The changes, which took effect from January 22, 2021 in Section 135 of the Companies Act, 2013 and the Corporate Social Responsibility (CSR) Policy Rules, 2014 brought about substantial change in the CSR regime in India. However, on several issues, the stakeholders needed clarifications. The Ministry of Corporate Affairs (MCA), Government of India, therefore, issued a detailed Frequently Asked Questions (FAQ) on CSR vide General Circular No. 14 /2021 dated August 25, 2021. Some important points clarified in the FAQ are summarised below-

1. Administrative overheads mean the expenses incurred by the company in the general management and administration of CSR functions in the company. Expenses incurred by implementing agencies on the management of CSR activities shall not amount to administrative overheads.
2. Corpus contribution is not an admissible CSR expenditure w.e.f. January 22, 2021.
3. The expenses relating to transfer of capital asset such as stamp duty and registration fees, will qualify as admissible CSR expenditure in the year of such transfer.
4. Preference to local area in the Act is only directory and not mandatory and companies need to balance local area preference with national priorities.
5. CSR expenditure cannot be claimed as business expenditure.
6. No specific tax exemptions available for CSR expenditure.
7. CSR contribution cannot be in kind and monetized to be shown as CSR expenditure.
8. CSR expenditure not to be incurred on activities beyond Schedule VII. However, entries in the said Schedule VII must be interpreted liberally.
9. Involvement of employees in CSR projects of a company cannot be monetized and accounted for under the head of CSR expenditure.
10. Any activity designed exclusively for the benefit of employees will not qualify as permissible CSR expenditure. However, any activity which is designed for the public at large, and if the employees and their family members are incidental beneficiaries, then, such activity will qualify as eligible CSR activity.
11. CSR activities directly by company – No requirement of filing of e-form CSR-1.
12. A company needs to open a separate Unspent CSR Account for each financial year but not for each ongoing project.
13. Penal provision in section 135(7) – Penal provision in section 135(7) is specific to non-transference of the unspent CSR amount as per 135 (5) or 135 (6) only.
14. Penal provisions relating to non-compliance with provisions other than section 135(5) and 135(6) – The provisions of section 134(8) or general penalty under section 450 of the Act will be applicable. In case of non-payment of penalty within the stipulated period, the provisions of section 454(8) will be applicable.
15. Impact assessment – Prerogative with Board to decide on the eligibility criteria for selection of the independent agency for impact assessment. Web-link to access the complete impact assessment reports and providing executive summary of the impact assessment reports in the annual report on CSR, shall be considered as sufficient compliance.

The said FAQ on CSR published by MCA can be accessed here.