Summary of the General Circular issued by MCA dated 25/08/2021
MCA issues FAQs to clarify certain provisions with respect to Corporate Social Responsibility (CSR)
The FAQs cover CSR applicability, its framework, expenditure, implementation, treatment of unspent amount and excess spend, disclosures and the enforcement of these provisions.
Key highlights of the revised FAQ issued are as follows:
Compliance with CSR requirements is specific to each company on fulfilment of eligibility criteria prescribed under section 135(1) irrespective of Holding or Subsidiary relationship which includes Section 8 Company and Companies that have not completed 3 financial years (FYs) since their incorporation
CSR Expenditure and Activities
The following expenses/activities shall not form part of CSR expenditure:
- Contribution to corpus of any entity w.e.f. 22nd January, 2021
- CSR contribution in kind
- Expenses on involvement of employees in CSR projects
- Incurred on activities beyond Schedule VII of the Act
- Incurred on any activity benefitting employees of the company
- Incurred on any activity undertaken by the company outside India
- Companies are required to undertake impact assessment of the CSR projects completed on or after January 22, 2021
- This expenditure is over and above the specified limit for administrative overheads
- Since the requirement of registration of these agencies 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.
- Mere disbursal of funds for implementation of a project does not amount to spending unless the implementing agency utilises the whole amount.
- 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. Maximum permissible time period for these projects shall be three financial years excluding the financial year in which it is commenced i.e., (1+3) financial years.
- The budget outlay dedicated for one project can be used against another project
Unspent Amounts and Excess Spend
- Unspent Amounts cannot be spent on CSR activities after the end of the FY and must be transferred to the unspent CSR account. Any excess CSR amount spent can be carried forward up to immediately succeeding three FYs and it will lapse at the end of the said period.
- The excess amount can be set off against the immediately succeeding three FYs w.e.f 22nd January, 2021 and not for financial years prior to FY 2020-21.