A Comprehensive Guide to CSR Reporting in India:Forms, Importance, and Penalties

1. A Comprehensive Guide to CSR Reporting in India: Forms, Importance, and Penalties +91 8506860903 contact@thinkcapadvisors.com www.thinkcapadvisors.com

2. Corporate Social Responsibility (CSR) reporting has become an integral part of business operations in India. Under the Companies Act, 2013, businesses are mandated to invest in socially beneficial initiatives, but it is not just about executing projects—companies must also report their CSR activities to ensure compliance, transparency, and accountability.

3. Key Components of CSR Reporting in India CSR reporting in India primarily revolves around providing disclosure of a company’s CSR policy, projects and, financial outlays. Below are the main components of CSR reporting: 1. CSR Policy Disclosure Every company that falls under the CSR mandate must have a well-drafted CSR policy. This policy outlines the company’s philosophy on CSR, areas of focus (education, health, environment, etc.), and governance structure for implementing these activities. The policy must be publicly disclosed, as part of the annual report and on the company’s website.

4. Key Components of CSR Reporting in India 2. Annual CSR Report The Companies Act mandates that companies include a detailed annexure on CSR activities in their annual report. This report should cover: Details of company’s CSR policy and committee. Details of the CSR projects undertaken including geographical areas, partners involved etc. CSR expenditure actual spend, unspent amount and carry forward details. An analysis of the impact of CSR activities on the beneficiaries (jn case mandatory impact assessment is applicable). Explanation of failure to spend the mandated 2%

5. Key Components of CSR Reporting in India 3. CSR-2 Form Introduced by the Ministry of Corporate Affairs (MCA) in 2022, Form CSR-2 is an essential addition to CSR reporting. Companies must file this form as a separate document, providing a detailed account of CSR activities. CSR-2 ensures that accurate, standardized data on CSR initiatives is available for regulatory authorities to review. Key sections of CSR-2 include: CSR committee details. Project wise details of CSR activities including mode of implementation financial reporting of CSR expenses.

6. Key Components of CSR Reporting in India 4. Impact Assessment Companies with average CSR spending of ₹10 crore or more in the previous three financial years must conduct a mandatory impact assessment of their CSR projects having outlays of one crore rupees or more, and which have been completed not less than one year. These assessments help demonstrate the tangible benefits of CSR activities and must be included in the CSR report. Such assessments offer stakeholders a clear view of the real-world impact created by the company’s initiatives.

7. Why CSR Reporting is Crucial 1. Regulatory Compliance CSR reporting is a legal requirement under Section 135 of the Companies Act, 2013. Companies must disclose their CSR spending and activities to remain compliant. Non-compliance can lead to legal penalties, tarnishing the company’s reputation and financial standing. 2. Transparency and Accountability CSR reporting ensures transparency in how businesses use their resources for social development. It holds companies accountable to the public, shareholders, and regulators. This level of transparency also builds trust among stakeholders, enhancing a company’s social reputation.

8. Why CSR Reporting is Crucial 3. Corporate Governance and Ethical Practices Reporting on CSR activities demonstrates the company’s commitment to ethical business practices and good corporate governance. This contributes to building a responsible corporate image, attracting investors and customers who prefer to engage with socially responsible businesses. 4. Stakeholder Engagement CSR reports offer companies a platform to engage with stakeholders, including investors, employees, communities, and customers. By providing detailed accounts of social initiatives, companies can foster goodwill and highlight their contributions to society.

10. Penalties for Delayed or Incorrect CSR Reporting Non-compliance with CSR reporting can have serious consequences. Here are the key penalties for failing to meet CSR reporting standards: 1. Monetary Penalties - Under the Companies Act, companies that fail to meet CSR compliance requirements, including reporting, can face fines ranging from 3lakhs to twice the unspent amount. Additionally, company officers responsible for the default will also be fined. 2. Reputation Damage - Delayed or incorrect CSR reporting can severely damage a company’s public image. In today’s environment, where consumers and investors value transparency and corporate responsibility, poor CSR reporting can undermine a company’s brand value and stakeholder trust.

11. How a CSR Consulting Firm Assist In CSR Reporting A CSR consulting firm can assist companies in streamlining their CSR reporting process by providing expert guidance tailored to compliance requirements. These firms can help set up processes and structural formats to track CSR activities, financial outlays, project outcomes, and impact assessments, ensuring that all relevant data is organized and easily accessible. CSR consulting firms can assist in preparing mandatory filings like CSR-2, ensuring that the reporting is accurate, timely, and in line with regulatory standards. Part of CSR consulting services, they design workflows & templates that enable companies to efficiently gather data from various departments and implementing partners. By offering strategic advice and automated solutions, CSR consulting firms not only simplify the reporting process but also enhance transparency, improve accountability, and help companies avoid penalties for non-compliance.

12. Conclusion Accurate and timely CSR reporting in India is not just a regulatory requirement but a vital element of a company’s broader commitment to social responsibility. Besides avoiding penalties, responsible CSR reporting enhances a company’s reputation, builds stakeholder trust, and demonstrates an authentic commitment to creating positive social change. For businesses operating in India, a robust CSR reporting framework is not just good governance—it’s a strategic asset.

13. Contact Us +91 8506860903 contact@thinkcapadvisors.com www.thinkcapadvisors.com