Brief on the key amendments to the CSR provisions notified by the Ministry of Corporate Affairs on 22nd January 2021

Mandatory satisfaction by the Board of the Company basis a Certification by the CFO / Finance Head on the appropriate utilisation of funds.
Mandatory Impact assessment for company having average CSR obligation of Rs. 10 Crore or more in three immediately preceding financial years through an independent agency of their CSR projects of having outlays of Rs. 1 Crore or more. The impact assessment reports shall be placed before the Board and shall be annexed to the annual report.
Responsibilities of CSR Committee and the Board have been increased significantly. As per the new Rule, 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:-

  • The list of CSR projects that are approved to be undertaken in areas or subjects specified in Schedule VII of the Act.
  • The manner of execution of such projects as specified.
  • The modalities of utilisation of funds and implementation schedules for the projects.
  • Monitoring and reporting mechanism for the projects.
  • Details of need and impact assessment, if any, for the projects.
Earlier, the Company was required to disclose the content of its CSR policy on its website. In the amended rule, the disclosure obligations have also been increased substantially and the Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website, if any, for public access.
An entity which has not spent the mandatory CSR funds is required to disclose the reasons for non-spending in their annual report and the amount is required to be transferred to a Fund specified in Schedule VII within a period of 6 months of the expiry of the financial year.
International organisations can be engaged for designing, monitoring and evaluation of the CSR projects as per its CSR policy as well as for capacity building of their own personnel for CSR.
Administrative Overheads now defined as expense incurred for general management and admin of CSR functions but does not include expense directly incurred for the designing, implementation, monitoring, and evaluation of a particular CSR project. Capping of 5% retained.
Definition of CSR Activities have been redefined with some of the notable exclusions such as sponsorship activities for marketing benefits its products or services, activities carried out for fulfilment of any other statutory obligations under any law in force in India.
The societies / trusts engaged for project implementation need to be registered under section 12A and 80 G of the Income Tax Act, 1961 and they are also required to register themselves with ROC by filing the Form CSR-1 electronically w.e.f 01 April 2021 to obtain a unique CSR Registration Number.
The CSR amount may be spent by a company for creation or acquisition of a capital asset, which shall be held in the prescribed manner.
Where a company contravenes the above provisions, then the Company shall be liable to a penalty of twice the above amount not transferred / utilised or Rs. 1 Crore, whichever is less, and every officer of such company shall be liable to a penalty of 1/10th of the amount or Rs. 2 lakh, whichever is less.”
We will be happy to provide any clarifications.  
The content of this document and any views expressed therein are provided for information purpose only, and should not be construed as legal advice on any subject matter. Tax and regulatory laws are subject to changes from time to time and as such any changes may affect the content contained in this document. Readers should seek consultation with Asire professional or obtain their own independent advice before taking any action or making any decision on any of the matter contained in this document. The Firm expressly disclaims all liability to any person who enters into any arrangement, takes any action, or not to take any action based on any or all the contents of this document. This document is not intended or written to be used, and it cannot be used, for the purpose of avoiding any taxes and any other liability / compliance due to any regulator in or outside India.

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