Form CSR-2 and Its Applicability

Corporate Social Responsibility (CSR) in India is a means of ensuring that large companies contribute to the well-being of society. Doing something out of the blue is not enough. In India, the law demands proof and transparency, which is why the Companies Act, 2013, introduced the form CSR-2, where it mandated that eligible companies disclose exactly how they spent and managed their CSR funds. The form is filed annually, electronically with the Ministry of Corporate Affair (MCA), in which the essential details such as the composition of the CSR Committee, the company’s CSR policy, amounts spent or unspent, the nature and location of projects undertaken, and the transfer of any unspent funds to specified accounts or government funds, where applicable, is provided.

This blog will help you to understand the meaning of the form, its importance, who must file it, what needs to be included, how it’s filed, and what happens if you miss the deadline.

What is CSR- 2 Form?

Form CSR-2 is an annual electronic return mandated by the Ministry of Corporate Affairs (MCA) for companies to disclose their Corporate Social Responsibility (CSR) activities under Section 135 of the Companies Act, 2013.

Purpose of CSR-2 Form

Form CSR-2 was introduced through the Companies (Accounts) Amendment Rules, 2022, on 11.02.2022 by the MCA to provide a standardised annual disclosure of CSR activity, giving details about spending, committee, and any unspent funds.

Importance of CSR-2 Form

Form CSR-2 plays an important role in strengthening India’s Corporate Social Responsibility (CSR) compliance framework. It helps in:

1. Staying compliant with law: The Ministry of Corporate Affairs (MCA) has mandated the filing of the CSR-3 form for the eligible entities. Non-compliance can lead to hefty penalties on the company responsible as well as officers in default.
2. Promote transparency: The form CSR-2 ensures that stakeholders, investors, regulators, and the public can clearly see how the company is utilising its funds to fulfil its CSR obligations.
3. Preventing misreporting: Unlike earlier formats, the field in the CSR-2 form helps in reducing the ambiguity with a detailed column of spending, which makes it harder for companies to misrepresent or selectively disclose CSR activities.
4. Supporting the formulation of policies: Data collected from CSR-2 helps the government analyse trends in CSR spending, identify underserved sectors, and frame better policies for national development.

Eligibility for Filing the CSR-2 Form

Any company meeting the criteria of Section 135(1) of the Companies Act, 2012 has to file the CSR-2 Form annually:

• Net worth of ₹500 crore or more, or
• Turnover of ₹1,000 crore or more, or
• Net profit of ₹5 crore or more during the preceding financial year

NOTE:  The threshold is applicable to the foreign companies operating via branches in India.

What Information Does the CSR-2 Form Require?

The CSR-2 form requires the following information:

1. Basic information of the Company, its:

• Corporate Identity Number (CIN)
• Name and registered office address
• Official email ID
• Financial year details
• SRN of the filed AOC-4/AOC-4 XBRL/AOC-4 NBFC

2. CSR applicability and financial criteria

Net worth, turnover, and net profit figures

3. CSR committee details

• Constitution of the CSR Committee
• Names, DIN, and category of directors
• Number of meetings held and attended
• Website link (if available) and disclosures made on it (CSR policy, projects, and committee composition)

4. Impact assessment & set-off information

• Whether an impact assessment of CSR projects was carried out and disclosed in the Board’s Report
• Details of amounts available for set-off from previous years

5. Net Profit Details for CSR Calculation

• Net profit for the last three financial years (as per Section 198)
• Adjustments under CSR Rules
• Average net profit and the 2% CSR obligation calculation

6. CSR spending details

• Whether the CSR amount for the year has been spent
• Break-up of spending on ongoing and non-ongoing projects (with project IDs, location, duration, mode of implementation, and implementing agency details)
• Administrative overheads and impact assessment costs
• Unspent CSR amounts and transfers to the Unspent CSR Account or specified funds

7. Unspent CSR from previous years

Details of spending or transfer of unspent amounts from the preceding three years

8. Capital assets acquired from CSR funds

Particulars of assets created/acquired, value, location, beneficiary details, and CSR Registration Numbers

9. Reasons for non-spending

Explanation of why the company failed to spend the mandatory 2% CSR obligation

Step-by-Step Procedure for Filing the CSR-2 Form

1. File AOC-4 or its variants first (AOC-4, AOC-4 XBRL, NBFC, etc.).
2. Draft CSR-2, audited financials, CSR policy, reports, minutes.
3. Visit the MCA portal (MCA V2 or V3, depending on availability).
4. Fill the e-form with the required data and upload documents.
5. Sign the form by affixing a valid DSC.
6. Submit and note the Service Request Number (SRN) and acknowledgement.

Consequences of Non-compliance

As per Section 135 of the Companies Act, 2013, if the company fails to transfer the required amount in the CSR activity, then the company shall be penalised with twice the unspent amount or ₹1 crore, whichever is less.

Officers in default shall be penalised with the penalty of 10% of the unspent amount or ₹2 lakh, whichever is less.

Conclusion

CSR is not merely a statutory obligation; it helps in ensuring the standardised transparency in the functioning of the company. It compels businesses to disclose their CSR spending in a structured, verifiable manner and ensures that corporate contributions are not just claimed but delivered for the development of the nation.