MCA has introduced Companies (Corporate Social Responsibility Policy), Amendment Rules,

2021. And importantly CSR Spending made mandatory from voluntary w.e.f. financial year
2020-21.

1. Earlier CSR mechanism

At least 2% per cent of the average net profits of the company made during the 3
immediately preceding financial years in every financial year.
CSR spending was “comply or explain” basis.

2. After amendment
At least 2% per cent of the average net profits of the company made during the 3
immediately preceding financial years in every financial year.
CSR spending made Mandatory. Hence now it is” Spend or penalized”.

TREATMENT OF UNSPENT AMOUNT:

If the Company fails to spend 2% of the Average net profit, then the following shall be the treatment
of the unspent amount.

Condition Impact

If unspent amount not Amount remaining unspent for the f.y. 2020-21 shall be transferred
relating to an ongoing to Schedule VII fund (CSR activities as mentioned in Schedule) latest
project by September 30, 2021.

If unspent amount relating The amount remaining unspent (on ongoing project) for the FY
to an ongoing project 2020-21 shall be transferred to Unspent Corporate Social
Responsibility Account (UCSRA) latest by April 30, 2021

The amount remaining unspent transferred for f.y. 2020-21 to

UCSRA, must be utilized for the project upto FY 2023-24,

If fails to spend on the If Company Fails to spend in 3 years, The unspent amount shall be
ongoing project transferred to a fund specified in Schedule VII.

IMPLEMENTATION OF CSR SPENDING:

The CSR activities can be undertaken by the Company itself or through the followings implementing
agencies:

1. A company established under Section 8 of the Act; or

2. A Registered Public Trust; or (amended as only registered public trust)
3. A Registered society

♦ Either singly or along with the other Company; or

♦ Above entity established by the Central Government or State Government; or

♦ Any of the above entity having a track record of at least 3 years in undertaking similar activities; or

♦ Any of the above entity established under an Act of parliament or a State Legislature.

Note:
Registration under Section 12A and 80G of the Income Tax Act, 1961 become mandatory.
Registration of such entity shall be mandatory by filing form CSR 1.

TREATMENT OF EXCESS AMOUNT SPENT ON CSR:

Excess amount may be set off against the requirement to spend under section 135(5) up to
immediate succeeding 03 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.

WEBSITE DISCLOSURE:

The Board of Directors of the Company shall mandatorily disclose the followings on its website (if
any):

1. Composition of CSR Committee

2. CSR Policy
3. Projects approved by the Board on their website.

IMPACT ASSESSMENT:

It is a new concept introduced through these rules.

A company having the obligation of spending the average CSR amount of Rs 10 Crore or more in the
three immediately preceding financial years in pursuance of Section 135(5) of the Act, shall
undertake impact assessment.

Impact assessment to be done by an independent agency. Impact assessment to be done in respect

of CSR projects having outlays of one crore rupees or more, and which have been completed not less
than one year before undertaking the impact study.

CONSEQUENCE OF NON-COMPLIANCE:

1. Company liable to pay penalty twice the amount of default or Rs. 1 cr, whichever is less.
2. Every officer liable to pay penalty @ 10% of default or Rs. 2 lacs, whichever is less.

Accordingly, in our companies, we have to calculate CSR spending to be made during F.Y. 20-21
along with unspent amount of F.Y. 2019-20 and spend the required amount before 31.03.2021 to
comply with the provisions.