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From ‘Comply or Explain’ to mandatory spending regime - A Paradign shift in Indian CSR law

When the concept of Corporate Social Responsibility was introduced in the Indian legal system through section 135 of the Companies Act, 2013, it was presented as a mandate, yet the spending on CSR activities was not really mandatory. Instead, the eligible companies were given the liberty to explain the reasons for not spending in a given financial year in its Board’s Report and get away with no CSR spending on sufficient causes being shown therein. Nonetheless, the newly introduced CSR law did set the ball rolling in the country for expenditure by corporates on activities with a social or environmental cause. Fast forward seven years, and the ‘seemingly’ voluntary regime is gone and ‘actual spending’ on CSR activities as prescribed in Schedule VII of the Companies Act, 2013 is the rule of the day. Companies that do not fulfil their obligations will be paying hefty penalty that will be twice the amount of shortfall in spending or Rs. 1 crore, whichever is less, and for every officer of the company who is in default the penalty amount will be one-tenth of the amount of shortfall in spending or Rs. 2 lakhs, whichever is less.

CSR Reporting

Until recently, the only mandatory reporting requirement of the CSR activities of a company was in its Board’s Report. The concept of Annual CSR Report has not been done away with. But with the recent introduction of form CSR-2, there is a definite paradigm shift towards stricter monitoring of CSR spending by companies by the MCA with the help of data analytics and artificial-intelligence. So now, companies that have hence before been putting off the CSR provisions as unimportant, need to awaken from their slumber, fasten their seat belts and get started with strict compliance of the CSR provisions. The introduction of the form CSR-2 is a great step towards introducing a regime of strict monitoring of CSR activities of corporates by the MCA. This will increase the seriousness and adeptness of companies towards compliance of CSR provisions both in law and in spirit. However, utmost care and diligence is required while filling up and filing this form. CSR-2 form is an elaborate reporting of CSR activities and is definitely not one to be put aside until the last date for filing. The following paragraphs contain more about the form.

The Notification

The MCA had, vide notification no. G.S.R. 107(E) dated 11th February, 2022 notified the Companies (Accounts) Amendment Rules, 2022 which came into force from 11th February 2022. In the original Companies (Accounts) Rules, 2014, after Rule 12 (1A) the following clause (1B) was inserted by the notification:

“(1B) Every company covered under the provisions of sub-section (1) to section 135 shall furnish a report on Corporate Social Responsibility in Form CSR-2 to the Registrar for the preceding year (2020-2021) and onwards as an addendum to form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be:

Provided that for the preceding year (2020-2021), Form CSR-2 shall be filed separately on or before 31st March, 2022, after filing form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be.”

About CSR-2 form

CSR-2 is a web based form available on the online portal of MCA. It requires filling in the details pertaining to the company, the eligibility criteria, constitution of CSR committee, disclosure of details about its CSR committee, CSR policy and CSR projects on its website, impact assessment, calculation of CSR obligation, details of amount spent in the preceding financial years, unspent amount of CSR, details about ongoing projects, transfer of unspent amount of CSR, creation of capital assets, reasons for failure to spend as required and so on.

Who is required to file CSR 2?

The newly introduced form CSR-2 (report on Corporate Social Responsibility) is required to be filed by the companies which fall under the purview of Section 135 of the Companies Act, 2013, meaning that they meet any one of the criteria (a) Turnover ≥ Rs. 1,000 Crores, (b) Net Worth ≥ Rs. 500 Crores or (c) Net Profit ≥ Rs. 5 Crores.

Due Date of filing

Due date of filing CSR-2 is as follows:

For FY 2020-21: On or before 31st March, 2022 For FY 2021-22 onwards: As an addendum to form AOC-4 (hence will depend on the due date of AOC-4)

Objective of CSR-2 form

The data gathered with the help of this form will help the government in generating an extensive database of CSR activities, sectors getting the funds, actual amount of spending, implementation agencies, unspent fund and capital assets created. This will help the lawmakers to ensure that the CSR funds are rightfully spent, the unspent funds are not ploughed back to the company and to penalize those who are misusing the CSR provisions.


Ever since the CSR mandate was introduced in the Companies Act, 2013, it has been observed that while certain companies were taking the provisions very seriously, a majority of the others were not. CSR funds were not being spent properly and CSR provisions were not being complied with in spirit by such companies. Some organisations were even using the CSR provisions for their own benefit. The total absence of a monitoring framework for overseeing the CSR activities and spending by eligible companies led most companies to shirk their responsibilities. All these necessitated the introduction of more stringent laws on CSR. The first step towards this was through introduction of very high penalties and the next, through overhauling of the reporting framework. Provisions with respect to transfer of capital assets created using the CSR Fund, mandatory transfer of unspent CSR funds, compulsory registration of implementation partners (CSR-1), introduction of Impact Assessment and so on have also highly strengthened the CSR law framework. The form CSR-2 has been introduced for the purpose of annual reporting of CSR activities by companies coming within the purview of sec 135(1). This is a step in the right direction as it will help the government to monitor the compliance of CSR law by eligible companies in the country from now on. It is worth mentioning here that when CSR provisions were first introduced in FY 2014-15, government had expected a minimum annual CSR spending of RS. 25,000 crores by eligible companies in the first few years and that the same would progressively increase over the next few years. But because the provisions have for long been non-mandatory (in terms of actual spending) and due to the fact that many eligible companies had shortfall in spending and some did not spend at all, the cumulative CSR spend of companies for the last 7 years of implementation of the provisions as per the National CSR portal is only Rs. 1,21,412 Crores meaning an average of Rs. 17,344 crores per year only. With the requirement of compulsory transfer of unspent CSR fund to a Fund specified in Schedule VII and the introduction of the mandatory reporting of CSR activities in CSR-2 form now it is expected that total CSR spend in the country would drastically improve.

CSR-2 Form
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