Comprehensive CSR compliance services covering policy development, CSR committee formation, CSR-1 registration, impact assessment, and annual CSR reporting under the Companies Act, 2013.
Corporate Social Responsibility (CSR) is a statutory obligation under the Companies Act, 2013 that requires eligible companies to contribute a portion of their profits towards social welfare activities. Section 135 of the Companies Act, 2013, along with the Companies (CSR Policy) Rules, 2014, establishes the legal framework for CSR compliance in India.
Companies meeting prescribed thresholds — net worth of Rs 500 crore or more, or turnover of Rs 1000 crore or more, or net profit of Rs 5 crore or more — are required to constitute a CSR Committee, formulate a CSR Policy, and spend at least 2% of their average net profits of the preceding three financial years on eligible CSR activities. Non-compliance attracts significant penalties including monetary fines and imprisonment for officers in default.
The CSR regulatory landscape has undergone significant changes in recent years. The introduction of mandatory unspent CSR transfer requirements, CSR-1 registration mandate, enhanced disclosure norms, and the concept of ongoing projects have added complexity to CSR compliance. Companies must navigate these requirements carefully to avoid penalties and ensure their CSR spend counts towards compliance.
Eligible companies must constitute a CSR Committee comprising three or more directors, with at least one independent director. The committee is responsible for recommending the CSR Policy, formulating spending plans, and monitoring CSR activities. For private companies without independent directors, two directors suffice. The committee must meet at least twice a year.
The Board of Directors must approve a comprehensive CSR Policy that outlines the company approach to CSR, identifies focus areas, sets spending targets, and establishes monitoring mechanisms. The policy must be disclosed on the company website and filed with the ROC. It must specify the activities to be undertaken, the implementation plan, and the monitoring framework.
The minimum CSR spend is 2% of the average net profits of the company during the three immediately preceding financial years. Net profit is calculated as net profit before tax as per financial statements, excluding certain items like dividend income, profit on sale of assets, and foreign exchange gains. The CSR amount must be spent in the same financial year or transferred to an unspent CSR account.
Any unspent CSR amount must be transferred to a designated unspent CSR account within 6 months of the end of the financial year. The amount must then be spent on eligible CSR activities within 3 years or transferred to one of the funds specified under Schedule VII. Non-transfer attracts penalties including company fines up to twice the unspent amount.
CSR-1 registration must be filed by every entity that intends to undertake CSR activities or receive CSR funds. This includes companies established under Section 8 of the Companies Act, registered societies, registered public trusts, and any other entity registered under any law. The entity must have a valid registration under Section 12A of the Income Tax Act for tax-exempt status.
The CSR-1 form requires certified copies of the registration certificate, MOA/AOA or trust deed, PAN card, details of governing body members, details of key managerial personnel, bank account details, and certification by a practicing professional (Company Secretary, Chartered Accountant, or Cost Accountant). All documents must be digitally signed by an authorized signatory.
The CSR-1 form must be filed online through the MCA portal with the applicable fee. Processing typically takes 30-45 days. The entity receives a CSR-1 registration number upon approval, which must be shared with corporate donors for claiming CSR expenditure credits. Any changes in information must be updated through an amended CSR-1 filing within 30 days of the change.
Eligible CSR activities are listed under Schedule VII of the Companies Act and include: eradication of hunger and malnutrition, promoting education including special education and employment enhancement, promoting gender equality and empowering women, reducing child mortality, improving maternal health, combating HIV/AIDS and other diseases, ensuring environmental sustainability, and contribution to the PM National Relief Fund.
Companies with average CSR spend of Rs 10 crore or more in the three preceding financial years must undertake impact assessment of their CSR projects. The assessment must be conducted by an independent agency and cover the design, implementation, and outcomes of the CSR project. The impact assessment report must be placed before the Board and annexed to the annual CSR report.
Ongoing projects are multi-year CSR projects sanctioned before the beginning of a financial year with a minimum duration of 3 years and maximum of 5 years. Companies may undertake ongoing projects with Board approval. At least 25% of the CSR amount earmarked for ongoing projects must be spent in the first year, 50% in the second year, and the balance in subsequent years.
Companies may implement CSR activities through their own CSR department, registered trusts, registered societies, or Section 8 companies with CSR-1 registration. Companies may also collaborate with other companies for joint CSR projects. Companies with CSR obligation of Rs 50 crore or more must appoint a full-time CSR officer. The implementing entity must maintain proper books of accounts for CSR expenditure.
Section 134(3)(o) of the Companies Act requires inclusion of a CSR report in the Board report. The report must contain details of the CSR Committee, CSR Policy, CSR spend amount and percentage, projects undertaken, implementation mechanism, and any shortfall in CSR spending. The format is prescribed under the Companies (CSR Policy) Amendment Rules, 2021.
The prescribed Annual CSR Report in Annexure II of the Board report must include: composition of CSR Committee, CSR Policy overview, CSR expenditure details including administrative overheads and corpus, project-wise allocation and utilization, details of CSR projects undertaken with implementing agencies, and excess or shortfall in CSR spend. The report must be signed by the Chairperson of the CSR Committee.
Companies must file CSR-related information in their annual return filed on the MCA21 portal. This includes details of CSR expenditure, CSR Committee composition, and CSR projects. The CSR annual return must be filed within 60 days of the annual general meeting. Failure to file attracts additional fees and penalties under the Companies Act.
From CSR Committee formation and policy development to project implementation, impact assessment, and annual reporting, we provide comprehensive support across all aspects of CSR compliance under the Companies Act.
We help companies optimize their CSR spend by identifying high-impact projects, selecting the right implementing partners, and ensuring maximum utilization of the CSR budget while meeting all regulatory requirements.
Our team conducts rigorous impact assessments using globally accepted frameworks. We help companies measure and report the social impact of their CSR initiatives, ensuring meaningful outcomes and stakeholder value creation.
Our proactive approach ensures timely compliance with all CSR obligations, including unspent CSR transfer requirements and disclosure deadlines. We monitor regulatory changes and update clients on implications for their CSR compliance.
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Corporate Social Responsibility (CSR) under the Companies Act, 2013 requires certain companies to spend at least 2% of their average net profits of the preceding three financial years on CSR activities. This applies to companies with net worth of Rs 500 crore or more, or turnover of Rs 1000 crore or more, or net profit of Rs 5 crore or more during any financial year.
Companies meeting any of the following criteria during any financial year are required to comply with CSR provisions: (1) Net worth of Rs 500 crore or more, (2) Turnover of Rs 1000 crore or more, or (3) Net profit of Rs 5 crore or more. This includes holding, subsidiary, and foreign companies with branch offices in India.
CSR-1 is a mandatory registration form that must be filed by every entity (company, section 8 company, or registered society) that wants to undertake CSR activities. The form must be filed with the Registrar of Companies (ROC) through the MCA portal. The registration is required before receiving any CSR funds from corporates.
Eligible CSR activities include: (1) Eradicating hunger and malnutrition, (2) Promoting education, (3) Promoting gender equality, (4) Reducing child mortality, (5) Improving maternal health, (6) Combating HIV/AIDS, (7) Ensuring environmental sustainability, (8) Social business projects, (9) Contribution to PM National Relief Fund, and (10) Any other activities as prescribed under Schedule VII of the Companies Act.
Penalties for CSR non-compliance include: (1) Company penalty of up to twice the unspent amount or Rs 1 crore, whichever is less, (2) Every officer in default may be imprisoned for up to 3 years or fined up to Rs 5 lakh, or both, (3) Mandatory transfer of unspent CSR amount to a specified fund within 6 months of the financial year end, and (4) Disclosure requirements in annual return and board report.
Our team of qualified professionals is ready to assist you with all aspects of CSR compliance. Contact us for a comprehensive review of your CSR obligations and compliance status.
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