Form CSR-2
CS Rantu Das
CS Rantu Das is the Founder and Managing Partner of M/s. Rantu Das & Associates, a firm established in 2010. As a Fellow Member of ICSI and a law graduate (LL.B., LL.M.), with an M.Com from Calcutta University, he has over 13 years of expertise in corporate laws, SEBI matters, FEMA, RBI regulations, and compliance audits. He regularly represents cases before NCLT and NCLAT under the Companies Act, 2013, and IBC, 2016.
Introduction
The concept of Corporate Social Responsibility (CSR) in India has evolved from voluntary philanthropy to a legally mandated obligation for certain classes of companies. To strengthen transparency, accountability, and standardization of CSR activities, the Ministry of Corporate Affairs (MCA) has introduced Form CSR-2 as a separate filing requirement.
The Evolution of CSR in India
From a voluntary practice to a statutory requirement
Historically, CSR in India was largely voluntary; companies donated to charitable causes, ran community development programs, or supported social initiatives of their own accord. The shift toward statutory CSR began with the Companies Act, 2013.
Under Section 135 of the Companies Act, 2013, certain companies are mandated to spend at least 2% of their average net profits over the preceding three years on CSR activities, subject to fulfillment of other criteria.
Initially, CSR disclosures were included in the Board’s Report and annexed to the financial statements. Over time, regulators have tightened the compliance regime to enhance oversight and data transparency.
The need for a separate CSR return
While the disclosures in annual reports gave some visibility, issues emerged:
- Discrepancies between what was disclosed in financial statements and actual CSR spending or project details
- Difficulty for regulators to aggregate CSR data across companies for policy or monitoring purposes
- The need for a standardized, structured format to capture project-level information
Therefore, the MCA introduced Form CSR-2 to serve as a dedicated CSR return (or “CSR statement”) that offers greater granularity and enables better tracking, analysis, benchmarking, and enforcement.
Legal & Regulatory Framework of Form CSR-2
Statutory basis and amendments
Form CSR-2 is prescribed under Rule 12(1B) of the Companies (Accounts) Rules, 2014, under the purview of Section 135 of the Companies Act.
In 2022, the MCA inserted sub-rule (1B) in Rule 12, making CSR-2 a mandatory e-form for companies covered under CSR obligations.
Over time, the rules have been amended to refine deadlines, the relation with AOC-4 filing, and portal migration:
- For financial years henceforth, CSR-2 must be filed separately from AOC-4 (i.e., not as an annex), after the latter has been filed.
- The MCA has extended/modified the deadlines for CSR-2 filing in certain years to accommodate system changes or ease compliance. For example, for FY 2023-24, the due date was extended to 30 June 2025.
- Due to portal migration (MCA21 V2 to V3), special transitional windows have been provided for filing CSR-2 using older SRNs.
A relevant circular (General Circular No. 02/2025, dated 16 June 2025) clarifies that for companies that filed AOC-4 in MCA V2, CSR-2 using that SRN can be filed in MCA V3 during a transition window from July to August 2025.
Thus, the regulatory architecture positions CSR-2 as a stand-alone CSR return to be filed annually, independent of but sequenced after the financial statements filing.
Applicability: Which companies must file CSR-2
A company must file CSR-2 if it is covered under Section 135(1) of the Companies Act. In simpler terms, companies meeting any of these thresholds in the preceding financial year are obligated:
- Net worth of ₹500 crore or more
- Turnover of ₹1,000 crore or more
- Net profit of ₹5 crore or more
These companies must constitute a CSR Committee and spend at least 2% of their average net profits from the preceding three financial years on CSR projects.
Even if a company ends up not spending its CSR amount (for whatever reason), it is required to file Form CSR-2, declaring that no CSR expenditure was made and disclosing reasons. It cannot simply skip filing.
- Subsidiaries, holding, associate, or joint-venture companies: If a parent company is obligated, its group entities may also be required to report, depending on their own financials and involvement in CSR projects.
- Section 8 companies / non-profit companies: Generally, these may be outside the usual CSR obligation, unless they independently meet the thresholds.
- New companies/companies in their first year: If they qualify under thresholds in preceding years, they must comply.
Structure of Form CSR-2
Form CSR-2 is designed to capture structured, standardized information across several dimensions of CSR. Below are the principal elements:
1. Basic company details
a. Company name, CIN, financial year, address, etc.
b. CSR Committee details: names, designation, meeting dates, attendance
2. CSR Policy information
a. CSR policy approval, upload link, disclosure on website
b. Key features of the CSR policy (focus areas, implementation arrangements)
3. Project-level disclosures
For each CSR project/program:
a. Project name, sector, location (state, district)
b. Project duration (start date, end date)
c. Project objectives, whether ongoing or new
d. Amount allocated/approved
e. Amount spent during the year
f. Status: unspent balance, reasons for delay, steps for completion
g. Impact assessment (if done)
h. Details of implementing agency (if third party)
4. Financial summary
a. Total amount required to be spent (2% of profit)
b. Amount actually spent
c. Unspent CSR funds and how they have been handled (e.g., transferred to a special bank account, scheduled continuation, or forfeited)
d. Any surplus arising and its utilization
5. Other disclosures
a. Manner of execution: direct implementation vs via implementing agency / NGO / Trust
b. Whether CSR activities were integrated with business (if applicable)
c. Linking with Sustainable Development Goals (SDGs) or national priorities
d. Any detailed annexures, e.g., for impact assessments, pictures, site visits, etc.
6. Declaration & certifications
a. Declaration by directors / CSR Committee
b. Auditor’s certification (if required)
c. Attachments or documents as per the rules
Filing Procedure, Deadlines & Transitional Issues
Sequence & deadlines
The filing of CSR-2 must follow after the filing of AOC-4 / AOC-4 XBRL / AOC-4 NBFC (Ind AS) — that is, you first submit the audited financial statements and then file CSR-2.
In many years, the deadline for CSR-2 has been synchronized with or shortly after the annual filing window, but some amendments have introduced differing timelines. For example:
- For FY 2023-24, the MCA extended the CSR-2 deadline to 30 June 2025.
- Because the MCA portal V2 is being deprecated (from 18 June 2025), stakeholders needing to file using older SRNs have to use a special window on V3 between 14 July and 15 August 2025.
- In earlier years, the deadline was 31 March (for many companies) or 30 June, but Rule amendments and notifications have tightened or extended the window for specific years.
Given these changes and transitions, companies must track MCA notifications closely.
Transitional arrangements & system migration
Because the MCA is moving from portal MCA21 V2 to V3, there are transitional complications. As per the General Circular No. 02/2025:
- V2 portal will be decommissioned on 18 June 2025.
- Companies that filed AOC-4 via V2 and have SRNs from V2 can use those SRNs to file CSR-2 in V3 during a specified window (14 July to 15 August 2025).
- This is a temporary window; after that, new CSR-2 filings will have to be via V3 entirely, and SRNs must come from V3.
Challenges, Risks & Practical Issues
Implementing and reporting CSR via CSR-2 poses several challenges. Below are key pitfalls and risk areas:
Data collection & coordination
- CSR projects are often implemented across multiple states, districts, and via multiple implementing agencies (NGOs, trusts). Collating standardized, reliable data (financial spends, project progress, delays, impact metrics) across all projects is non-trivial.
- Discrepancies may arise among NGO reports, internal project teams, and audit findings.
- In some cases, the CSR team may not have direct oversight over on-ground execution; hence, misalignment, delays, or fund mis-utilization can occur.
Alignment of disclosures and financial statements
- Because many disclosures overlap (in directors’ reports, statutory disclosures, notes to accounts, and CSR-2), inconsistencies may creep in unless reconciled carefully.
- Regulators may flag mismatches (e.g., declared CSR spend vs. actual project spend) or missing project-level details.
Unspent CSR & carry-forward
- If a company cannot deploy the full CSR amount in a year (due to project delays, land acquisition issues, regulatory hurdles, etc.), it must declare and manage the unspent portion.
- The rules prescribe handling of unspent CSR: the funds may need to be deposited in a special bank account, project timelines may be adjusted, or the funds might be reallocated, subject to board / CSR committee approval.
- Failure to manage or disclose unspent CSR funds properly invites scrutiny and penalties.
Compliance risk & penalties
- Non-filing of CSR-2 or late filing can attract penalties under the Companies Act.
- Directors and CSR Committee members may be held liable for non-compliance.
- Given the more rigorous reporting framework, companies face reputational risk if CSR reporting is seen as window dressing rather than substantive action.
Systemic/technical constraints
- Portal downtime, software glitches, and migration issues (from V2 to V3) can delay filing.
- Lack of training or institutional knowledge may lead to incorrect entries, formatting errors, or rejected filings.
Impact assessment & audit
- One of the newer expectations is that companies should conduct impact assessments for CSR projects (especially large ones) and disclose key findings. Credible assessments require third-party evaluators, baseline/follow-up data, etc.
- Auditors may be asked to verify CSR-2 disclosures or reconcile project-level data, which may increase audit burden.
Balancing compliance vs meaningful CSR
- There is a risk that companies focus more on compliance box-ticking than truly impactful CSR. Filling CSR-2 with numbers, data, and projects without real community benefits undermines the goal of social responsibility.
- Meaningful CSR requires strategic alignment with core business capabilities, stakeholder engagement, sustainability, evaluation, and scalability—not merely incremental projects undertaken for the sake of spending 2%.
Best Practices
To navigate these challenges and turn CSR-2 into a tool for better CSR governance, companies should adopt certain practices:
Early planning & calendar alignment
- Begin CSR planning long before the fiscal year-end, setting project pipelines, budgets, timelines, and implementing agency tie-ups.
- Maintain an internal CSR calendar aligning with audit, board meetings, financial statement timelines, and CSR-2 filing deadlines.
Centralized data & MIS systems
- Use a CSR management information system (MIS) or an integrated module in ERP to track project finances, progress, milestones, site visits, delays, risk logs, and impact metrics.
- Create standard templates (project-level), dashboards, and data validation checks to ensure consistency.
Clear roles, responsibilities & governance
- Define the roles of the CSR Committee, CSR team, implementation agencies, field teams, auditors, and board oversight.
- Institute periodic reviews/audits of project progress, fund utilization, delays, and remedial steps.
Strong NGO / partner selection & due diligence
- Vet implementing NGOs and agencies carefully for governance standards, prior track record, auditing capacity, compliance, domain expertise, and experience in impact evaluation.
- Require regular reporting, site visits, and third-party evaluation (especially for large projects).
- Have clear contracts / MoUs delineating deliverables, milestones, disbursement schedules, and consequences for underperformance.
Continuous monitoring, mid-course correction & documentation
- Do site visits, mid-term reviews, beneficiary feedback, and status reports. If delays or hurdles occur, document reasons, action plans, and revised timelines.
- Keep photographic evidence, beneficiary records, impact narratives, and third-party validation data.
Integrate CSR with business vision & sustainability
- Instead of scattershot projects, aim for CSR aligned with the core competency of the company (shared value approach).
- Choose projects with sustainability, scalable models, replication potential, local community ownership, and long-term impact.
Transparent communication & stakeholder feedback
- Disclose CSR policy, projects, results, and challenges openly on the corporate website, annual report, and social media.
- Solicit stakeholder/community feedback, grievance redressal, and public reporting.
Review & audit readiness
- Before the final submission of CSR-2, conduct an internal reconciliation to ensure that figures in CSR-2 match the audited accounts, maintain consistency across all disclosures, and validate project-level data.
- Engage auditors / third-party reviewers to check completeness, compliance, and internal controls.
- Have backup documentation ready (contracts, receipts, invoices, site reports, certifications) in case of regulatory review.
Training & capacity building
- Train CSR teams, finance teams, legal teams, auditors, and board members on CSR-2 requirements, changes in rules, impact evaluation, and compliance risks.
- Stay updated with MCA notifications, portal changes (V2 → V3), amendments, and regulatory precedents.
Benefits & Strategic Value of CSR-2 (beyond compliance)
While CSR-2 is a regulatory mandate, it also offers opportunities for better CSR governance and value creation:
- Data-driven insights: Aggregated, comparable CSR data across companies can enable benchmarking, sectoral analysis, policy formulation, and learning.
- Accountability & transparency: With structured disclosures, companies are accountable not only to regulators but also to stakeholders (investors, NGOs, communities).
- Reputational advantage: High-quality, impactful CSR with credible disclosures can enhance brand reputation, stakeholder trust, and license to operate.
- Risk mitigation: Better oversight reduces the risk of fund misuse, project delays, non-delivery, and legal penalties.
- Learning and improvement: Project-level data, impact assessments, and iterative reviews help refine CSR strategies over time for better outcomes.
- Policy alignment & public good: Reliable CSR data helps government, NGOs, and think tanks understand societal gaps, promote public–private collaborations, and design better social initiatives.
Illustration
To bring things to life, here’s a simplified hypothetical scenario for a company, Alpha Ltd:
- Financials: For FY 2023-24, Alpha Ltd has an average net profit of ₹50 crore over the prior three years. Thus, CSR spend = 2% = ₹1 crore.
- CSR Committee: Composed of 3 directors and meets quarterly to approve CSR projects.
- Project pipeline (three projects):
1. Project A – Rural Water Supply (Ongoing)
Location: Village X, State Y
Duration: 3 years (start: FY 2022-23, end: FY 2024-25)
Approved allocation: ₹40 lakh
Spent in FY 2023-24: ₹15 lakh
Unspent (₹25 lakh) carried forward with reasons: delay in procurement, awaiting government permits
Impact assessment: baseline survey done, midline evaluation planned
2. Project B – Digital Literacy (New project)
Location: District Z
Duration: 2 years (FY 2023-24 to 2024-25)
Approved allocation: ₹30 lakh
Spent: ₹12 lakh
Unspent: ₹18 lakh
Implementation via NGO ABC; quarterly site visits and progress reports required
3. Project C – Health Camps (Multiple districts)
Location: Mixed states
Duration: 1 year (FY 2023-24)
Approved allocation: ₹30 lakh
Spent: ₹25 lakh
Unspent: ₹5 lakh (reallocated to Project B, board approval documented)
a. Unspent & surplus handling: The ₹43 lakh unspent (₹25 + ₹18) has been deposited in a designated CSR bank account; ₹5 lakh was re-appropriated after CSR committee approval and board resolution.
b. Auditor & certification: The CSR-2 is audited, and the auditor certifies that the figures match books and project-level records.
c. Disclosure & website link: CSR policy, project summaries, progress photos, and links are published on the company website.
d. Impact narrative: The company includes beneficiary testimonials, water output data, health camp reach, digital literacy class attendance, and projected social return estimates.
Recent Developments & Trends
- MCA has extended due dates for CSR-2 for specific years to accommodate systemic changes. For FY 2023-24, the due date was extended to 30 June 2025.
- The separation of CSR-2 from AOC-4 was formalized through the 2025 amendments.
- The transitional arrangements concerning MCA portal migration (V2 → V3) have been formalized, and stakeholders must use the prescribed windows to ensure continuity.
- Increasing regulatory emphasis on impact assessment, qualitative disclosures, and third-party evaluation is pushing CSR beyond just financial numbers.
- Many corporations are moving from scattergun CSR to strategic CSR aligned with ESG, SDGs, and business value—thus making CSR-2 disclosures more meaningful to investors and stakeholders.
Conclusion
Form CSR-2 represents a critical inflection point in India’s CSR regime. What began as voluntary social outreach has matured into a regulated, structured, and transparent reporting framework. While CSR-2 adds compliance burden, it also presents companies with a powerful tool for accountability, learning, stakeholder engagement, and social impact.
To derive real value from CSR-2, companies must go beyond just filling the form. The best ones will see CSR-2 as an opportunity to refine their CSR strategy, strengthen oversight, deepen community partnerships, and honestly measure outcomes.
For CSR officers, board members, legal and finance teams, staying abreast with MCA notifications, portal migrations, rule amendments, and evolving disclosure expectations is imperative. Equally important is embedding systems, capacity, and governance mechanisms that enable robust project execution, data integrity, risk mitigation, and impact assessment.
For any clarifications or queries, please feel free to reach out to us at admin@fintracadvisors.com
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