# CSR Rules - Permitted vs. Excluded Activities and Other Conditions

## Administrative Overheads

Administrative overheads shall NOT exceed 5% of the total CSR expenditure of the company for that financial year.

## Activities NOT Considered as CSR (Mnemonic: BFPESL)

The following activities shall NOT be considered as CSR activities:

Code	Activity
B	Activities undertaken in pursuance of the normal course of business (OCOB) of the company
F	Activities undertaken outside India - except training of Indian sports persons representing any State or Union Territory at national level or India at international level
P	Contribution of any amount, directly or indirectly, to any political party under Section 182
E	Activities benefitting only employees of the company (and their families)
S	Sponsorship activities for deriving marketing benefits for its products/services
L	Activities carried out for fulfillment of any other statutory obligations under any law in force in India

## Who Can Undertake CSR Activities (Implementing Agencies)?

The Board may undertake CSR activities:

1. By itself, OR

2. Through implementing agencies which must be:

A Section 8 company, OR
A Registered Public Trust, OR
A Registered Society

### Conditions for Implementing Agency

The agency must be:

Established by the company itself or along with any other company, OR
Established by the Central Government or State Government or any entity established under an Act of Parliament/State Legislature, OR
An entity having an established track record of at least 3 years in undertaking similar activities, AND must have registration under Section 12A and 80G of the Income Tax Act, 1961.

## CSR Registration Number

Every entity intending to undertake CSR activity on behalf of a company shall:

File Form CSR-1 with the Registrar of Companies (ROC).
A unique CSR Registration Number will be generated upon successful filing.
This is mandatory for any implementing agency.

## Acquisition of Capital Asset for CSR

CSR amount may be spent for creation or acquisition of a capital asset, which shall be held by:

1. A Section 8 Company, a Registered Public Trust, or a Registered Society having charitable objects and a CSR Registration Number, OR

2. Beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities, OR

3. A Public Authority.

> Important: The capital asset cannot be held in the name of the company itself; it must be transferred to one of the above categories.

Worked example

### Example 1

Example 1: A company sponsors a cricket tournament to promote its product brand. Is this CSR?

Answer: No. Sponsorship for deriving marketing benefits is excluded from CSR (S in BFPESL).

### Example 2

Example 2: A company runs CSR activities through an NGO that has been operating for 4 years and is registered u/s 12A and 80G of Income Tax Act. Can it act as implementing agency?

Answer: Yes, provided it is a registered Public Trust/Society/Section 8 Co. AND files Form CSR-1 to obtain a CSR Registration Number.

### Example 3

Example 3: A company acquires a school building under CSR. Can the building be held in the company's own name?

Answer: No. Capital assets created under CSR must be held by a Section 8 company/Trust/Society with CSR Reg. No., OR beneficiaries (self-help groups), OR a Public Authority.

### Example 4

Example 4: Total CSR spend for the year is Rs. 1 crore. Maximum admin overheads allowed?

Answer: 5% of Rs. 1 crore = Rs. 5 lakh.

⚠️ Common exam mistakes

Treating CSR activities done in normal course of business as eligible CSR.
Forgetting the exception under 'F' - training of Indian sports personnel is allowed even outside India.
Treating sponsorship for marketing as CSR.
Allowing the company to hold CSR capital assets in its own name.
Missing the requirement of 12A/80G registration AND 3-year track record for independent implementing agencies.
Allowing admin overheads to exceed 5% of CSR spend.
Forgetting to file Form CSR-1 for the implementing agency.

Bare-Act text Rule 2(1)(d), Rule 4, and Rule 7 · Companies (CSR Policy) Rules, 2014 · click to expand

Rule 2(1)(d) of Companies (CSR Policy) Rules, 2014: 'Corporate Social Responsibility (CSR)' means the activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in these rules, but shall not include the following, namely:- (i) activities undertaken in pursuance of normal course of business of the company (ii) any activity undertaken by the company outside India except for training of Indian sports personnel representing any State or Union territory at national level or India at international level; (iii) contribution of any amount directly or indirectly to any political party under section 182 of the Act; (iv) activities benefitting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019; (v) activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services; (vi) activities carried out for fulfilment of any other statutory obligations under any law in force in India. Rule 7(1): The board shall ensure that the administrative overheads shall not exceed five percent of total CSR expenditure of the company for the financial year.

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Activities Excluded from CSR, Administrative Overheads and Capital Asset Acquisition

Worked example

⚠️ Common exam mistakes