Short Fall in CSR Spent, Excess in CSR Spent

• Short Fall in CSR Spent:

A shortfall in CSR spent occurs when a company fails to meet the minimum mandatory expenditure requirement on Corporate Social Responsibility under Section 135 of the Companies Act, 2013. Companies with a net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more must spend at least 2% of their average net profits (of the past three financial years) on CSR activities. If there is any unspent amount, especially related to ongoing projects, it must be transferred to a special “Unspent CSR Account” within 30 days from the end of the financial year. Failure to comply results in financial penalties and legal action as per the Companies (CSR Policy) Amendment Rules.

• Excess in CSR Spent:

Excess in CSR spent occurs when a company spends more than the prescribed 2% of its average net profits on Corporate Social Responsibility activities in a given financial year, as mandated by Section 135 of the Companies Act, 2013. According to the Companies (CSR Policy) Amendment Rules, 2021, such excess CSR expenditure can be carried forward and set off against the required CSR spending for up to three subsequent financial years, provided the excess amount is not related to surplus arising out of CSR activities. To utilize the excess in future years, the Board must pass a resolution approving the set-off. Proper disclosure of the excess amount and its future adjustment must be made in the Board’s Report and Annual CSR Report. This provision offers flexibility to companies in managing CSR obligations efficiently over multiple financial years.