Key Highlights of the CSR Amendments

S.No

Amended Provisions

Old Provisions

Comments

1

Rule 2 (1) (b) - "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;

No such definition

The reference for the term Administrative overheads is given under the sub rule 7 pertaining to the CSR Expenditure, wherein the claim under Administrative Overheads is restricted up to five percent of total CSR expenditure of the company for the financial year.

2

Rule 2 (1) (d) - "Corporate Social Responsibility (CSR)" means the 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:

Provided that any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new

Rule 2 (1) (c) - "Corporate Social Responsibility (CSR)" means and includes but is not limited to:-

(i) Projects or programs relating to activities 1[areas or subjects] specified in Schedule VII to the Act; or

(ii) Projects or programs relating to activities undertaken by the board of directors of a company (Board) in pursuance of recommendations of the CSR Committee of the Board as per declared CSR Policy of the company subject to the condition that such policy will 2[include activities, areas or subjects] specified in Schedule VII of the Act.

Earlier the term used for defining CSR was "means and Includes" and now it has been changed to "Means".

With the introduction of New rule, MCA has made the definition of CSR more exhaustive. Since the term has been changed to "means" we have to infer that the no other meaning can be assigned to the term CSR.

Further MCA has specifically excluded the various activities of

vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions that

(a) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act;

(b) details of such activity shall be disclosed separately in the Annual report on CSR included in the Board’s Report;

(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;

the Company from the definition of CSR.

It is pertinent to note that any activities undertaken by the Company for the benefit of their employees will not be considered as CSR.

"Employees" - means, any person (other than an apprentice engaged under the Apprentices Act, 1961), employed on wages by an establishment to do any skilled, semi- skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union;

Further any activities which may result into any marketing benefits in favour of the Company or any activities which is required to carried out under any statues applicable for the Company shall not be treated as CSR.

3

Rule 2 (1) (f) - "CSR Policy" means a statement containing the approach and direction given by the Board of a company, taking into account the recommendations of its CSR Committee, and includes guiding principles for selection, implementation and monitoring of activities as well as formulation of the

annual action plan;

"CSR Policy" relates to the activities to be undertaken by the company in areas or subjects specified in Schedule VII to the Act and the expenditure thereon, excluding activities undertaken in pursuance of normal course of business of a company;

*Inserted by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020. Dated 24.08.2020 [Provided that any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22 and 2022-23 subject to the conditions that-

(i) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act.

(ii) details of such activity shall be disclosed separately in the Annual Report on CSR included in the Board’s Report.]

The provision inserted with respect to the effect of Covid-19 vide Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020 dated 24.08.2020 has omitted from the definition of CSR Policy and included under the definition of the term "CSR".

Further, it is provided that the CSR policy shall contain the approach and direction of the Board of Directors in undertaking CSR activities and shall also include manner of selection, implementation and monitoring the activities of CSR.

In this scenario, the Companies may required to change the CSR policy to make it in line with the New Rules 2021.

4

"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

No such definition

(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;

No such definition

6

"Public Authority" means ‘Public Authority’ as defined in clause (h) of section 2 of the Right to

Information Act, 2005 (22 of 2005)

No such definition

7

Rule 3 (2) - Every company which ceases to be a company covered under subsection (1) of section 135 of the Act for three consecutive financial years shall not be required to -

(a) constitute a CSR Committee; and

(b) comply with the provisions contained in sub-section (2) to (6) of the said section,

till such time it meets the criteria specified in sub-section (1) of section 135.

Rule 3 (2) - Every company which ceases to be a company covered under subsection (1) of section 135 of the Act for three consecutive financial years shall not be required to -

(a) constitute a CSR Committee; and

(b) comply with the provisions contained in sub- section (2) to (5) of the said section,  till such time it meets the criteria specified in sub- section (1) of section 135.

The Company which has not triggered the limit under 135 (1) for

3 consecutive years need not require to comply with the provision w.r.t transfer of unspent amount to Unspent Corporate Social Responsibility Account or to the Fund specified in Schedule VII.

8

4. CSR Implementation. – (1) The Board shall  ensure that the CSR activities are undertaken by the company itself or through -

CSR Activities

It is now mandatory to get

registration under 12A and 80 G of the Income Tax Act, 1961 for a

(a) 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

(b) 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

(c) any entity established under an Act of Parliament or a State legislature; or

(d) 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) Every entity, covered under sub-rule (1), who intends to undertake any CSR activity, shall register itself with the Central Government by filing the form CSR-1 electronically with the Registrar, with effect from the 01st day of April 2021:

Provided that the provisions of this sub-rule shall not affect the CSR projects or programmes approved prior to the 01st day of April 2021.

(b) Form CSR-1 shall be signed and submitted electronically by the entity and shall be verified digitally by a Chartered Accountant in practice

or a Company Secretary in practice or a Cost Accountant in practice.

(1) The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or programs or activities (either new or ongoing),

4"(2) The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through

(a) a company established under section 8 of the Act or a registered trust or a registered society, established by the company, either singly or alongwith any other company, or

(b) 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 :

Provided that- if, the Board of a company decides to undertake its CSR activities through a company established under section 8 of the Act or a registered trust or a registered society, other than those specified in this sub-rule, such company or trust or society shall have an established track record of three years in undertaking similar programs or projects; and the company has specified the projects or programs to be undertaken, the modalities of utilisation of funds of such projects and programs and the monitoring and reporting mechanism".

(3) A company may also collaborate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR Committees of respective companies are in a position

section 8 of the Act, or a registered public trust or a registered society to carry on the CSR activities.

Further entities carrying the CSR activities 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 and shall obtain unique CSR Registration Number.

(c) On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number shall be generated by the system automatically.

(3) 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.

(4) 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.

(5) 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.

(6) 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. ".

to report separately on such projects or programs in accordance with these rules.

(4) Subject to provisions of sub-section (5) of section 135 of the Act, the CSR projects or programs or activities undertaken in India only shall amount to CSR Expenditure.

(5) The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with section 135 of the Act.

(6) Companies may build CSR capacities of their own personnel as well as those of their Implementing agencies through Institutions with established track records of at least three financial years but such expenditure 1["including expenditure on administrative overheads,"] shall not exceed five percent of total CSR expenditure of the company in one financial year.

(7) Contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity.

9

Rule 5 (2) - 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:-

Rule 5 (2) - The CSR Committee shall institute a transparent monitoring mechanism for

implementation of the CSR projects or programs or activities undertaken by the company.

The role and activities of the CSR Committee has made more specific.

(a) the list of CSR projects or programmes that are approved to be undertaken in areas or subjects specified in Schedule VII of the Act;

(b) the manner of execution of such projects or programmes as specified in sub-rule (1) of rule 4;

(c) the modalities of utilisation of funds and implementation schedules for the projects or programmes;

(d) monitoring and reporting mechanism for the projects or programmes; and

(e) details of need and impact assessment, if any, for the projects undertaken by the company:

Provided that Board may alter such plan at any time during the financial year, as per the recommendation of its CSR Committee, based on the reasonable justification to that effect. ".

10

Omitted

Rule 6 - CSR Policy

(1) The CSR Policy of the company shall, inter-alia, include the following namely :-

(a) a list of CSR projects or programs which a company plans to undertake 1[areas or subjects specified in] of the Schedule VII of the Act, specifying modalities of execution of such project or programs and implementation schedules for the same; and

(b) monitoring process of such projects or programs:

The provisions to the effect stipulated in the Sub rule 6 have inserted under the other sub rules and hence in order to avoid the repetitiveness, the sub rule 6 has been omitted.