Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR)

General Circular No. 14 /2021 

E-file no.CSR-05/01/2021-CSR-MCA 

Government of India 

Ministry of Corporate Affairs 

 5th Floor, ‘A' Wing 

Shastri Bhawan, Dr. R.P. Road 

 New Delhi-110001. 

 Dated: 25th August 2021 

To, 

All Regional Director, 

All Registrar of Companies, 

All Stakeholders. 

Subject: - Frequently Asked Questions (FAQs) on Corporate Social  Responsibility (CSR) -reg. 

Madam/Sir(s), 

The broad framework of CSR has been provided in Section 135 of the Companies  Act, 2013 (herein after referred as ‘the Act’), Schedule VII of the Act and Companies  (CSR Policy) Rules, 2014 (herein after referred as ‘the CSR Rules’). Further, Ministry  had also issued clarifications including FAQs from time to time on various issues  concerning CSR. 

2. A number of significant developments have taken place since then. The Ministry has  notified the amendments in Section 135 of the Act as well in the CSR Rules on  22nd January 2021 with an aim to strengthen the CSR ecosystem, by improving  disclosures and by simplifying compliances. In response to such amendments, Ministry  has received several references and representations from stakeholders seeking  clarifications on the various issues related to CSR. 

3. Accordingly, in suppression of clarifications and FAQs issued vide General Circular  no. 21/2014 (dated 18th June 2014), 36/2014 (dated 17th September 2014), 01/2016  (dated 12th January 2016) ,05/2016 (dated 16th May 2016), clarification issued vide letter  dated 25.01.2018 and General Circular no. 06/2018 (dated 28th May 2018), a set of FAQs  along with response of the Ministry is provided herewith at Annexure for better  understanding and facilitating effective implementation of CSR. 

4. This issues with the approval of competent authority. 

Yours faithfully, 

(Shobhit Srivastava) 

Deputy Director (CSR Cell) 

Copy to: 

1. E Governance for uploading on MCA website 

2. Guard File.

Annexure  

Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR)

S. No.	Question	Answer
1.0	Applicability of CSR
1.1	Which companies qualify for CSR under the Companies Act, 2013?	A company satisfying any of the following criteria during the immediately preceding financial year is required to comply with CSR provisions specified under section 135(1) of the Companies Act, 2013 read with the Companies (CSR Policy) Rules, 2014 made thereunder: (i) net worth of rupees five hundred crore or more, or  (ii) turnover of rupees one thousand crore or more, or (iii) net profit of rupees five crore or more.
1.2	Whether a holding or  subsidiary of a company  fulfilling the criteria under  section 135(1) has to  comply with the provisions  of section 135, even if the  holding or subsidiary itself  does not fulfil the criteria?	No, the compliance with CSR requirements is specific to  each company. A holding or subsidiary of a company is not  required to comply with the CSR provisions unless the  holding or subsidiary itself fulfils the eligibility criteria  prescribed under section 135(1) stated above.  Example: Company A is covered under the criteria  mentioned in section 135(1). Company B is holding company  of company A. If Company B by itself does not satisfy any of  the criteria mentioned in section 135(1), Company B is not  required to comply with the provisions of section 135.
1.3	Whether provisions of CSR  are applicable to a section  8 Company?	Yes, section 135(1) of the Act commences with the words  “Every company........” and thus applies to section 8  companies as well.
1.4	Whether CSR provisions apply to a company that has not completed the period of three financial years since its incorporation?	Yes. If the company has not completed three financial years since its incorporation, but it satisfies any of the criteria mentioned in section 135(1), the CSR provisions including spending of at least two per cent of the average net profits made during immediately preceding financial year(s) are applicable. Example: Company A is incorporated during FY 2018-19, and as per eligibility criteria the company is covered under section 135(1) for FY 2020-21. The CSR spending obligation under section 135(5) for Company A would be at least two per cent of the average net profits of the company made during FY 2018-19 and FY 2019-20.

2.0	CSR Framework
2.1	What is the composition of  the CSR Committee?	The composition of the CSR Committee for various  categories of companies is as under:  Listed companies Three or more directors, out of which at least one shall be an independent director. Unlisted public companies - Three or more directors, out of which at least one shall be an independent director. However, if there is no requirement of having an independent director in the company, two or more directors. Private companies Two or more directors. No independent directors are required as mentioned in the proviso under section 135(1). Foreign company At least two persons out of which: (a) one shall be as specified under clause (d) of sub section (1) of section 380 of the Act, and (b) another shall be nominated by the foreign company. (Refer rule 5(1) of the Companies (CSR Policy) Rules, 2014) Where the amount required to be spent by a company on CSR does not exceed fifty lakh rupees, the requirement for constitution of the CSR Committee is not mandatory and the functions of the CSR Committee, in such cases, shall be discharged by the Board of Directors of the company.

2.2	What are the functions of  the CSR Committee?	The Corporate Social Responsibility Committee shall —  (i) formulate and recommend the CSR policy to the Board;  (ii) recommend the amount of expenditure to be incurred  on CSR activities;   (iii) monitor the CSR policy of the company from time to  time; and  (iv) formulate and recommend to the Board, an annual  action plan in pursuance of its CSR policy, which shall  include the items as mentioned in rule 5(2) of the  Companies (CSR Policy) Rules, 2014.  For companies covered under Section 135(9) of the Act  and not required to have CSR Committee, these functions  shall be carried out by the Board itself.
2.3	What are the  responsibilities of the  Board in relation to the CSR  provisions?	CSR is a Board-driven process. The responsibilities of the Board of a CSR-eligible company, inter-alia, include the  following —  (i) approve the CSR policy;   (ii) disclose contents of such policy in its report and also  place it on the company's website, if any;   (iii) ensure that the activities included in the CSR policy are  undertaken by the company;  (iv) ensure that the company spends, in every financial  year, at least two per cent of the average net profits of  the company made during the three immediately  preceding financial years;  (v) satisfy itself regarding the utilisation of the disbursed  CSR funds; and   (vi) if the company fails to spend at least two per cent of  the average net profits of the company, the Board shall,  in its report made under clause (o) of sub-section (3) of  section 134, specify the reasons for not spending the  amount and transfer the unspent CSR amount as per  provisions of sections 135(5) and 135(6) of the Act.

2.4	What is the role of the  Government in the  approval and  implementation of the CSR  programmes/projects of a  company?	Provisions of section 135, read with Schedule VII of the Act and Companies (CSR Policy) Rules, 2014 provide the broad  framework within which the eligible companies are  required to formulate their CSR policies including activities  to be undertaken and implementation of the same. CSR is  a board-driven process, and the Board of the company is  empowered to plan, approve, execute, and monitor the  CSR activities of the company based on the  recommendation of its CSR Committee.  The Government has no direct role in the approval and  implementation of the CSR programmes /projects of a  company.
2.5	What are the mechanisms  for monitoring the CSR  process?	CSR is a Board-driven process, and the Board of the  company is empowered to plan, decide, execute, and  monitor the CSR activities of the company based on the  recommendation of its CSR Committee. The CSR  architecture is disclosure-based and CSR-mandated  companies are required to file details of CSR activities  annually in MCA21 registry. Companies are required to  make necessary disclosures in the financial statements  regarding CSR including non-compliance. The existing  legal provisions such as mandatory disclosures,  accountability of the CSR Committee and the Board, and  provisions for audit of accounts of the company provide  sufficient mechanisms for monitoring.
2.6	What is the role of the Government in monitoring  compliance of CSR  provisions by companies?	The Government monitors the compliance of CSR  provisions through the disclosures made by the  companies in the MCA 21 portal. For any violation of CSR  provisions, action can be initiated by the Government  against such non-compliant companies as per provisions  of the Companies Act, 2013 after due examination of  records, and following due process of law. Non  compliance of CSR provisions has been notified as a civil  wrong w.e.f. 22nd January, 2021.

3.0	CSR Expenditure
3.1	How is average net profit  calculated for the purpose  of section 135 of the Act?  Whether ‘profit before tax’  or ‘profit after tax’ is used  for such computation?	The average net profit for the purpose of determining the  spending on CSR activities is to be computed in  accordance with the provisions of section 198 of the Act  and will also be exclusive of the items given under rule  2(1)(h) of the Companies (CSR Policy) Rules, 2014. Section  198 of the Act specifies certain additions/deletions  (adjustments) to be made while calculating the net profit  of a company (mainly it excludes capital  payments/receipts, income tax, set-off of past losses).   Profit Before Tax (PBT) is used for computation of net  profit under section 135 of the Act.
3.2	What is the meaning of the  term ‘administrative  overheads? What is the  maximum permissible limit  for administrative  overheads?	Administrative overheads are the expenses incurred by the  company for ‘general management and administration’ of  CSR functions. However, the expenses which are directly  incurred for the designing, implementation, monitoring,  and evaluation of a particular CSR project or programme, shall not be included in the administrative overheads.   Administrative overheads generally comprise of items  such as employee costs, utilities, office supplies, legal  expenses, etc. However, expenses which are attributed to  the project implementation shall be included in project  cost only.  Example: Salary and training for the employees working  in the CSR division of a company, stationery cost, travelling  expenses, etc. may be categorised as administrative  overheads. However, salary of school teachers or other  staff, etc. for education-related CSR projects shall be  covered under education project cost.   The maximum permissible limit for administrative  overheads is five per cent of the total CSR expenditure of  the company for the financial year.

3.3	Are administrative  overheads applicable only  for expenses incurred by  the company, or can they  be applied to expenses  incurred by the  implementing agency as  well?	According to rule 2(1)(b) of the Companies (CSR Policy)  Rules, 2014, administrative overheads mean the expenses  incurred by the company in the general management and  administration of CSR functions in the company.  Therefore, expenses incurred by implementing agencies  on the management of CSR activities shall not amount to  administrative overheads and cannot be claimed by the  company.
3.4	What is the meaning of  surplus arising from CSR  activities? How can this surplus be utilised?	Surplus refers to income generated from the spend on CSR  activities, e.g., interest income earned by the implementing  agency on funds provided under CSR, revenue received from  the CSR projects, disposal/sale of materials used in CSR  projects, and other similar income sources.   The surplus arising out of CSR activities shall be utilised only  for CSR purposes.
3.5	Whether contribution to the  corpus of an entity is an  admissible CSR expenditure?	No, the provision relating to contribution to corpus as  admissible CSR expenditure has been amended and the contribution to corpus of any entity is not an admissible CSR  expenditure w.e.f. 22nd January, 2021.
3.6	Whether expenses related  to transfer of capital asset  as provided under rule 7(4)  of Companies (CSR Policy)  Rules, 2014, will qualify as  admissible CSR expenditure?	Yes, the expenses relating to transfer of capital asset such  as stamp duty and registration fees, will qualify as  admissible CSR expenditure in the year of such transfer.
3.7	If a company spends more  than the requirement  provided under section  135, can that excess  amount be set off against  the mandatory 2% CSR  expenditure in succeeding  financial years?	Yes, the excess amount can be set off against the required  2% CSR expenditure up to the immediately succeeding  three financial years subject to compliance with the  conditions stipulated under rule 7(3) of the Companies  (CSR Policy) Rules, 2014. This position is applicable from  22nd January, 2021 and has a prospective effect. Thus, no  carry forward shall be allowed for the excess amount  spent, if any, in financial years prior to FY 2020-21.

3.8	If a company cannot take  the benefit of set off of excess amount spent in the  previous financial year  because of non applicability of CSR  provisions, will the excess  amount lapse?	Yes, the law states that the excess CSR amount spent can  be carried forward up to immediately succeeding three  financial years; thus, in case any excess amount is left for  set off, it will lapse at the end of the said period.  Example: In FY 2020-21 a company had spent Rs. 2 crores  in excess. In FY 2021-22, it sets-off Rs. 50 lakhs from such  excess. However, from FY 2022-23, the company is no  longer subject to CSR provisions under section 135(1). In  such case, the company may continue to retain the  remaining excess CSR of Rs. 1.50 crores up to FY 2023-24,  and thereafter the same shall lapse.
3.9	Whether it is mandatory for  companies to carry out CSR  in their local areas?	The first proviso to section 135(5) of the Act provides that  the company shall give preference to local areas and the  areas around where it operates. Some activities in  Schedule VII such as welfare activities for war widows, art  and culture, and other similar activities, transcend  geographical boundaries and are applicable across the  country. With the advent of Information & Communication  Technology (ICT) and emergence of new age businesses  like e-commerce companies, process-outsourcing  companies, and aggregator companies, it is becoming  increasingly difficult to determine the local area of various  activities.   The spirit of the Act is to ensure that CSR initiatives are  aligned with the national priorities and enhance  engagement of the corporate sector towards achieving  Sustainable Development Goals (SDGs).  Thus, the preference to local area in the Act is only  directory and not mandatory in nature and companies  need to balance local area preference with national  priorities.
3.10	Whether CSR expenditure of  a company can be claimed  as a business expenditure?	No, the amount spent by a company towards CSR cannot be  claimed as business expenditure. Explanation 2 to section  37(1) of the Income Tax Act, 1961 which was inserted through  the Finance Act, 2014 provides that any expenditure incurred  by an assessee on the activities relating to CSR referred to in  section 135 of the Companies Act, 2013 shall not be deemed  to be an expenditure incurred by the assessee for the  purposes of the business or profession.

3.11	What tax benefits can be  availed under CSR?	No specific tax exemptions have been extended to CSR  expenditure. The Finance Act, 2014 also clarifies that  expenditure on CSR does not form part of business  expenditure.
3.12	Whether contribution in  kind can be monetized to  be shown as CSR  expenditure?	The requirement comes from section 135(5) that states  that “The Board of every company shall ensure that it  spends…” Therefore, CSR contribution cannot be in kind  and monetized.
3.13	Can CSR expenditure be  incurred on activities  beyond Schedule VII?	No, CSR expenditure cannot be incurred on activities  beyond Schedule VII of the Act. The activities undertaken  in pursuance of the CSR policy must be relatable to  Schedule VII of the Companies Act, 2013. The items  enlisted in Schedule VII of the Act are broad-based and are  intended to cover a wide range of activities. The entries in  the said Schedule VII must be interpreted liberally to  capture the essence of the subjects enumerated in the said  Schedule.
3.14	What are the different  modes of incurring CSR  expenditure?	CSR expenditure can be incurred in multiple modes:  (i) ‘Activities route’, which is a direct mode wherein a  company undertakes the CSR projects or  programmes as per Schedule VII of the Act, either  by itself or by engaging implementing agencies as  prescribed in Companies (CSR Policy) Rules, 2014.   (ii) ‘Contribution to funds route', which allows the  contributions to various funds as specified in  Schedule VII of the Act.  (iii) Contribution to incubators and R&D projects, as  specified in item (ix)(a) and contribution to  institutes/organisations, engaged in research and  development activity, as specified under item (ix)(b)  of Schedule VII of the Act.

3.15	Which are the funds  specified in Schedule VII of  the Act for the purpose of  CSR contribution?	Contributions to the following funds shall be admissible as CSR expenditure:  (i) Swachh Bharat Kosh   (ii) Clean Ganga Fund   (iii) Prime Minister’s National Relief Fund (PMNRF) (iv) Prime Minister’s Citizen Assistance and Relief in  Emergency Situations Fund (PM CARES Fund) (v) Any other fund set up by the Central Government  and notified by the Ministry of Corporate Affairs, for  socio-economic development and relief and  welfare of the Scheduled Castes, the Scheduled  Tribes, other backward classes, minorities and  women.
3.16	Will contribution to any  other fund set up for  carrying out the activities  mentioned in Schedule VII  of the Act, be an admissible  CSR expenditure?	No, the Act does not recognise any contribution to any  other fund, which is not specifically mentioned in Schedule  VII, as an admissible CSR expenditure.
3.17	Can CSR funds be utilised  to fund Government  schemes?	The objective of CSR provisions is to involve the  corporates as partners in the social development process.  Use of corporate innovations and management skills in  the delivery of ‘public goods’ is at the core of CSR  implementation by the companies. Therefore, CSR should  not be interpreted as a source of financing the resource  gaps in Government Schemes. However, the Board of the  eligible company may undertake similar activities  independently subject to fulfilment of Companies (CSR  Policy) Rules, 2014.
3.18	Whether involvement of  employees of a company in  their CSR projects can be  monetized and accounted  for under the head of ’CSR  expenditure’?	No, involvement of employees in CSR projects of a  company cannot be monetized. Contribution and  involvement of employees in CSR activities of the  company will no doubt generate interest/pride in CSR  work and promote transformation from Corporate Social  Responsibility (CSR) as an obligation to Socially  Responsible Corporate (SRC) in all aspects of their  functioning. Companies, therefore, should be  encouraged to involve their employees in CSR activities.

4.0	CSR Activities
4.1	Which activities do not  qualify as eligible CSR  activity?	Rule 2(1)(d) of the Companies (CSR Policy) Rules, 2014 defines CSR and the following activities are specifically excluded from being considered as eligible CSR activity: (i) Activities undertaken in pursuance of normal course of business of the company. However, exemption is provided for three financial years, till FY 2022-23, to companies engaged in R&D activities for new vaccines, drugs, and medical devices in their normal course of business, related to COVID 19. This exclusion is allowed only in case the companies are engaged in R&D in collaboration with organisations as mentioned in item (ix) of Schedule VII and disclose the same in their Board reports. (ii) Activities undertaken 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 section 2(k) of the Code on Wages, 2019; (v) Sponsorship activities for deriving marketing benefits for products/services; (vi) Activities for fulfilling statutory obligations under any law in force in India.
4.2	Whether the companies can  undertake any CSR activity  mentioned under Schedule  VII of the Act for the  exclusive benefit of their  employees, workers and  their family members?	Rule 2(1)(d)(iv) of the Companies (CSR Policy) Rules, 2014  states that any activity benefitting employees of the  company shall not be considered as eligible CSR activity. As  per the rule, any activity designed exclusively for the benefit  of employees shall be considered as an “activity benefitting  employees” and will not qualify as permissible CSR  expenditure. The spirit behind any CSR activity is to benefit  the public at large and the activity should be non  discriminatory to any class of beneficiaries. However, any  activity which is not designed to benefit employees solely,  but the public at large, and if the employees and their family  members are incidental beneficiaries, then, such activity  would not be considered as “activity benefitting employees”  and will qualify as eligible CSR activity.

4.3	What is the meaning of  sponsorship activities  deriving marketing benefits  for company’s products or  services?	Sponsorship activities of an event are done with an aim of  deriving marketing benefits for a company’s product or  services. The intent of CSR is to encourage companies to  undertake the activities in a project or programme mode  rather than as a one-off event. Companies shall not use  CSR purely as a marketing or brand building tool for their business, but brand building as a collateral benefit does  not vitiate the spirit of CSR.
4.4	Are activities undertaken by  companies outside India  for the benefit of resident  Indians, permitted as  eligible CSR activity?	Rule 2(1)(d)(ii) of the Companies (CSR Policy) Rules, 2014  clearly states that any activity undertaken by the company  outside India shall not be an eligible CSR activity. The only  exception is training of Indian sports personnel  representing any State or Union Territory at national or  international level.
4.5	How can companies with  small CSR funds take up  CSR activities in a project  mode?	A well-designed CSR project can be managed with small  CSR funds as well.  Further, there is a provision in the Companies (CSR Policy) Rules, 2014 that enables such companies to collaborate  with other companies for undertaking CSR activities by  way of pooling their CSR resources. (Refer rule 4(4) in  Companies (CSR Policy) Rules, 2014).
5.0	CSR Implementation
5.1	What are the different  modes of implementation  of CSR activities?	Pursuant to rule 4 of the Companies (CSR Policy) Rules, 2014 a company may undertake CSR activities through following three modes of implementation: (i) Implementation by the company itself (ii) Implementation through eligible implementing agencies as prescribed under sub-rule (1) of rule 4. (iii) Implementation in collaboration with one or more companies as prescribed under sub-rule (4) of rule 4.

5.2	Which entities are eligible to  act as an implementing  agency for undertaking CSR  activities?	Rule 4(1) of the Companies (CSR Policy) Rules, 2014 provides  the eligible entities which can act as an implementing agency  for undertaking CSR activities. These are:  (i) Entity established by the company itself or along with any  other company – 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.  (ii) Entity established by the Central Government or State  Government – a company established under section 8 of  the Act, or a registered trust or a registered society.  (iii) Statutory bodies – any entity established under an Act of  Parliament or a State legislature.  (iv) Other bodies – 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.
5.3	Whether all three types of  entities – a company  established under section 8 of the Act, or a registered  public trust, or a registered  society, are required to  have income-tax  registration u/s 12A as well  as 80G of the Income Tax  Act, 1961?	Yes, as per rule 4(1) all three types of entities – a company  established under section 8 of the Act, or a registered  public trust, or a registered society are required to have  income-tax registration u/s 12A as well as 80G of the  Income Tax Act, 1961 to act as implementing agency,  except for any entities established by Central or State  Government.
5.4	What is meant by ’registered public trusts’ in  such states where  registration is not  mandatory?	Registered public trust (as referred to in rule 4(1) of the  Companies (CSR Policy) Rules,2014) would include trusts  registered under the Income Tax Act, 1961 in respect of those states where registration of public trusts is not  mandatory.
5.5	What is the purpose of  registration of the  implementing agency on  MCA21 portal?	The identification of suitable implementing agencies is a major concern for companies. Registration of  implementing agencies on MCA21 portal is aimed at  creating a database of such agencies for companies who may want to engage them. Further, this will bring  accountability and transparency in the implementation of  CSR activities and thereby strengthen the CSR eco-system.

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5.6	Is it mandatory for every  implementing agency to  register on the MCA21  portal?	Yes, every implementing agency mentioned in rule 4(1) of  the Companies (CSR Policy) Rules, 2014 shall mandatorily  register itself in the MCA21 portal w.e.f. 01st April 2021 in  order to enable it to undertake CSR activities on behalf of  the company.
5.7	Whether an ongoing  project approved prior to  April 01, 2021, may be  implemented by an  implementing agency not  registered on MCA21  portal?	Since the requirement of registration has commenced  from 01st April, 2021, any ongoing project which has been  approved between 22nd January, 2021 and 31st March, 2021, may be carried out by an implementing agency  which is not registered in MCA21 portal.  However, the unregistered implementing agency is  required to register in MCA21 portal before undertaking  any new project after 01st April, 2021.
5.8	Whether registration of  implementing agency by  filing e-form CSR-1 is mandatory in case the  company carries out CSR  activities directly?	No. The question of filing e-form CSR-1 does not arise in  case the company carries out CSR activities directly.
5.9	Can international  organisations act as an  implementing agency?	No, an international organisation cannot act as an  implementing agency.
5.10	What is the role of  international organisations  in the context of CSR?	Pursuant to rule 4(3) of the Companies (CSR Policy) Rules,  2014, a company can engage international organisations  for the limited purposes of designing, monitoring, and  evaluation of the CSR projects or programmes, or for  capacity building of personnel of the company involved in  CSR activities.
6.0	Ongoing Project
6.1	What is the meaning of  ‘ongoing project’? Which  projects can be considered  as ongoing?	Ongoing project has been defined under rule 2(1)(i) of the Companies (CSR Policy) Rules, 2014 as:  (i) a multi-year project, stretching over more than one  financial year;  (ii) having a timeline not exceeding three years excluding  the year of commencement;  (iii) includes such project that was initially not approved as  a multi-year project but whose duration has been

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		extended beyond one year by the Board based on  reasonable justification.  The project should have commenced within the financial  year to be termed as ‘ongoing’. The intent is to include a  project which has an identifiable commencement and  completion dates. After the completion of any ongoing  project, the Board of the company is free to design any  other project related to operation and maintenance of  such completed projects in a manner as may be deemed  fit on a case-to-case basis.  Note: The term ‘year’ refers to financial year as defined in  section 2(41) of the Act.
6.2	When will an ongoing  project be regarded as  ‘commenced’?	An ongoing project will have ‘commenced’ when the  company has either issued the work order pertaining to  the project or awarded the contract for execution of the  project.
6.3	What is the maximum  permissible time period for  any ongoing project? Can  the time period of an  ongoing project be  extended beyond the  permissible period?	As per the definition of an ongoing project, the maximum  permissible time period shall be three financial years  excluding the financial year in which it is commenced i.e.,  (1+3) financial years.  Under no circumstances shall the time period of an  ongoing project be extended beyond its permissible limit.
6.4	What are the  responsibilities of the  Board in case ongoing  projects are undertaken by  the company?	In case of ongoing projects, the major responsibilities of  the Board, inter-alia, include:  (i) identification of the ongoing projects;  (ii) year-wise allocation of funds;  (iii) transferring the unspent money to a separate bank  account as prescribed under sub-section (6) of section  135;  (iv) monitoring the implementation of the projects with  reference to the approved timelines and year-wise  allocation; and  (v) making modifications, if any, for smooth  implementation of the projects within the overall  permissible time period.

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6.5	Can ongoing projects be  implemented through  implementing agencies?	Yes, once the Board approves a project as an ongoing project, then it can choose to implement the project either  itself, or through any of the implementing agencies as  mentioned in rule 4(1) of the Companies (CSR Policy)  Rules, 2014.
6.6	Does the Board have the  power to abandon or  modify an ongoing project  within the permissible  period of three years?	As per provisions of the CSR Rules, the Board may  abandon or modify an ongoing project, partially or wholly,  under exceptional circumstances, during the prescribed  project period as per the recommendation of its CSR  Committee, and by providing reasonable justification to  that effect. It is important to keep in mind that the  maximum permissible period for an ongoing project is  three years excluding the year of its commencement.
6.7	Can funds earmarked for  one project be used for  another project?	Yes, the budget outlay dedicated for one project can be  used against another project. In such a case, the Board and  CSR Committee should appropriately record the alteration  in the target spending and modify the same in accordance  with the actuals.
7.0	Treatment of Unspent CSR Amount
7.1	What actions need to be  taken if a company spends  less than the amount  required to be spent under  CSR obligation in a particular  year?	If a company spends less than the amount required to be  spent under their CSR obligation, the Board shall specify the  reasons for not spending in the Board’s report and shall deal  with the unspent amount in the following manner:  Nature of Action required Timelines unspent amount Unspent amount Transfer such unspent Within 30 pertains to amount to a separate days from the ‘ongoing bank account of the end of the projects 'company to be called financial year. as ‘Unspent CSR Account’. Unspent amount Transfer unspent Within 6 pertains to ‘other amount to any fund months from than ongoing included in Schedule the end of the projects’ VII of the Act. financial year.

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7.2	Where the company was  unable to meet its CSR  obligation, but transferred  the said unspent amount to  any fund included in  Schedule VII of the Act, will the same be considered as  compliance under section  135?	The compliance of CSR is fulfilled when the company  spends the prescribed amount as per its obligation. However, in case the company fails to spend the requisite  amount within the financial year, it shall fulfil its obligation  by transferring the unspent amount to any fund included  in Schedule VII of the Act. The same will be considered as  compliance with section 135(5) of the Act. Further, the  Board of the company is required to give the requisite  disclosure in the Board report and annual report on CSR.
7.3	A company has been given  six months’ time to transfer the unspent CSR amount, other than the amount  pertaining to ongoing  projects, to any fund  included in Schedule VII of  the Act. Can the company  spend this amount in the  said period of six months  on any CSR activity?	No, companies are not permitted to spend the unspent  CSR amount, other than the amount pertaining to ongoing  projects, on any CSR activity during the intervening period  of six months after the end of the financial year. Such  unspent CSR amount is required to be transferred to any  fund included in Schedule VII of the Act.
7.4	Whether disbursal of funds  by a company to the  implementing agency for  the implementation of  projects will be considered  as spend under section  135(5) and rules made there  under?	Section 135(5) of the Act prescribes minimum spending  obligation for the company. The company may fulfil its CSR  spending obligation directly by itself or though engaging an  implementing agency. The implementing agency acts on  behalf of the company and mere disbursal of funds for  implementation of a project does not amount to spending  unless the implementing agency utilises the whole amount.  In the annual action plan, the CSR Committee of the company  is required to provide for modalities of utilisation of funds.  The CSR Committee shall recommend to the Board on budget allocation for any CSR project including modalities of  utilisation of funds in every project. Further, as per rule 4(5)  of the Companies (CSR Policy) Rules, 2014, 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.

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		Accordingly, the CSR Committee and Board should ensure  that CSR fund should be disbursed to implementing  agencies, partially or wholly, in such a manner so that they  can be utilised by them during the financial year. Mere  disbursal of funds for implementation of a project does not  amount to spending unless the implementing agency utilises  the whole amount.
7.5	Should a company open a separate ’Unspent CSR  Account’ for each ongoing  project?	No, a company can open a single special account, called  ‘Unspent Corporate Social Responsibility Account’, for a financial year in any scheduled bank, to transfer the  unspent amount w.r.t ongoing project(s) of that financial  year. A company needs to open a separate ’Unspent CSR  Account’ for each financial year but not for each ongoing  project.
7.6	Can the amount transferred  to ‘Unspent CSR Account’  of the company be utilised  for regular business of the  company?	No, the provisioning of a separate special account, namely the ‘Unspent CSR Account’, in any scheduled bank is to  ensure that the unspent amount, if any, is transferred to  this designated account and used only for meeting the  expenses of ongoing projects, and not for other general  purposes of the company. The special account cannot be  used by the company as collaterals or creating a charge or  any other business activity.
7.7	Can an ongoing project  initiated by a company in  any previous financial year (for instance in FY 2019-20)  be classified as an ongoing  project under section  135(6) of the Act. Is the  unspent amount of  previous financial years  also required to be  transferred to the Unspent  CSR Account?	No, the provisions related to ongoing projects have come  into effect from 22nd January 2021, i.e., from FY 2020-21  onwards. The said provisions are prospective in effect and  not applicable to projects of previous financial years.  Further, the Board of the company is free to decide the  treatment of the unspent CSR amount of previous financial  years prior to FY 2020-21. The Board can either transfer the  amount to ‘Unspent CSR Account’ or continue as per the  previous accounting practices adopted by the company.

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8.0	CSR Enforcement
8.1	What are the penal  provisions for non compliance with the  provisions regarding transfer of unspent  amount?	The said non-compliance is a civil wrong and shall attract  the following penalties:  Company Twice the unspent amount required to be  transferred to any fund included in   Schedule VII of the Act or Unspent CSR   Account, as the case may be, or one crore   rupees, whichever is less.  Every   1/10th of the unspent amount required to   Officer in   be transferred to any fund included in   Default  Schedule VII of the Act or Unspent CSR   Account, or two lakh rupees, whichever is   less.
8.2	Will the penal proceedings  apply even after the  unspent amount has been  transferred to the Unspent  CSR Account or to the  funds mentioned in  Schedule VII of the Act?	The penalty does not relieve the company from the  obligations under the law, and the penalty is over and  above the obligated amount required to be transferred  under section 135(5) or 135(6). The penalty is the  consequence of not abiding by the law, and not an  alternative for the same.
8.3	Is the penal provision in  section 135(7) specific to  non-transference of the  unspent CSR amount?	Yes, section 135(7) clearly states the penalty for default in  complying with the provisions of sub-section (5) or sub section (6) only.
8.4	What are the penal  provisions relating to non compliance with provisions  other than section 135(5)  and 135(6) of the Act?	In case of non-compliance with any other provisions of the  section or rules, the provisions of section 134(8) or general  penalty under section 450 of the Act will be applicable. Further, in case of non-payment of penalty within the  stipulated period, the provisions of section 454(8) will be  applicable.

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9.0	Impact Assessment
9.1	What is the objective of  providing impact  assessment of CSR  activities?	The purpose of impact assessment is to assess the social  impact of a particular CSR project. The intent is to  encourage companies to take considered decisions before  deploying CSR amounts and assess the impact of their CSR  spending. This not only serves as feedback for companies  to plan and allocate resources better but shall also deepen  the impact of CSR.
9.2	Which companies are  required to undertake impact assessment?	Rule 8(3) of the Companies (CSR Policy) Rules, 2014  mandates following class of companies to conduct impact  assessment:  (i) companies with minimum average CSR obligation of  Rs. 10 crore or more in the immediately preceding 3  financial years; and  (ii) companies that have CSR projects with outlays of  minimum Rs. 1 crore and which have been completed  not less than 1 year before undertaking impact  assessment.  Impact assessment shall be carried out project-wise only  in cases where both the above conditions are fulfilled. In  other cases, it can be taken up by the company on a  voluntary basis.
9.3	Whether companies are required to undertake impact assessment for FY 2020-21?	The provisions for impact assessment have come into  effect from 22nd January, 2021. Accordingly, the company  is required to undertake impact assessment of the CSR  projects completed on or after January 22, 2021. However,  as a good practice the Board may undertake impact  assessment of completed projects of previous financial  years.
9.4	Who can conduct impact  assessment?	Rule 8(3) of the Companies (CSR Policy) Rules, 2014  requires that the impact assessment be conducted by an  independent agency. The Board has the prerogative to  decide on the eligibility criteria for selection of the  independent agency for impact assessment.

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9.5	Is expenditure on impact  assessment over and above  the administrative  overheads of 5%, or  included in the same?	Yes, the expenditure incurred on impact assessment is  over and above the specified administrative overheads of  5%. Expenditure up to a maximum of 5% of the total CSR  expenditure for that financial year or 50 lakh rupees  (whichever is lower) can be incurred separately for impact  assessment.
9.6	Whether impact  assessment reports of all  the CSR projects shall be  annexed to the annual  report on CSR?	Rule 8(3)(b) of the Companies (CSR Policy) Rules, 2014  provides that impact assessment reports shall be placed  before the Board and shall be annexed to the report on  CSR. It is clarified that web-link to access the complete  impact assessment reports and providing executive  summary of the impact assessment reports in the annual  report on CSR, shall be considered as sufficient compliance  of the said rule.
9.7	When two or more  companies collaborate for  implementation of a CSR  project, should the impact  assessment carried out by  one company be shared  with other companies?	Yes, in case two or more companies choose to collaborate  for the implementation of a CSR project, then the impact  assessment carried out by one company for the common  project may be shared with the other companies for the  purpose of disclosure to the Board and in the annual  report on CSR. The sharing of the cost of impact  assessment may be decided by the collaborating  companies subject to the limit as prescribed in rule 8(3)(c)  of the Companies (CSR Policy) Rules, 2014 for each  company.
10.0	CSR Reporting & Disclosure
10.1	Whether reporting of CSR  is mandatory in Board’s  Report?	Yes, as per rule 8(1) of the Companies (CSR Policy) Rules, 2014, the Board’s Report pertaining to any financial year, for a CSR-eligible company, shall include an annual report  on CSR containing particulars specified in Annexure I or Annexure II of the said rules, as applicable.
10.2	Is it mandatory for foreign  companies to give reports on CSR activities?	Yes, as per rule 8(2) of the Companies (CSR Policy) Rules,  2014, in case of a CSR-eligible foreign company, the  balance sheet filed under clause (b) of sub-section (1) of  section 381 of the Act, shall include an annual report on  CSR containing particulars specified in Annexure I or  Annexure II of the said rules, as applicable.

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10.3	What are the disclosure  requirements on the  website of the company?	As per rule 9, the Board of Directors of the company shall mandatorily disclose the following on their website, if any,  for public access:  (i) Composition of the CSR Committee;  (ii) CSR Policy; and  (iii) Projects approved by the Board.
10.4	Whether every CSR project  irrespective of outlay and  percentage to the total CSR  expenditure of the  company needs to be  disclosed on the website of  the respective company in  terms of rule 9 of the  Companies (CSR Policy)  Rules, 2014?	Yes, as per rule 9 of the Companies (CSR Policy) Rules,  2014, all CSR projects approved by the Board are required  to be disclosed on the website of the company, if any, for  public access.

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