CSR REGISTRATION IN INDIA

Details, Description & Professional Advisory

 

1️⃣ WHAT IS CSR?

Corporate Social Responsibility (CSR) is a mandatory responsibility of certain companies under Section 135 of the Companies Act, 2013 to spend a percentage of their profits on social welfare activities.

CSR initiatives aim to contribute to:

• Education

• Health care

• Environmental sustainability

• Eradication of poverty

• Women empowerment

• Rural development

🔹 CSR applies to companies with:

• Net worth ≥ ₹500 crore, OR

• Turnover ≥ ₹1000 crore, OR

• Net profit ≥ ₹5 crore (during immediately preceding financial year)

 

2️⃣ LEGAL FRAMEWORK

Provision	Description
Section 135, Companies Act 2013	CSR obligation for qualifying companies
Companies (CSR Policy) Rules 2014	Detailed rules on CSR activities, spending, and reporting
Schedule VII	Lists activities considered eligible under CSR

 

3️⃣ CSR OBLIGATIONS

✔ Companies must spend at least 2% of average net profits of the preceding three financial years on CSR activities.
✔ CSR activities should align with Schedule VII of the Companies Act.
✔ A CSR Committee of Board is mandatory for companies meeting the threshold.
✔ CSR Reporting in Board Report and annual filings (Form AOC-4, Form CSR-2).

 

4️⃣ CSR COMMITTEE STRUCTURE

• Minimum 3 directors, including at least 1 independent director (if applicable)

• Responsibilities:

  • Approve CSR policy

  • Monitor CSR initiatives

  • Ensure statutory compliance

 

5️⃣ DOCUMENTS REQUIRED

📁 COMPANY DOCUMENTS

✔ Certificate of Incorporation
✔ PAN & TAN
✔ Financial Statements of last 3 years

📁 CSR COMMITTEE DOCUMENTS

✔ Board Resolution appointing CSR Committee
✔ CSR Policy Document (Board approved)
✔ Minutes of Meetings

📁 NGO / Implementing Agency DOCUMENTS

(If CSR is implemented through NGO or trust)
✔ NGO Registration Certificate
✔ 12AB / 80G Registration (if applicable)
✔ FCRA Certificate (if foreign donations involved)

 

6️⃣ CSR REGISTRATION / COMPLIANCE PROCESS

Step 1: Constitute CSR Committee

Mandatory for qualifying companies. Document in Board Resolution.

Step 2: Prepare CSR Policy

• Define areas of focus

• Identify implementing agency

• Approve Board Resolution

• Publish on website

Step 3: Identify Projects

Projects must be:

• Schedule VII compliant

• Local area-focused, if possible

• Measurable & reportable

Step 4: Implement CSR Activities

• Through company itself or NGO / trust

• Keep proper documentation & receipts

• Maintain separate CSR fund (recommended)

Step 5: Monitor & Report

• Quarterly review by CSR Committee

• Board approval of annual CSR Report

• Annual filing with ROC: Form CSR-2

 

7️⃣ POST-REGISTRATION STATUTORY FILINGS

Filing	Purpose	Timeline
CSR-2 (Annual Return)	ROC filing of CSR activities & spending	Within 30 days of AGM
Board Report CSR Section	Disclosure in Annual Report	Annual Filing
Financial audit	Proof of CSR expenditure	As part of audit of books

 

8️⃣ CSR SPENDING – KEY POINTS

• Minimum 2% of average net profits over last 3 financial years

• Unspent CSR fund must be disclosed and carried forward

• Excess spending is allowed but cannot be adjusted against future years

• Funding through NGO or society is permissible

 

9️⃣ BENEFITS OF CSR REGISTRATION & COMPLIANCE

✔ Legal compliance under Companies Act
✔ Enhances corporate image & brand reputation
✔ Eligibility for tax exemptions
✔ Access to credible NGO partners for implementation
✔ Strengthens investor & stakeholder confidence

 

🔟 COMMON MISTAKES (AVOID)

❌ Non-formation of CSR Committee
❌ CSR Policy not approved by Board or not published
❌ Spending below 2% without proper disclosure
❌ Choosing projects outside Schedule VII
❌ Poor documentation of expenditure

 

📄 PROFESSIONAL ADVISORY DRAFT

(Ready to issue on CA / CS / Legal firm letterhead)

ADVISORY NOTE – CSR REGISTRATION & COMPLIANCE IN INDIA

This is to inform you that Corporate Social Responsibility (CSR) is mandatory under Section 135 of the Companies Act, 2013 for companies meeting prescribed thresholds.

CSR registration and compliance involve:

• Formation of CSR Committee of Board

• Drafting and approval of CSR Policy

• Identification and monitoring of eligible CSR projects

• Spending of minimum 2% of average net profit

• Annual reporting in Board Report and ROC filings (Form CSR-2)

Our firm provides professional assistance in:
• Drafting CSR Policy
• Formation of CSR Committee & Board resolutions
• Selection of credible NGOs / implementing partners
• Monitoring and documenting CSR expenditure
• Annual reporting and compliance filings

Proper CSR compliance ensures regulatory adherence, enhanced corporate image, and maximized social impact, while avoiding penalties or legal challenges.

 

✅ PRACTICAL ADVISORY TIPS

• Always maintain proof of CSR expenditure: invoices, receipts, reports

• Select NGOs with proper registration and audited accounts

• Conduct quarterly review of CSR activities by CSR Committee

• Report unspent CSR funds in annual filing to remain transparent

• Align CSR projects with company’s long-term social responsibility strategy

 

SR IMPLEMENTATION STRATEGY

Clients often ask: “How do we choose the right projects for maximum impact?”

Advisory points:

• Focus on 3–5 key areas aligned with company values.

• Prioritize projects in geographical areas where company has operations (local impact).

• Use measurable KPIs: number of beneficiaries, infrastructure built, awareness programs conducted.

• Decide between direct execution vs NGO partnership:

  • Direct: better control, higher resource requirement

  • NGO: faster execution, proven expertise

 

2️⃣ CSR BUDGET PLANNING

Clients often ask: “How should we plan the 2% CSR fund efficiently?”

Advisory points:

• Calculate average net profit of last 3 years to determine exact 2% obligation.

• Allocate CSR fund into multiple smaller projects rather than one large project for better monitoring.

• Maintain a contingency buffer for last-minute initiatives or urgent local needs.

• Keep documented approvals for all budget allocations to avoid audit issues.

 

3️⃣ NGO / IMPLEMENTING PARTNER DUE DILIGENCE

Clients ask: “Which NGO should we partner with?”

Checklist for selecting NGOs:

• Registered under Trust / Society / Section 8

• Valid 12AB / 80G certifications for tax benefit

• FCRA registration if foreign funding involved

• Audited financial statements

• Proven track record in relevant CSR area

• Local presence or operational efficiency

Tip: Maintain formal agreement / MoU with NGO for transparency.

 

4️⃣ DOCUMENTATION & MONITORING

Clients ask: “What reports are expected?”

Advisory points:

• Maintain project-wise expenditure reports

• Collect photographs, receipts, beneficiary lists

• Quarterly CSR Committee review reports

• Keep Board approvals and minutes

• Annual impact report (optional, but builds credibility)

Tip: These are extremely useful for audits, investor review, and PR.

 

5️⃣ TAX & ACCOUNTING CLARIFICATIONS

Clients ask: “Can CSR fund be treated as business expense?”

Advisory points:

• CSR expenditure is not a business expense for tax purposes; cannot reduce taxable profit.

• Must be accounted separately in financial statements under “CSR Expenditure”

• Maintain proof of payment to NGO / project execution for statutory audit

 

6️⃣ CSR REPORTING PRACTICALITIES

Clients ask: “What is the easiest way to file CSR reports?”

Advisory points:

• ROC filing Form CSR-2: upload approved CSR Policy, project details, expenditure

• Board report should include: CSR committee, policy summary, annual spend, projects executed

• Some companies also publish CSR Impact Reports on website to enhance brand credibility

 

7️⃣ CSR STRATEGIC TIPS USED BY CLIENTS

• Focus on long-term projects rather than one-time donations

• Partner with well-known NGOs to enhance corporate reputation

• Integrate CSR initiatives with employee volunteering programs

• Use CSR for PR & stakeholder engagement

• Track impact metrics and use data in annual reporting

 

8️⃣ COMMON CLIENT QUESTIONS

Question	Advisory Answer
Can CSR funds be used for political activities?	❌ No, strictly Schedule VII activities only
Can CSR be spent on international projects?	✅ Only via FCRA-registered NGOs
Can unspent CSR funds be carried forward?	✅ Yes, disclose in Board Report
Can employees’ time/value be counted in CSR spend?	❌ Only actual cash/expenses count, not manpower hours
Can company implement CSR in multiple states?	✅ Yes, if projects are Schedule VII compliant

 

9️⃣ CLIENT-USED BEST PRACTICES

• Maintain separate CSR bank account for larger companies

• Use standardized CSR templates for NGO agreements

• Conduct annual audit of CSR projects

• Align CSR reporting with Sustainability / ESG reporting if applicable

• Document lessons learned for future CSR planning

 

Advanced CSR Strategies / Planning

• CSR alignment with company vision & ESG goals

• Long-term vs short-term CSR project planning

• Multi-year CSR budgeting & fund allocation

• Employee engagement in CSR (volunteering, mentorship programs)

• Collaboration with government programs for co-funded projects

 

2️⃣ CSR Impact Measurement

• Metrics & KPIs for social impact (number of beneficiaries, schools built, patients treated)

• Surveys / feedback from beneficiaries

• Reporting frameworks for ESG / sustainability reporting

• Use of technology to track CSR projects

 

3️⃣ CSR Legal & Compliance Insights

• Detailed explanation of Schedule VII activities

• Guidance for foreign donations / FCRA compliance

• Penalties for non-compliance under Companies Act

• Auditable documentation practices

• Clarifications about CSR expenditure not being business expense

 

4️⃣ NGO / Implementing Partner Guidance

• How to vet NGOs for credibility

• Agreements / MoU formats for partnerships

• Monitoring NGO performance

• Avoiding misuse or diversion of CSR funds

 

5️⃣ CSR Reporting & Public Disclosure

• Sample Board Report CSR section

• Annual CSR report templates for website publication

• Impact stories & PR potential from CSR projects

• Using CSR reports for stakeholder engagement

 

6️⃣ Sector-Specific CSR Insights

• CSR activities by industry sector (IT, Manufacturing, Pharma, Banking)

• Best practice case studies of companies in similar sectors

• Partnering with local NGOs for community-specific projects

 

7️⃣ Tax / Accounting Advisory

• Accounting for CSR in financial statements

• Managing CSR budget vs actual spend

• Reconciliation of CSR bank account

• Linking CSR spend to audit and reporting

 

8️⃣ CSR Governance Tips

• Formation and role of CSR Committee

• Meeting frequency and minutes of CSR Committee

• Risk management in CSR projects

• Internal compliance audits

 

9️⃣ Emerging CSR Trends Clients Ask About

• CSR for sustainable development / climate action

• Integration with SDGs (UN Sustainable Development Goals)

• Employee skill development programs under CSR

• Digital / technology-driven CSR initiatives

• CSR collaborations with startups & social enterprises

 

💡 In short: Beyond the statutory process, clients usually want strategy, measurement, reporting, governance, NGO vetting, industry-specific examples, and emerging trends.

ADDITIONAL CSR INFORMATION (NOT COVERED ABOVE)

1️⃣ CSR-1 REGISTRATION (VERY IMPORTANT)

Who needs it?
Any NGO / Trust / Society / Section 8 Company intending to receive CSR funds must file Form CSR-1 with MCA.

Key points:

• Mandatory since 1 April 2021

• Without CSR-1 approval → company cannot count spending as CSR

• Filed once only

• Generates a Unique CSR Registration Number

📌 Many companies miss this and later face audit objections.

 

2️⃣ ONGOING CSR PROJECTS – SPECIAL RULES

CSR projects extending beyond 1 year are classified as “Ongoing Projects”.

Conditions:

• Must be approved by Board

• Maximum duration: 3 years (excluding start year)

• Unspent amount → transferred to Unspent CSR Account within 30 days from end of FY

• Must be spent within 3 years

Failure → transfer to Government funds + penalty.

 

3️⃣ IMPACT ASSESSMENT – WHEN MANDATORY

Impact Assessment is compulsory if:

• CSR obligation ≥ ₹10 crore, AND

• Projects ≥ ₹1 crore

Key rules:

• Conducted by independent agency

• Cost allowed up to 2% of CSR spend or ₹50 lakh (whichever is lower)

• Report attached to Board Report

 

4️⃣ ADMINISTRATIVE OVERHEADS CAP

Administrative expenses:

• Max 5% of total CSR expenditure

• Includes:

  • CSR staff salaries

  • Monitoring expenses

  • Consultants for CSR execution

❌ Cannot include:

• NGO’s general admin expenses

• Company’s routine employee cost

 

5️⃣ EXCESS CSR SPEND – SET-OFF RULE

If company spends more than 2% CSR:

• Excess can be set off against future CSR obligations

• Allowed for next 3 financial years

• Must be approved by Board resolution

📌 Earlier belief that excess cannot be adjusted is outdated.

 

6️⃣ PENALTIES FOR NON-COMPLIANCE (UPDATED)

Non-compliance attracts civil penalties (no imprisonment now).

Penalty:

• Company: Twice the unspent amount or ₹1 crore, whichever is less

• Officers in default: 1/10th of unspent amount or ₹2 lakh, whichever is less

 

7️⃣ CSR VS DONATIONS – IMPORTANT DISTINCTION

Donation	CSR
Voluntary	Mandatory
Any purpose	Schedule VII only
Tax deduction possible	Not a business expense
No reporting format	Strict reporting & audit

📌 Political donations ≠ CSR
📌 Religious activities ≠ CSR (unless community welfare)

 

8️⃣ ACTIVITIES EXPRESSLY NOT CONSIDERED CSR

Even if socially useful, NOT CSR:

• Activities benefiting employees exclusively

• Sponsorships for brand promotion

• Statutory obligations (e.g., pollution control compliance)

• Political contributions

• Normal business activities

 

9️⃣ CSR THROUGH GOVERNMENT FUNDS

CSR can be spent via:

• PM CARES Fund

• Swachh Bharat Kosh

• Clean Ganga Fund

• Any Schedule VII notified fund

📌 No NGO due diligence required here, but documentation still needed.

 

🔟 CSR & ESG – KEY DIFFERENCE (Clients Ask Often)

CSR	ESG
Mandatory under Companies Act	Voluntary / market driven
Spending focused	Performance & disclosure focused
India-specific law	Global reporting frameworks
2% rule	No fixed percentage

CSR data is often used to build ESG reports.

 

1️⃣1️⃣ CSR BANK ACCOUNT – WHEN ADVISABLE

Not mandatory, but recommended if:

• Large CSR budgets

• Multiple projects

• NGO partnerships

Benefits:

• Clear audit trail

• Avoids fund mixing

• Easier impact tracking

 

1️⃣2️⃣ ROLE OF STATUTORY AUDITOR IN CSR

Auditors verify:

• CSR applicability

• 2% calculation

• Actual spend vs obligation

• Transfer of unspent funds

• Supporting vouchers & agreements

📌 CSR lapses are now auditor-reported issues.

 

1️⃣3️⃣ CSR DISCLOSURE ON COMPANY WEBSITE

Mandatory disclosures:

• CSR Policy

• Approved projects

• CSR Committee composition

• Annual CSR report summary

Optional but powerful:

• Impact stories

• Beneficiary testimonials

• CSR photo gallery

 

1️⃣4️⃣ CSR TIMELINE SNAPSHOT (PRACTICAL)

Activity	Timeline
CSR applicability check	Start of FY
CSR Committee meeting	Q1
Project approval	Q1–Q2
Execution	Throughout year
Unspent transfer	Within 30 days from FY end
CSR-2 filing	Within 30 days of AGM

 

1️⃣5️⃣ WHY CSR FAILS IN PRACTICE (INSIDER INSIGHT)

• Treating CSR as year-end donation

• Poor NGO vetting

• No internal monitoring

• Last-minute spending rush

• Weak documentation