CSR Compliance

Applicability

CSR applies if a company, in the immediately preceding financial year, has any one of the following: net worth of Rs. 500 crore or more, turnover of Rs. 1,000 crore or more, or net profit of Rs. 5 crore or more.

Applicable Section

• Section 135: CSR committee, CSR policy, CSR spending, and reporting obligations.
• Schedule VII: lists permitted CSR activities.
• CSR disclosure is generally made through the annual filing process, and the CSR report is filed separately after the financial statement filing.

Key Timelines

• CSR amount to be spent: at least 2% of average net profit of the preceding 3 years.
• Unspent amount for ongoing project: transfer to a separate Unspent CSR Account within 30 days from the end of the financial year.
• Use of amount in Unspent CSR Account: to be utilised within 3 financial years.
• Unspent amount for other than ongoing project: transfer to a prescribed fund within the statutory period, generally within 6 months from the end of the financial year.
• CSR reporting: disclosed separately in the annual return / annual financial compliance cycle, typically after or along with financial statement filing.economictimes.

CSR Committee

Where applicable, the company must constitute a CSR Committee to recommend the CSR policy, monitor implementation, and oversee compliance. The committee becomes important in structuring the CSR budget, identifying projects, and tracking unspent amounts.ies.

Eligible CSR Activities

CSR spending must be on activities permitted under Schedule VII, such as:

• Eradicating hunger, poverty, and malnutrition.
• Promoting education and skill development.
• Gender equality and women empowerment.
• Environmental sustainability.
• Rural development.
• Disaster management.
• Contributions to specified funds and approved projects.ies.gov+2

Reporting and Accounting

CSR expenditure should be recognised and disclosed separately in the financial statements, with clear note disclosure. Companies should maintain proper records of approved projects, amounts spent, ongoing-project balances, and transfers to the Unspent CSR Account or permitted funds.

Penalty for Non-Compliance

Non-compliance with CSR obligations may attract penalties on the company and officers in default, especially where unspent amounts are not dealt with as required. The consequences can include monetary penalties and compliance exposure in ROC filings and audits.