Companies Act – Chapter 9 Accounts of Companies

Accounts of Companies (S. 128 to 138)

Books of Right’s of
Reopening or Voluntary Board’s
Account and Recasting of Revision of members and
Financial account’s on Accounts Report filing of FS
statements Court’s or (S.131) (S.134) with Registrar
Tribunals' order
(S.128, 129 & (S.130) (S.136 & 137)
129A) Constitution
of NFRA and
power of CG CSR Internal Audit
to prescribe (S.135)
AS (S.138)
(S.132 & 133)

Why this chapter?

It is important for a company to maintain proper records of every receipt they receive and every payment that is
made, summarise this into proper books and prepare financial statement which would be shared with various
stakeholders, at the same time the BOD would want to give their opinion about the company’s performance,
guidelines regarding how to prepare BOA, where to keep them, when to prepare FS and how to prepare them, to
whom to send etc are provided in this chapter.

BOA
 Companies Act – Chapter 9 Accounts of Companies
Books of account S.128

In What Manner shall BOA be prepared? Where shall the BOA be kept?

1. Every company shall prepare books of accounts and other relevant books and records REGISTERED OFFICE.
and financial statement for every financial year.
Different place?
2. These books of accounts should give a true and fair view of the state of the affairs of
the company, including that of its branch office(s)and explain the transactions effected
both at the registered office and its branches. (Branch accounting) Anywhere within India allowed if
BOD pass a BR and intimate ROC
3. These books of accounts must be kept on accrual basis and according to the double within 7 days in AOC 5 giving full
entry system of accounting address of new place.

Definition of Books of Account 2(13)

1. all sums of money received and expended by a company and matters in relation to BOA for a BRANCH
which the receipts and expenditure take place.
1. It is sufficient if the BOA of a branch are maintained
2. all sales and purchases of goods and services by the company
at the branch, whether it is an Indian branch or a
foreign branch.
3. the assets and liabilities of the company
2. In case of a Foreign branch, summarized returns of
4. Books for cost audit where applicable.
the books of account of the branch shall be sent to the
registered office at quarterly intervals and it shall be
“Book and paper” and “book or paper” as defined in Section 2(12) include books of account, deeds,
vouchers, writings, documents, minutes and registers maintained on paper or in electronic form.
kept at the RO and open for inspection by the
directors.
Note : The above BOA shall be preserved by the company for a period of not less than 8
years immediately preceding the relevant financial year (Unless an enquiry or investigation
is ordered against the company where such authority demands a longer period)
BOA
 Companies Act – Chapter 9 Accounts of Companies

Inspection of BOA by directors Conditions to be satisfied to maintain BOA in electronic mode

ANY director can inspect the books of account and other A company has an option of keeping books of account or other relevant papers in
books and papers of the company during business hours. electronic mode as per Rule 3 of the Companies (Accounts) Rules, 2014,
the BOA in electronic mode shall
(Can director appoint an agent for the said purpose? – Yes)
1. remain accessible in India so as to be usable for subsequent reference
AND mandatory to have Audit trial Feature for the Accounting software.

2. shall be capable of being displayed in a legible Form.

Can the director inspect the BOA of the subsidiary? -> YES, if
a Board resolution is passed to authorise the same.
3. not be altered and shall be kept in a manner where it shall depict what
was originally received from the branches (In case of Returns/summary
received from the branch)

Where ANY OTHER FINANCIAL INFORMATION maintained 4. retained completely in the format in which they were originally
outside the country is required for the director, he shall make generated, sent or received, or in a format which shall present accurately
a written request for the same and the same shall be the information generated, sent or received and the information
provided within 15 days of such request. contained in the electronic records shall remain complete and
unaltered.
Such request can be made only by the director and not his
agent or authorised representative. 5. There shall be a proper system for storage, retrieval, display or
printout of the electronic records as the Audit Committee.

Who is responsible to maintain BOA? 6. The servers where books are stored in electronic form shall be KEPT IN INDIA,
whether it pertains to a foreign branch or not.
1. Managing director 2. WTD, in charge of finance
7. The company shall intimate to the Registrar on an annual basis at the time
3. CFO 4. any other person authorised by the board on this
of filing of financial statement the following related service provider;
behalf.
A. Name of service provider (Eg Tally etc)
Failure to maintain ? B. IP Address of service provider and location of service provider
C. Where Books are maintained in cloud, address of such service provider
Fine: Minimum : Rs 50,000 and Max: Rs 5,00,000 (Zoho, Google cloud etc)
BOA
 Companies Act – Chapter 9 Accounts of Companies

Financial Statement S.129

Definition of FS 2(40) Periodical Finanical Results (S.129A)

1. profit and loss account 1. The CG may prescribe a class of unlisted companies to prepare
(Income and expenditure account in case of a S.8 company) financial results of the company on periodical basis.
2. Balance sheet
3. Cash flow statement 2. the same shall be approved by BOD and a Limited review audit shall
(optional for small company, OPC, dormant company and Private be conducted on the same.
company if it is a start up and complies with S.92 and 137)
4. Statement of changes in Equity (if applicable) 3. They shall file a copy of the same with the registrar within 30 days of
5. any explanatory notes annexed to or forming part of financial completion of relevant period.
statements.
Note : Section 129 shall not apply to the Government Companies
engaged in defence production to the extent of application of relevant
Accounting Standard on segment reporting.

Example
FS to be prepared In case of Banking, electricity,
in accordance FS prepared shall
insurance companies or any
give a true and fair
with schedule III other class of companies where
view of the state of Where the disclosure of
Division 1 – AS affairs of the company a special act prescribes a
Division 2 – Ind AS certain matters are not different disclosure need not
or companies and
required under a governing follow Schedule 3
If there is any comply with AS as per
Act for a class of companies,
deviation from AS, S.133
the same shall not be treated Eg: for a Banking company
the company shall
as deviation interest income will be treated
disclose the reasons
for such deviation as revenue from operations and
and financial effect they provide provision on
if any in the FS. interest as well

BOA
 Companies Act – Chapter 9 Accounts of Companies

Financial Statements S.129

Financial Year for a Financial statement Consolidated Financial Statement

in relation to any company or body corporate, means the period 1. Every company at the AGM shall prepare and law at an AGM;
ending on the 31st day of March every year, and where it has been A. its own FS (SFS – Stand alone FS)
incorporated on or after the 1st day of January of a year, the period
B. Consolidated Financial statements (CFS) of all it’s subsidiaries
ending on the 31st day of March of the following year, in respect
whereof financial statement of the company or body corporate is
and Associate companies.
made up.
2. CFS shall be in the same manner as that of the SFS.
Exception: In relation to a company which is a holding or subsidiary
or an associate of a company incorporated outside india (Foreign 3. Company shall also prepare along with it’s own FS, salient
company) and for the purpose of consolidation requires to follow a features of it’ subsidiaries. (AOC 1)
different period as as its financial year, such company shall follow the
same after obtaining a permission from the central government, 4. CFS not applicable in the following cases;
However such permission is not required for a Specified
IFSC Public/Pvt company A. Members of the Wholly owned subsidiary or partly owned
subsidiary whether are entitled to vote or otherwise have been
(Example : Daimler, holding company is german and Subsidiary is indian) intimated in writing and they do not object the same.
(Company to maintain proof of delivery of notice) AND

B. Unlisted Company AND

Penalty Provision
1. Managing Director 2. Whole time director in charge of finance 3. C. it’s ultimate or intermediary holding company files CFS with
CFO 4. any person authorised by the board to comply with S.129 or 5. ROC which are in compliance of AS.
All directors in case of absence of above shall be Punishable with Rs
50,000 which may extent to Rs 5,00,000 in case of default.

BOA
 Companies Act – Chapter 9 Accounts of Companies

Reopening of accounts on court of tribunal’s order S.130 Voluntary Revision of Financial statement’s of Board’s Report
S.131

Income Tax Statutory Any A. If it appears to the Directors of the company that the
CG SEBI Authorities authority Person Financial Statements (FS) OR boards Report (BR)
are not in compliance with S.129 or S.134

Where an application is made by the above to the tribunal to the B. The director’s shall make an application to the tribunal for the revision
effect that; of the FS or BR within 14 days of Board Resolution in Form NCLT 1

C. The tribunal shall give notice of the same to the CG and Income tax
authorities, Auditor of Original FS and shall take their considerations if
the relevant earlier the affairs of the company were any, pass the order only after taking into the above considerations
accounts were mismanaged during the relevant
prepared in a period, casting a doubt on the D. The tribunal after hearing the representations from the CG and ITA, shall pass
fraudulent manner reliability of financial statements an order for the revision of the FS or BR as the case may be which shall be filed
with ROC within 30 days.

E. Procedure for revision after approval

The tribunal shall before passing an order obtain representations 1. The BOD shall prepare the revised FS or BR and file the same with the ROC
from the above said persons and the accounts so revised or re-cast along with the order of the tribunal within 30 days of GM Approval.
shall be FINAL.
2. Such a revision cannot be made for a period exceeding 3 financial years
Such re-opening can relate to a maximum period of 8 financial & such Revision cannot be made for more than once in a Financial year.
years immidiately preceeding the current financial year, however 3. reason for such revision shall be explained in the baord’s report in the
where the CG has ordered for maintaining BOA for a longer period, year where such revision Is made
re-opening can be for a longer period. 4. Where the FS are already sent out to the members/registrar and placed in
AGM, the correction should only be to the extent of non-compliance of
S.129 or S.134

BOA
 Companies Act – Chapter 9 Accounts of Companies

NFRA S.132
National Financial Reporting Authority
NFRA is constituted to provide for matters regarding AS made under this act (I.e AS U/s 133)

What does NFRA do? General provisions related to NFRA

1. make recommendations to the Central 1. The head office of the National Financial Reporting Authority shall be at New
Government on the formulation and laying Delhi and the National Financial Reporting Authority may, meet at such other
down of accounting and auditing policies and places in India as it deems fit.
standards.
2. The National Financial Reporting Authority shall cause to be maintained such
2. monitor and enforce the compliance with books of account and other books in relation to its accounts in consultation with
accounting standards and auditing standards C&AG

3. oversee the quality of service of the 3. The accounts of NFRA shall be audited by C&AG and forwarded to CG annually.
professions associated with ensuring
compliance with such standards, and suggest 4. The NFRA shall prepare its annual report giving a full account of its activities
measures required for improvement in quality of during the financial year and forward a copy to the Central Government and the
service Central Government shall cause the annual report and the audit report given by
the Comptroller and Auditor-General of India to be laid before each House of
4. Such other matters incidental. Parliament.

Composition of NFRA
A.. The NFRA shall consist of a chairperson, who shall be a person of eminence and having expertise in accountancy, auditing, finance
or law to be appointed by the Central Government. B. 3 full time (including Chairman) and 9 part time members.

C. The 9 part time members include one member from C&AG, MCA, RBI,SEBI each, two experts in field of Accountancy, audit, finance and law
and 3 members from ICAI (President, Chairperson Auditing and Accounting Standards Board)

D. Once a member leaves NFRA, he shall not be associated with an Audit firm (including consultancy firm) for a period of 2 years.
BOA
 Companies Act – Chapter 9 Accounts of Companies

NFRA S.132
National Financial Reporting Authority
NFRA is constituted to provide for matters regarding AS made under this act (I.e AS U/s 133)

Penalty in case of Proved misconduct by a Which companies does NFRA Oversee?

professional
1. Company Listed in India or Outside India

2. unlisted public companies having paid-up capital of

not less than rupees 500 crores
Individual FIRM OR
having annual turnover of
not less than rupees 1000 crores
OR
Penalty Not less than Penalty Not less than Rs having, in aggregate, outstanding loans, debentures and deposits of not less than rupees
Rs 1,00,000 but max 5,00,000 but max extent 500 Crores as on the 31st March of immediately preceding financial year.
extent to 5 times of to 10 times of the fees
the fees received received 3. Insurance companies, banking companies, electricity companies

4. Foreign company or body corporate which is a subsidiary or an associate of an Indian

debarring the member or the firm from being company (referred to point 1 to 3 above) if the income of the foreign entity exceeds 20% of
appointed as an auditor or internal auditor or
the consolidated Income or Net worth of the indian entity
undertaking any audit in respect of financial
statements or internal audit of the functions and
activities of any company or body corporate. Punishment in case of Non-compliance
for a minimum period of six months or such higher If a company or any officer of a company or an auditor or any other person contravenes any of the
period not exceeding ten years as may be provisions of NFRA Rules
determined by the National Financial Reporting
Authority. the company and every officer of the company who is in default or the auditor or such other person
shall be punishable as per the provisions of section 450 of the Act
Note: Professional misconduct takes the same S.450 -> Fine upto Rs 10,000 and a fine of Rs 1,000 in case of a continuing offence.
meaning as given in ICAI Act BOA
 Companies Act – Chapter 9 Accounts of Companies

Signing of Financial statemen’s and board’s report

S.134

What is the brief of this section?

Section 134 provides that the financial statement including consolidated Penalty for Non-compliance?
financial statements should be approved by the Board of Directors before Company – Rs 3,00,000
they are signed and submitted to auditors for their report. This provision gives
guidance as to who has to authenticate the FS and what are the contents of Officer – Rs 50,000
the board’s report.

Signing of Financial Statement’s Directors Responsibility statement

A. Chairperson of the company where he 1. in the preparation of the annual accounts, the applicable accounting standards had been
is authorised by the Board OR by two followed along with proper explanation relating to material departures
directors out of which one shall be
managing director, if any
2. the directors had selected such accounting policies and applied them consistently and
AND made judgments and estimates that are reasonable and prudent so as to give a true and fair
view of the state of affairs of the company.
B. CEO (Chief executive officer),
C. CFO (Chief financial officer), 3. the directors had taken proper and sufficient care for the maintenance of adequate
C. CS (Company secretary of the accounting records in accordance with the provisions of this Act for safeguarding the assets of
company), the company and for preventing and detecting fraud and other irregularities.
Where the above are appointed.
In case of OPC – one director 4. the directors had prepared the annual accounts on a going concern basis.

5. the directors had devised proper systems to ensure compliance with the provisions of all
applicable laws and that such systems were adequate and operating effectively
What has to be circulated to members?
6. the directors, in the case of a listed company, had laid down internal financial controls to be
Signed copy of FS, CFS, any Notes annexed followed by the company and that such internal financial controls are adequate and were
to the above, auditor’s and boards’ report operating effectively

BOA
 Companies Act – Chapter 9 Accounts of Companies

Content’s of Board’s report S.134

Contents of Board’s Report

1. Web adress where BR is placed 2. number of meetings of the Board 3. directors’ responsibility statement
4. details in respect of frauds reported by auditors under sub-section (12) of section 143 (Other than CG Reporting)
5. A statement on declaration given by independent directors u/S 149
6. company’s policy on directors’ appointment and remuneration including criteria for determining qualifications, positive
attributes, independence of a director and other matters U/s 178
7. Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made—
by the auditor in his report; and
(ii) by the company secretary in practice in his secretarial audit report 8. particulars of loans, guarantees or investments U.s 186
9. RPT u/s 188 10. The amount which is proposed to be transferred to reserves
11. the state of the company’s affairs. 12. Proposed dividend
13. Material changes between the close of previous FY and current FY
14. conservation of energy, technology absorption, foreign exchange earnings and outgo, in such manner as may be prescribed;
However, the Govt. companies engaged in producing defence equipment is exempted from disclosure under this clause
15. statement indicating development and implementation of a risk management policy for the company including identification
therein of elements of risk.
16. details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during
the year.
17. every listed company and every other public company having a paid up share capital of twenty five crore rupees or more calculated at
the end of the preceding financial year shall include, in the report by its Board of directors, a statement indicating the manner in which formal
annual evaluation has been made by the Board of its own performance and that of its committees and individual directors. (NA to Govt Coy)
18. Financial summary highlights 19. Change in nature of business 20. Details of directors and KMP appointed and resigned during
the year, their qualification and proficiency (Whether they can actually take this job) 20. companies that have ceased to be H/S/A/JV.
21. Details of deposits accepted and returned during the year 22. Compliance with cost records where applicable. 23. Details of
material orders affecting the going concern of the company

Note: Point 1,2,3,4,7(i),13,18 & 23 are only applicable to OPC and Small compamy
BOA
 Companies Act – Chapter 9 Accounts of Companies

Copy of Financial statements to be filed with registrar S.137

AGM is held AGM is not held

[Copy of FS + CFS + other documents to be Attached with FS under theAct] the financial statements along with the documents required to be
attached + Duly signed statement of facts and reason for not
holding the AGM shall be filed with the Registrar within thirty
days From the date before which the AGM should have been held.
FS etc are NOT adopted in the
FS etc are adopted in the AGM AGM OR AGM is adjourned.

File the Unadopted FS in Other Key provisions

form with ROC within 30
days of AGM
File the FS in form 1. OPC shall file the FS along with prescribed documents within
(AOC 4 or AOC 4 180 days from the date of AGM.
The Registrar shall take them
CFS) with ROC within in his records as provisional
30 days of AGM till the financial statements 2. Where a company has subsidiaries outside india, the company
are filed with him apart from AOC 4 shall attach the accounts of it’s subsidiary or
subsidiaries which are incorporated outside india (Foreign
Subsidiary) and which have not established a place of business in
If the FS are adopted in the
India.
adjourned AGM, then they
shall be filed with the Note: where the foreign subsidiary’s books are not audited
Registrar within 30 days of because the local requirement’s of the country does not require an
the date of such adjourned audit, the company shall filed unaudited FS of the Foreign
AGM with such fees or subsidiary.
such additional fees.

BOA
 Companies Act – Chapter 9 Accounts of Companies

Copy of Financial statements to be filed with registrar

S.137

What is XBRL Reporting? Penalty for Non- compliance with S.137

1. Company -> Company shall be liable for a penalty of Rs 10,000 and in case of a
As per Rule 1 of the Companies (Filing of Documents and forms in continuing offence, further penalty of Rs 100 per day of default S.T a maximum of Rs
Extensible Business Reporting Language) Rules, 2015 certain 2,00,000.
companies must file their FS in the E- form AOC 4 XBRL
2. Managing director AND WTD, in charge of finance, if any or if the above is not
there, then
any other person authorised by the board on this behalf, In absence of above, ALL
1. Listed companies and their
subsidiaries Exemptions from XBRL the directors of the company shall be liable to a penalty of Rs 10,000 and in case of
Reporting continuing failure, with a further penalty of Rs 100 for each day of default S.T a
maximum of Rs 50,000.
2. companies having paid up 1. NBFC’s if not following IND AS
capital of five crore rupees
or above 2. Housing finance companies S. 136 Right of members to copes of Audited Financial statement
3. Banking companies 1. Copies of FS + CFS + Audit report + Other document required by law -> to be sent to
3. Companies having
turnover of one hundred every Member , Debenture trustee and other persons mentioned U/s 101 atleast 21
crore rupees or above 4. Insurance companies days before the date of meeting.

2. < 21 days notice allowed where 95% of members entitled to vote give consent .
4. Companies which follow
IND AS Note 3. ALL Listed Companies AND public companies with Net worth > 1 crore AND
A company which files FS Turnover > 10 crores MAY circulate the notice in e-mode if the Shares are in Demat.
in XBRL reporting in one
year shall file the FS in 4. Listed company shall make available the copies for inspection in R.O atleast 21 days
XBRL for every prior to GM and allow members to take copies.
subsequent year whether
the conditions are met or 5. Foreign Subsidiary -> Not required to get it’s FS audited, placed unaudited FS and
translate to english where it is not in english.
not
BOA
 Companies Act – Chapter 9 Accounts of Companies

Internal Audit
[S.138 read along with rule 13 of companies (Accounts) Rules, 2014]

For whom is Internal Audit Applicable? Other Key Provisions

1. Every Listed Company 1. Internal Auditor shall either be a Chartered Accountant or a

Cost Accountant, or such other professional as may be decided
AND by the Board to conduct internal audit of the functions and
activities of the company.
2. Every Unlisted Public Company during the preceding financial year
having; 2. The internal auditor may or may not be an employee of the
company and such CA/CMA may or may not be in practice.
A. Turnover of Rs 200 crores or more OR
B. Outstanding Loans or borrowings from banks or public financial 3. Internal Auditor may be an individual, partnership firm or a
institutions of Rs 100 Crore or more at any point of time during the body corporate.
preceding financial year OR
C. Paid up share capital of Rs 50 crores or more OR 4. Audit committee shall in consultation with the Internal auditor
D. Outstanding Deposits of Rs 25 crores or more at any point of time decide the manner in which an internal audit has to be conducted.
during the preceding financial year
5. The internal auditor is appointed by the BOD and he reports to
AND the BOD as well, he has no obligation to report to the
shareholders.
3. Every Private company having
A. Turnover of Rs 200 crores or more OR
B. Outstanding Loans or borrowings from banks or public financial
institutions of Rs 100 Crore or more at any point of time during the
preceding financial year

BOA
 Companies Act – Chapter 9 Accounts of Companies

Corporate Social Responsibility

S.135 read along with Companies (CSR Policy) Rules 2014

Why CSR?
The Companies Act, 2013 lays down the provisions requiring corporates to mandatorily spend a prescribed percentage of their profits on certain
specified areas of social upliftment in discharge of their social responsibilities. Broadly, Corporate Social Responsibility (CSR) implies a concept,
whereby companies decide to contribute to a better society and a cleaner environment – a concept, whereby the companies integrate social and
other useful concerns in their business operations for the betterment of its stakeholders and society in general

1. For whom is CSR Applicable?

2. How much to spend?
A. Every company having; The company shall spend in every financial year atleast 2% of the AVERAGE Net profits
et worth of Rs 500 crore or more, or of the company made during the three immidiately preceding financial years.
urnover of Rs 1000 crore or more or
net profit of Rs 5 crore or more Company incorporated for less than 3 years? Include all years.
during the immediately preceding financial year.
Net profit shall not include
B. Every company including its holding or 1. Any profit arising from any overseas branch or branches of the company, whether
operated as a separate company or otherwise.
subsidiary, and a foreign company having its
branch office or project office in India, which 2. Any dividend received from other companies in India, which are covered under and
fulfills The limits above. complying with the provisions of section 135 of the Act

C. NA for first 5 years of Inc. for a specified IFSC company. Note: as per Rule 10 any unspent CSR amount shall be transferred by the company to
any FUND included in Schedule VII of the act within 6 months from the expiry of FY.

3. Composition of CSR Committee Role/duties of CSR Committee

1. 3 or more directors and one shall be an Independent 1. Formulate and recommend to the Board, a CSR Policy which shall indicate the
director (ID not required? -> then 2 or more directors is activities to be undertaken by the company in areas As per Schedule VII.
enough)
2. Private company has only 2 directors -> then have only 2
directors in committee 2. recommend the amount of expenditure to be incurred on the activities.
3. Foreign Company -> Person u/s 380 + Another Nominee
3. Where the amount to be spent for CSR does not exceed 3. Monitor the CSR Policy of the company from time to time
Rs 50,00,000 then this committee is not required and the
BOD shall take the responsibility of the same. BOA
 Companies Act – Chapter 9 Accounts of Companies

Corporate Social Responsibility S.135

Activities Mentioned in Schedule VII

1. eradicating hunger, poverty and malnutrition, promoting health care 9. Contribution to incubators or research development projects in the field of
including preventive health care and sanitation including contribution to science, technology, engineering and medicine, funded by CG or SG or any
the Swach Bharat Kosh set-up by the Central Government for the agency or Public Sector Undertaking of CG or SG.
promotion of sanitation and making available safe drinking water.
10. contributions to public funded Universities; Indian Institute of Technology
2. promoting education, including special education and employment (IITs); National Laboratories and Autonomous Bodies established under
enhancing vocation skills especially among children, women, elderly, Department of Atomic Energy (DAE); Department of Biotechnology (DBT);
and the differently abled and livelihood enhancement projects. Department of Science and Technology (DST); Department of Pharmaceuticals;
Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy
(AYUSH); Ministry of Electronics and Information Technology and other bodies,
3. promoting gender equality, empowering women, setting up homes namely Defense Research and Development Organisation (DRDO);Indian Council
and hostels for women and orphans; setting up old age homes, day of Agricultural Research (ICAR); Indian Council of Medical Research (ICMR)
care centres and such other facilities for senior citizens and measures Council of Scientific and Industrial Research (CSIR), engaged in conducting
for reducing inequalities faced by socially and economically backward research in science, technology, engineering and medicine aimed at promoting
groups. Sustainable Development Goals (SDGs)

4. ensuring environmental sustainability, ecological balance, protection 11. rural development projects
of flora and fauna, animal welfare, agroforestry, conservation of natural
resources and maintaining quality of soil, air and water including 12. slum area development. [For the purposes of this item, the term ‘slum
contribution to the Clean Ganga Fund set up by the Central Government area’ shall mean any area declared as such by the Central Government or any
for rejuvenation of river Ganga. State Government or any other competent authority under any law for the
time being in force
5. protection of national heritage, art and culture including restoration
of buildings and sites of historical importance and works of art; setting 13. disaster management, including relief, rehabilitation and reconstruction
up public libraries; promotion and development of traditional arts and activities.
handicrafts (eg : restoration of sites in Hampi)
14. Har gar tiranga – campaign to promoteawareness on Indian flag and mass
production of the flag Is considered as CSR.
6. measures for the benefit of armed forces veterans, war widows and
their dependents, Central Armed Police Forces (CAPF) & Central Para
Military Forces (CPMF) veterans, and their dependents including 15. Spending of CSR funds for COVID related activities such as;
widows.
A. Awareness and public outreach on COVID 19 Vaccination.
7. training to promote rural sports, nationally recognised sports,
paralympic sports and Olympic sports B. Setting up makeshift hospitals and Temporary COVID care facilities on
( Eg : games like hide and seek in village/city are not covered) COVID 19

8. contribution to the Prime Minister’s National Relief Fund or Prime C. Creating health infrastructure for for COVID care, establishment of
Minister’s Citizen Assistance and Relief in Emergency situations Fund (PM medical oxygen and storage plant.
CARES FUND) any other fund set up by the Central Government for socio-
economic development and relief and welfare of the Scheduled Castes, Tribes,
other backward classes, minorities and women. BOA
 Companies Act – Chapter 9 Accounts of Companies

Corporate Social Responsibility

S.135 read along with Companies (CSR Policy) Rules 2014

The following is not considered as part of CSR How will CSR Activities be undertaken by the company?
(i.e exclusions from CSR)
1. The CSR activities shall be taken by the company as per its CSR Policy, as
1. The CSR projects or programs or activities undertaken projects or programmes or activities either new or ongoing which are
outside India approved by the CSR committee.

2. The CSR projects or programs or activities that benefit 2. CSR activities can be undertaken through a company established under
only the employees of the company and their families section 8 of the Act or a registered trust or a registered society,
established by the company, either singly or along with any other
3. Activities undertaken in ordinary course of business company Which is Established by the company either on it’s own or with
another company or established by the CG or SG or any entity established
under an Act of Parliament or a State Legislature
4. Contribution of any amount directly or indirectly to any OR
political party.
the Board of a company decides to undertake its CSR activities through a
company established under section 8 of the Act or a registered trust or a
5. CSR activities should be undertaken by the companies registered society, other than those specified in this sub-rule, such company
in project/ programme mode. One-off events such as or trust or society shall have an established track record of three years in
marathons/ awards/ charitable contribution/ undertaking similar programs or projects, provided the same is properly
advertisement/ sponsorships of TV programmes etc. monitored and projects and funds allocated are clearly identified through a
would not be qualified as part of CSR expenditure. reporting mechanism.
6. Expenses incurred by companies for the fulfillment of 3. Every company undertaking a CSR activity shall register itself with the CG
any Act/ Statute of regulations (such as Labour Laws, by filing form CSR-1 W.E.F 1st april 2021 which shall be verified by CA/CS/
Land Acquisition Act etc.) would not count as CSR CMA in practice. On submission of the same a unique CSR registration
expenditure under the Companies Act (Eg : Bonus to number shall be generated. (not applicable for projects undertaken prior to
employees) this rule)
4. CSR 2 to be filed for every financial year along with filing of FS u/s 137
(AOC 4)

Penalty for Non-compliance

1. Where company fails to comply with the provisions of CSR spending or treating unspent amount

Company -> Penalty of TWICE (the amount to be transferred to the fund specified in Schedule VII or unspent CSR) or Rs 1 crore W.E LESS
Every officer -> Penalty of One tenth (the amount to be transferred to the fund specified in Schedule VII or unspent CSR) or Rs 2 lakhs W.E LESS
BOA
 Companies Act – Chapter 9 Accounts of Companies
Corporate Social Responsibility
Key Amendments W.E.F 22.01.2021 in Rule 7 and Rule 8
1. The BOD shall ensure that the AOH related to CSR shall not exceed 5% of the total CSR expenditure of the company for the financial year.
2. Where out of CSR activities the company earns any surplus, the same cannot be treated as business profits and the same shall be ploughed
back into the same project OR transfer to unspent CSR account and spend as per CSR policy OR transfer to fund specified in Schedule VII
within 6 months from the close of the FY.
3. Where a company spends an amount in excess of requirement provided (i.e 2%) such excess amount may be set off against the
requirement to spend such amount up to immediate succeeding three financial years subject to the conditions that;
A. the excess amount available for set off shall not include the surplus arising out of the CSR activities, if any (AFTER 22/1/21 ONLY).
B. BR is passed by the company.
4. A company can acquire Capital asset for the purpose of creation or acquisition of a capital asset which shall be held by (i) S.8 company or
registered public trust with charitable objects (ii) beneficiaries of CSR project in form of self help groups or (iii) Public authority .
ANY capital asset created prior to commencement of this rules shall comply with these rules within 180 days or such higher period which shall
not exceed an additional 90 days. (Transitional provision)
5. CSR Reporting (Rule 8)
A. Every company including a foreign company shall include an annual report on CSR.
B. Every company having average CSR obligation of 10 Crores or more u/s 135(5) in the immidiately prececeding 3 financial years shall
undertake an impact assessment through an independent agency of all the CSR projects having a budgeted outlay of Rs 1 crore or more and
which have been completed 1 year before undertaking the impact study.
(I.e where CSR to be spent being 10 Cr or more and the company has any project with a budget of RS 1 crore individually for CSR and such project was
completed more than a year before the date of the assessment, they have to conduct an assessment of such project through an independent agency)

C. The impact assessment report to be placed before the board and to be included as part of annual report on CSR
D. A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year,
which shall not exceed TWO percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is Higher. (i.e limit on
maximum amount that can be spent towards impact assessment)
BOA
 Companies Act – Chapter 9 Accounts of Companies

Corporate Social Responsibility - Few general questions and Clarification on the same

1. Which net profit should be considered, before tax or after? PBT (Profit before tax)

2. Can companies with small CSR funds pool their project with other similar companies? YES

3. Will any TAX emeption be provided for these spending? Yes, as provided in IT Act

No, only if the H/S individually

4. If company A fullfills limits U/s 135 should it’s holding or subsidiary also comply with S.135?
satisfy S.135

5. Whether CSR would be applicable for S.8 company if it satisfies limits U/s 135 YES

6. If a company has spent excess (More than 2%) in any FY can the excess be set off with the
requirement for CSR in any subsequent FY (i.e can excess spent be carried forward and set off)
YES S.T Conditions

Ongoing Project-> within 30 days to a separate bank account and the same shall should be spent
7. Can unspent amount of an ongoing
within 3 financial years from the date of transfer, failing which the balance should be transferred
project be carried forward to the next
to fund under Schedule VII within 30 days from close of 3 financial years.
year? What about not an ongoing project?
Not Ongoing project -> Within 6 months from close of FY

8. Can contribution to CM relief fund or State relief fund for COVID 19 be considered for CSR? No, not included in Sch VII
9. Can payment of salary/wages paid to employees including contract labour and daily wage
workets during COVID lockdown be considered as CSR?
NO

10. Can payment made in the form of ex-gratia to temporary/ YES, if made over an above regular disbursements to tackle COVID 19.
casual/ daily wage workers qualify as CSR expenditure? allowed as one time exception and has to be certified by the auditor.

BOA