Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021

The Ministry of Corporate Affairs has released a new order notifying the amendments in the CSR rules to provide greater transparency to companies by allowing to undertake multi-year projects, setting off excess expenses over three years and also requiring that all CSR implementing agencies be registered with the government.

“These rules may be called the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021,” a gazette order released by the Ministry of Corporate Affairs (MCA) of the Government of India stated.

All companies with a net worth of Rs 500 crore or more, a turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more, are required to spend 2 % of their average profits of the previous three years on CSR activities every year. The amended CSR rules allow companies to set off CSR expenditure above the required 2 % expenditure in any fiscal year against required expenditure for up to three financial years.

As per the new provisions, every entity that intends to undertake any CSR activity will have to register itself with the Central Government by filing the form CSR-1 electronically with the Registrar of Companies, with effect from April 1, 2021.

“Form CSR-1 shall be signed and submitted electronically by the entity and shall be verified digitally. On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number shall be generated by the system automatically,” MCA added.

Besides this, companies undertaking CSR activities will have to share:

  • Impact Assessment for big CSR projects
  • Annual action plan for CSR by Board every year in addition to CSR policy
  • Mandatory disclosure of CSR projects and activities on company website
  • In case of creation or acquisition of capital asset, furnish the details relating to the asset so created or acquired through CSR spent in the financial year
  • Park the unspent amount of ongoing projects in a separate account within 30 days of the end of financial year
  • Transfer of unspent amount to government notified fund within 6 months of the end of financial year.


In the event of the company failing to spend the earmarked two percent of net profits towards CSR, it will “have to specify the reasons for not spending the amount” and, unless the unspent amount relates to any ongoing project, transfer it to a government notified fund within 6 months of end of financial year.

CSR Implementation :

  1. The Board shall ensure that the CSR activities are undertaken by the company itself or through –
    • a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80 G of the Income Tax Act, 1961 (43 of 1961), established by the company, either singly or along with any other company, or
    • a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government; or
    • any entity established under an Act of Parliament or a State legislature; or
    • a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities.
  2. A company may engage international organisations for designing, monitoring and evaluation of the CSR projects or programmes as per its CSR policy as well as for capacity building of their own personnel for CSR.
  3. A company may also collaborate with other companies for undertaking projects or programmes or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programmes in accordance with these rules.
  4. 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.
  5. 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 of the project within the overall permissible time period.


CSR Expenditure :

  1. The board shall ensure that the administrative overheads shall not exceed five percent of total CSR expenditure of the company for the financial year.
  2. Any surplus arising out of the CSR activities shall not form part of the business profit of a company and shall be ploughed back into the same project or shall be transferred to the Unspent CSR Account and spent in pursuance of CSR policy and annual action plan of the company or transfer such surplus amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.
  3. Where a company spends an amount in excess of requirement provided under sub-section (5) of section 135 , such excess amount may be set off against the requirement to spend under sub-section (5) of section 135 up to immediate succeeding three financial years subject to the conditions that –(i) 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.(ii) the Board of the company shall pass a resolution to that effect.
  4. The CSR amount may be spent by a company for creation or acquisition of a capital asset, which shall be held by –(a) a company established under section 8 of the Act, or a Registered Public Trust or Registered Society, having charitable objects and CSR Registration Number under sub-rule (2) of rule 4; or(b) beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities; or(c) a public authority:


Consequences of Non compliance :

  • The penalty for non compliance is Twice the unspent amount required to be transferred by the company or Rs.1 Cr whichever is less.
  • The penalty for every officer of the company who is in default shall be @10% of default or Rs.2 Lakhs whichever is less.


CSR has for long been understood as a social obligation and voluntary in nature. Prior to this amendment, the government was of the view that CSR should be voluntary in nature and the motive behind introduction of CSR was to enable corporations to conduct their social obligations, and not to punish them. The Government seems to have displayed an absolute reversal of attitude. Gone are those days when the companies used to take the CSR provisions lightly.