## CSR Activities – Rule 4 of CSR Policy Rules, 2014

### 1. Mode of Undertaking CSR Activities

CSR activities shall be undertaken by the company as per its CSR Policy, as projects, programmes or activities.

The Board may undertake CSR activities either directly OR through:

(a) A Section 8 company / registered public trust / registered society, registered u/s 12A and 80G of the Income Tax Act, 1961, established by the company (alone or with another company); OR

(b) A Section 8 company / registered trust / registered society, established by the Central or State Government; OR

(d) A Section 8 company / registered public trust / registered society, registered u/s 12A and 80G of the Income Tax Act, 1961, having an established track record of at least 3 years in undertaking similar activities.

### 2. Form CSR-1 Registration

Every implementing entity must register itself with the Central Government by filing Form CSR-1 electronically with the Registrar w.e.f. 1st April 2021.
Does NOT affect CSR projects approved before 1st April 2021.
Form CSR-1 must be digitally verified by a CA / CS / CMA in practice.
On submission, a unique CSR Registration Number (CRN) is auto-generated.

### 3. Collaboration

Companies may collaborate with other companies for CSR projects, provided each company's CSR Committee can report separately.

### 4. Capacity Building – 5% Cap

Capacity building expenditure (including admin overheads) ≤ 5% of total CSR expenditure in one FY. Institutions used must have ≥ 3 years track record.

### 5. Treatment of Surplus from CSR Activities

Surplus from CSR activities shall NOT form part of business profit. It shall be:

Ploughed back into the same project, OR
Transferred to the Unspent CSR Account and spent per CSR policy/annual action plan, OR
Transferred to a Fund specified in Schedule VII within 6 months of expiry of the financial year.

### 6. Set-Off of Excess Spending

As covered separately — excess may be set off against the next 3 FYs with Board Resolution; excluding CSR surplus.

### 7. Capital Asset Created from CSR Funds

May be held by:

(a) A Section 8 company / Registered Public Trust / Registered Society having charitable objects AND a CSR Registration Number; OR

(b) Beneficiaries (self-help groups, collectives, entities); OR

Capital assets created before commencement of the 2021 Amendment Rules: must comply within 180 days (extendable by 90 days with Board approval and reasonable justification).

### 8. Contribution to Corpus

Qualifies as CSR expenditure if:

(a) The Trust/Society/Section 8 company is created exclusively for CSR, OR

(b) The corpus is created exclusively for a purpose directly relatable to Schedule VII.

### 9. Salaries to CSR Staff

Salaries paid to regular CSR staff and volunteers (in proportion to time spent on CSR) may be factored into CSR project cost.

### 10. Foreign Holding Company Contribution

Expenditure by a Foreign Holding Company on CSR activities in India qualifies as CSR spend of the Indian subsidiary if:

The CSR spend is routed through the Indian subsidiary, AND
The Indian subsidiary is required to do CSR u/s 135.

Worked example

### Example 1

Example 1 (Implementing Agency): MNO Ltd. wishes to undertake an education CSR project through a registered trust set up by another company 5 years ago. That trust must be registered u/s 12A and 80G AND have a 3-year track record in similar activities. The trust must also file Form CSR-1 to get a CRN before MNO Ltd. routes funds through it.

### Example 2

Example 2 (Surplus): A skilling project generated ₹2 lakh surplus during FY 2024-25. By 30 September 2025, this surplus must be either (a) ploughed back into the same project, (b) transferred to an Unspent CSR Account, or (c) transferred to a Schedule VII fund.

### Example 3

Example 3 (Capital Asset): ABC Ltd. constructed a community library from CSR funds. The library cannot be held by ABC Ltd. itself — it must be transferred to a Section 8 company/registered trust with a CRN, to beneficiaries (a self-help group/collective), or to a public authority.

### Example 4

Example 4 (Foreign Holding Co.): XYZ Inc. (USA) wishes to fund flood relief in India. To qualify as CSR spend of its Indian subsidiary XYZ India Ltd., the funds must be routed through XYZ India Ltd., and XYZ India Ltd. must itself be u/s 135.

⚠️ Common exam mistakes

Forgetting that all CSR implementing agencies must file Form CSR-1 and obtain a CRN.
Treating CSR surplus as business profit — it must be ploughed back or transferred.
Allowing CSR-created capital assets to remain in the company's name (must be transferred to one of the 3 categories).
Believing all corpus contributions qualify — they qualify only if the trust is exclusively for CSR or the corpus is for a Schedule VII purpose.
Counting full salary of CSR staff rather than the proportionate time spent.

Bare-Act text Rule 4 · Companies (CSR Policy) Rules, 2014 · click to expand

The Board shall ensure that the CSR activities are undertaken by the company itself or through – (a) a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80G of the Income Tax Act, 1961, established by the company, either singly or along with any other company; or (b) a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government; or (c) any entity established under an Act of Parliament or a State legislature; or (d) a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities.

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CSR – Activities under Rule 4 (Implementation Modes & Surplus Treatment)

Worked example

⚠️ Common exam mistakes