MCA has introduced Companies (Corporate Social Responsibility Policy), Amendment Rules, 2021. And importantly CSR Spending made mandatory from voluntary w.e.f. the financial year 2020-21.

Companies (Corporate Social Responsibility Policy), Amendment Rules, 2021 came into effect on 22 January 2021, as the same has been published in the official gazette on the same date. Therefore, these amended rules are applicable on the financial year 2020-21 (subject to the specific dates of some rules).


Old Rule No.Old Rule NameEffectNew Rule No.New Rule Name
Rule 4CSR ActivitiesFully substitutedRule 4CSR Implementation
Rule 5(2)CSR CommitteesSub rule 2 substitutedRule 5(2)CSR Committees
Rule 6CSR PolicyOmitted
Rule 7CSR ExpenditureFully substitutedRule 7CSR Expenditure
Rule 8CSR ReportingFully substitutedRule 8CSR Reporting
Rule 9Display of CSR Activities on websiteFully substitutedRule 9Display of CSR Activities on website
Rule 10There was no rule 10Newly inserted RuleRule 10Transfer of unspent CSR Amount

Companies are free to create their own social investment plans through Corporate Social Responsibility (CSR) and determine where to spend and enforce initiatives, but the government has proposed specific areas of need, such as the eradication of hunger and poverty, maternal and child health, promotion of gender equality and environmental sustainability, etc. The local areas where they work should be given priority by corporations. If a business does not perform its own Corporate Social Responsibility (CSR), it can give the required sum to the socio-economic welfare programs of the government, such as the National Relief Fund of the Prime Minister, etc.

Following is the detailed analysis of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021;

Amendment to Rule 2: Definitions

It should be noted that the following changes were made through the amendment rules of Companies (Corporate Social Responsibility Policy), 2021;

  • Administrative overheads mean the company’s expenses for ‘general management and administration’ of the company’s corporate social responsibility activities, but do not include the expenses specifically incurred for the planning, execution, monitoring and assessment of a specific project or program of corporate social responsibility.

The general management and administration expenditure in the description above excludes direct expenditure for a specific CSR project or program.

  • CSR Policy means a statement containing the company board’s strategy and course, taking into account the recommendations of its CSR Committee, and contains guiding principles for the selection, execution and monitoring of operations, as well as the formulation of the annual action plan.

In the above statement, the method and direction relating to the selection, implementation and monitoring of the CSR project or programme shall be included in the sentence.

  • International Organization means an organization notified under Section 3 of the United Nations (Privileges and Immunities) Act, 1947 by the Central Government as an international organization to which the provisions of the Schedule to the said Act refers.

The Government has approved the design, monitoring and evaluation of the CSR Project or Program by the International Organisation.

  • Ongoing Project means a multi-year project undertaken by a business in fulfilment of its CSR responsibility, which has timelines not exceeding three years, except the financial year in which it started, and which, on fair justification, involves a project which was originally not accepted as a multi-year project but has been extended by the Board for a period of more than one year.

As per definition, Ongoing project = Project already commenced + multi-year project whose duration is not less than one year but not exceeding 3 years.

  • Public Authority means ‘Public Authority’ as defined in clause (h) of section 2 of the Right to Information Act, 2005.

Amendment to Rule 4: CSR Implementation

The Board shall ensure that the operations of CSR are carried out by the company itself or through the company. It includes:

  • Section 8 Company;
  • Registered Public Trust;
  • Registered Society registered u/s 12A & 80G of Income Tax Act, 1961; or
  • Company with established track record of atleast 3 years.

It should be noted that the qualifying intermediaries through whom the company undertakes a CSR project or program will be required to register with the Central Government by electronically submitting Form CSR-1 with effect from 01 April 2021.

In addition to filing Form CSR-1 with the central government, the device will automatically generate a unique CSR registration number.

As specified in Rule 2, the International Organization may also be engaged in the design, monitoring and evaluation of CSR projects or programmes in accordance with its CSR policy, as well as in the capacity building of its own CSR staff.

In addition, the Board of Directors of the organization is responsible for overseeing the execution of ongoing projects and for ensuring that the funds are used for approved purposes and are certified by the Chief Financial Officer (CFO) or the person in charge of the financing.

The Board shall be empowered to adjust certain projects in order to ensure the smooth execution of the project within a permissible time limit.

Amendment to Rule 5: CSR Committees

It should be noted that, in pursuance of its CSR policy, the CSR Committee shall devise and propose to the Board an annual action plan, which shall contain the following:

  • list of approved CSR projects or programs to be carried out in the areas or subjects stated in Schedule VII of the Act;
  • How such projects or programmes, as specified in sub-rule (1) of Rule 4, are implemented; monitoring and reporting frameworks for projects or programmes;
  • for the projects undertaken by the organization, specifics of the need and impact evaluation, if any, and;
  • Modalities for the allocation of funds and schedules for the execution of programs or programmes.

The Board may, as recommended by its CSR Committee, alter such a plan at any time during the financial year.

Amendment to Rule 7: CSR Expenditure

The Board of Directors shall ensure that operating overheads do not exceed 5% of the total company’s CSR expenditure for the financial year.

Any surplus resulting from CSR operations shall be returned to the same project or transferred to the unspent CSR Account and expended according to the Company’s CSR Policy and Annual Action Plan or transferred to the fund referred to in Schedule VII within 6 months of the end of the financial year.

Any excess sum can be set off against the obligation to invest up to 3 financial years immediately following, subject to the conditions that apply;

  • The excess amount available for set-off does not include the surplus resulting, if any, from CSR operations in compliance with sub-rule (2) of this rule;
  • To that effect, the Board of the Company shall pass a resolution.

Any capital asset created by a company prior to the start of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, shall comply with the provision of this regulation within 180 days of such start-up, which may be extended by a further duration not exceeding 90 days with the approval of the Board on the basis of fair justification.

Amendment to Rule 8: CSR Reporting

In the 3 immediately preceding financial years, companies with an average CSR obligation of 10 crore or more shall conduct an impact assessment through an independent agency for projects of 1 crore or more undertaken no less than 1 year prior to the undertaking of the impact report.

The reports on the impact assessment shall be submitted to the Board and shall be annexed to the annual report on CSR.

Amendment to Rule 9: Website Disclosure

The Board of Directors of the organization shall publish, on a mandatory basis, the composition of the CSR Committee and the CSR policies and projects approved by the Board for public access on its website, if any.

Amendment to Rule 10: Transfer of unspent CSR

For the purposes of sub-section (5) and (6) of section 135 of the Act, a fund defined in Schedule VII, the unspent CSR sum shall, if any, be transferred by the company to any fund included in Schedule VII of the Act.

New format inserted for disclosure shall be included in the board report of the Annual Report on CSR Activities.


In all forums, CSR has always been a discussion subject. The Indian scenario called for a rethink of strategy in order to achieve the intent of the CSR policy. The revisions, which are of a technical nature, are a way of ensuring full compliance with the laws and of closely monitoring the activities of businesses. They seek to further improve the ease of doing business, decriminalize non-compliance with CSR regulations and make the CSR framework more transparent.

Also in relation to the previously stated principles of CSR, CSR Strategy, and CSR Enforcement in the 2014 rules, the provisions of the New Rules seem to be more comprehensive and systematic. It is highly appreciated that companies engaged in research and development (R&D) activities for new COVID-19 vaccines, medicines and medical devices should be allowed to include these activities in their usual course of business for inclusion in CSR activities. With the new regulations, further responsibility has been put on the Board’s shoulders to ensure the correct enforcement of CSR-related legal requirements.

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