CSR Disclosures explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The original disclosure asked what was spent. The 24 March 2021 amendment asked what was not spent, why, and how much has accumulated unspent from earlier years.
The base CSR disclosures
Companies covered under section 135 must disclose the amount of expenditure incurred on CSR activities. Drawing on the Guidance Note on Accounting for Expenditure on Corporate Social Responsibility Activities:
- All expenditure on CSR activities that qualifies to be recognised as expense should be recognised as a separate line item, "CSR expenditure", in the statement of profit and loss, with the relevant note disclosing the break-up of the various heads of expenses included in that line item.
- The notes should contain the gross amount required to be spent by the company during the year, and the amount spent during the year on (i) construction or acquisition of any asset and (ii) purposes other than (i).
- The disclosure, to the extent relevant, may also be made in the notes to the cash flow statement.
- Details of related party transactions — for example contribution to a trust controlled by the company in relation to CSR expenditure — as per Ind AS 24.
- Where a provision is made, it is presented as per Schedule III, and movements in the provision during the year should be shown separately.
The MCA notification of 24 March 2021 added four items under clause (m), and none of them concerns money actually spent:
(i) the amount of shortfall at the end of the year out of the amount required to be spent during the year;
(ii) the total of previous years' shortfall amounts;
(iii) the reason for the above shortfalls, by way of a note; and
(iv) the nature of CSR activities undertaken by the company.
Items (i) and (ii) together convert the disclosure from an annual snapshot into a cumulative record. A company that has under-spent for several years now discloses the running total, not merely the current year's gap.
Item (iii) requires an explanation rather than a number, and item (iv) requires the company to describe what it actually did — closing the gap between a rupee figure and any sense of what was achieved with it.
The construction-or-acquisition split in the base disclosure serves a related purpose: spending that creates an asset is economically different from spending that does not, and separating them shows how much of the CSR outlay produced something durable.
Why the separate line item anchors the CSR disclosures
CSR expenditure could otherwise sit within other expenses and disappear. Presenting it as its own line in the statement of profit and loss — with a note breaking down the heads of expense inside it — makes the amount visible against the gross amount required to be spent, so the reader can compute the shortfall independently of the clause (m) disclosure.
The related party dimension of the CSR disclosures
Contribution to a trust controlled by the company is specifically named. Such a contribution is simultaneously CSR expenditure and a related party transaction, and both disclosures apply — the Ind AS 24 requirements are not displaced because the payment was made for CSR purposes.
Assembling the CSR disclosures
- CSR expenditure as a separate line in the statement of profit and loss.
- A note with the break-up of expense heads within it.
- Gross amount required to be spent during the year.
- Amount spent, split between asset creation and other purposes.
- Shortfall for the year and cumulative previous years' shortfalls.
- Reasons for the shortfalls.
- Nature of CSR activities undertaken.
- Any provision, with its movement, and any related party aspects.
Common mistakes
- Absorbing CSR spending into other expenses.
- Disclosing the current year shortfall without the cumulative figure.
- Giving amounts without describing the nature of activities undertaken.
- Omitting Ind AS 24 disclosure for contributions to a company-controlled trust.