CSR Procedures & Detailed Compliance Framework
(Sec on 135 of Companies Act, 2013 & CSR Rules)
Applicability Check – CSR Trigger Test
CSR applies if the company meets any one of the following financial thresholds in the preceding
financial year:
1. Net worth ≥ ₹500 crore, OR
2. Turnover ≥ ₹1,000 crore, OR
3. Net profit ≥ ₹5 crore
✔ Procedure:
Check financial statements.
Prepare internal note sta ng applicability.
Place before Board for recording CSR applicability.
Cons tu on of CSR Commi ee
Once CSR becomes applicable:
✔ Commi ee Composi on:
3 or more directors, including at least 1 Independent Director.
Excep ons:
o Unlisted public company → ID not mandatory if not required to appoint one.
o Private company → commi ee can have 2 or more directors.
o In case of foreign company → at least 1 resident director + person nominated by
foreign company.
✔ Procedure:
Dra resolu on (Board Mee ng).
File MGT-14 (if applicable under company type).
Update website with commi ee details.
Calcula on of CSR Amount
The required amount is:
2% of the average net profits of the company for the preceding 3 financial years.
Net profit = Sec on 198 profit, adjusted for certain items.
✔ Procedure:
Compute Sec on 198 net profit.
Take 3-year average.
Calculate 2%.
Submit to CSR Commi ee.
Formula on of CSR Policy
Prepared by CSR Commi ee and approved by Board.
✔ Must Include:
List of CSR ac vi es (as per Schedule VII).
Modali es of execu on.
Monitoring framework.
Roles of internal teams.
✔ Procedure:
CSR Commi ee dra s Policy → recommends to Board.
Board approves.
Upload on website.
Prepara on of the Annual Ac on Plan
Mandatory as per CSR Rules.
✔ Must Contain:
1. List of approved CSR projects.
2. Project execu on details.
3. Fund alloca on & targets.
4. Monitoring and evalua on plan.
5. Impact assessment requirements.
CSR Implementa on Process
CSR may be undertaken:
Directly by the company, OR
Through implemen ng agencies, such as:
o Sec on 8 company
o Registered trust
o Registered society
o Govt. bodies
All agencies must be registered with MCA (Form CSR-1).
Step-by-Step Implementa on Procedure:
Step 1: Iden fy CSR projects aligned with Schedule VII
E.g., educa on, environment, healthcare, rural development.
Step 2: Due diligence of implemen ng agency
Check CSR-1 registra on, track record, financial stability.
Step 3: Dra a project agreement/MoU
Specifying objec ves, melines, budgets, KPIs.
Step 4: Release funds as per project plan
With board approval.
Step 5: Periodic monitoring by CSR Commi ee
Field visits
Quarterly reports
U liza on cer ficates (CA-cer fied)
CSR Spending Rules
✔ Admin overheads:
Limited to 5% of total CSR expenditure.
✔ Surplus arising out of CSR:
Must be reinvested into CSR projects, or
Transferred to Unspent CSR A/c.
✔ Excess CSR spend:
Can be set off for next 3 financial years.
Unspent CSR Amount – Mandatory Procedure
(A) Unspent on ongoing projects
→ Transfer to "Unspent CSR Account" within 30 days from FY end.
→ Spend within 3 years.
→ If not spent → transfer to a Schedule VII fund within 30 days a er 3 years.
(B) Unspent on other projects
→ Transfer directly to Schedule VII fund within 6 months.
Impact Assessment
Mandatory if:
CSR obliga on ≥ ₹10 crore in last 3 years.
✔ Procedure:
Appoint an independent agency.
Conduct impact study for projects ≥ ₹1 crore.
Append the impact assessment to the CSR report.
CSR Repor ng & Disclosures
✔ Mandatory CSR Report (Annexure – CSR Report Format)
To be included in the Board’s Report containing:
CSR commi ee composi on
Approved CSR policy
CSR expenditure
Reasons for unspent amount
Impact assessment summary
Web-links to disclosures
Website Disclosure Requirements
Company must publish the following on its website:
CSR Policy
Composi on of CSR Commi ee
CSR projects approved by Board
Annual CSR Report
Penal es for Non-Compliance
Company:
Penalty = twice the unspent amount or up to ₹1,00,00,000 (whichever is lower).
Officers in default:
Penalty = 1/10th of unspent amount or up to ₹2,00,000.