for the benefit of such employees}
e.Activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services;
*{sponsorship basis implies a company being a sponsor of an event with an aim of taking marketing advantage for its product or services. CSR expenditure, in most cases, creates brand value and provides various marketing benefits. So CSR shall not be used as marketing and brand building tool for the business of the Company.}
f.Activities carried out for fulfillment of any other statutory obligations under any law in force in India;

Rule 2(b) – Added – Administration Over Head:
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; the administration over head shall not exceed 5% of the total CSR Expenditure of the Company for the financial year.

2.Rule 4 – CSR implementation – fully substituted
As per Rule 4(2) – Every entity who is covered under Rule(4)(1), who intends to undertake any CSR activity shall register itself with the Central Government by filling the form CSR-1 electronically with the Registrar, w.e.f. 01.04.2021. 
On submission of the form CSR-1 on the portal, a unique CSR registration number shall be generated by the system automatically.
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 CFO or the person responsible for financial management shall certify the effect.

In case of “ongoing project” the board of a company shall monitor the implementation of the project with reference to the approved timelines and year wise allocation and shall be competent to make modifications, if any for smooth implementation.
Rule 2(1)(i) of Amendment Rules defines the term “ongoing Project”
a.A multilayer project, stretching over more than 1 financial year
b.Having timeline not exceeding 3 years excluding the year of commencement
c.Includes such projects that was initially not approved as multi-year project but whose duration has been extended beyond one year by the Board based on reasonable justification.

3. Rule 5(2) – substituted – CSR Committee
The CSR Committee shall formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy, which shall include:
a. The list of projects, programmes that are approved and undertaken as per Schedule VII of the Act,;
b. The manner of execution
c. The modalities of utilisation of funds and implementation schedules
d. Monitoring and reporting mechanism
e. Details of need and impact assessment, if any

4. Rule 6 – Omitted

5. Rule 7 – CSR Expenditure – Fully Substituted
7(1)The Board shall ensure that the administrative overheads shall not exceed 5% of total CSR expenditure of the company for the financial year.
7(2)Any surplus arising out of the CSR activities shall not form part of the business profit of the Company and such surplus shall be used on the following within a period of 6 months of the expiry of the financial year
- ploughed back into the same project or 
- transferred to the Unspent CSR Account
- Spent in pursuance of the CSR policy and annual action plan of policy
7(3)Excess amount spends than requirement u/s 135(5) of the Act,
Such excess amount may be set off against the requirement to spend u/s 135(5) upto immediate succeeding 3 financial years subject to the conditions that
- The excess amount available for set-off shall not include the surplus arising out of the CSR activities, if any, in pursuance of sub-rule(2) of this rule
- The Board of the Company shall pass a resolution to that effect.

7(4) Spending on Capital Assets:
The CSR amount may be spent by a Company for the creation or acquisition of a capital asset, which shall be held by:-
- The CSR Assets to be held by a Section 8 Company, or a registered Pulic Trust, or registered society with the charitable objects, having CSR registration number or
- Beneficiaries of the said CSR project, in the Form of self-help groups, collectives, entities or
- A public
Any capital assets created by a company prior to the commencement of the said rules, shall within 180 days from such commencement comply with the requirement which may be extended upto90 days subject to approval of the Board on reasonable justifications for the same.

6. Rule 8  - CSR Reporting – Fully substituted
1. The Board’s Report of a Company shall include an annual report on CSR containing particulars specified in Annexure I or Annexure II as applicable
2. For foreign company – balance sheet filed u/s 381(1)(b) shall include an annual report on CSR containing particulars specified in Annexure I or Annexure II as applicable
3. Following class of companies requires impact assessment by independent agency:
- Companies with minimum average CSR obligation of Rs. 10 crore or more in the immediately preceding 3 financial years and
- Having CSR projects of outlays of minimum Rs. 1 crore and which have been completed not less than 1 year before undertaking impact assessment.
A company undertaking impact assessment may book the expenditure towards CSR, which shall not exceed 5% of the total CSR expenditure for that financial year or 50 lakh rupees, whichever is less.

7. Rule 9 – Display of CSR Activities on its website – fully substituted
Following is mandatory to disclose on website of the company:
- Composition of CSR Committee
- CSR policy
- Projects approved by the Board, if any

8. Rule 10 – Transfer of unspent CSR amount - Newly inserted
If company fails to spend 2% of the average net profit than company needs to transfer the unspent amount as following:

Relating to ongoing project -the amount be transferred within 30 days from the end of financial year to a special account to be opened by the company in any scheduled bank to be called the unspent corporate social responsibility account
Not relating to ongoing project -should specify the reasons for not spending the amount in its Board Report
-transfer such unspent amount to a fund specified in schedule VII, within a period of six months of the expiry of the financial year

Any non-compliance with the new requirements of law may attract the following penal provisions:
a) Penalty on Company – upto the amount required to be transferred to fund specified in Schedule VII or Unspent CSR account or Rs. 1 Crore, whichever is lower;
b) Penalty on officer in default – 1/10th of the amount required to be transferred to fund specified in schedule VII or unspent CSR account or Rs. 2 Lakhs, whoever is lower.

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information.


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