CSR 1 vs CSR 2 – Difference, Requirement & Filing Process

Corporate Social Responsibility (CSR) is no longer just a voluntary practice in India; it is a statutory obligation for certain companies under the Companies Act, 2013. As businesses can grow and contribute to society, the Ministry of Corporate Affairs (MCA) has introduced structured mechanisms to ensure transparency and accountability in CSR activities. Among these mechanisms are the CSR 1 and CSR 2 forms. Understanding the differences between CSR 1 and CSR 2, their filing requirements and the processes involved is essential for compliance and effective CSR implementation.

What is CSR?

Corporate Social Responsibility (CSR) refers to the initiatives undertaken by the various companies to contribute to social, environmental and economic development. CSR activities can include education, healthcare, poverty alleviation, environmental sustainability and more.

The Companies Act, 2013, specifically Section 135, mandates CSR for companies meeting any of the following criteria:

• Net worth of ₹500 crore or more, or
• Turnover of ₹1000 crore or more, or
• Net profit of ₹5 crore or more during a financial year.

Companies meeting these thresholds must spend at least 2% of their average net profits of the last three financial years on CSR activities.

Introduction to CSR Forms: CSR 1 & CSR 2

To standardize reporting and improve monitoring of CSR activities, the MCA introduced CSR 1 and CSR 2 forms under the Companies (CSR Policy) Rules, 2014 (as amended). Both forms are filed with the Ministry of Corporate Affairs through the MCA portal.

1. CSR 1

CSR 1 is primarily the form used for CSR registration and prior approval of CSR projects and activities. This form is required to be filed before starting any CSR activity.

Key points about CSR 1:

• It is used by companies to submit details of CSR projects and programmes.
• Requires information about the company, CSR committee, CSR policy and proposed CSR expenditure.
• Must be filed before undertaking a CSR project.
• Applicable to companies planning new CSR initiatives or projects.

2. CSR 2

CSR 2 is the form used for reporting the CSR activities undertaken and funds spent in a financial year. In other words, CSR 2 is annual CSR compliance reporting.

Key points about CSR 2:

• Captures details of CSR activities already completed or ongoing.
• Includes information about CSR expenditure, project status and outcomes.
• Filed after the CSR activities have been undertaken, usually as part of annual reporting.
• Helps MCA track CSR compliance and ensures transparency in fund utilization.

CSR 1 vs CSR 2 – Key Differences

CSR Requirement – Who Should File?

The filing requirements for CSR 1 and CSR 2 depend on the company’s financial status and CSR spending obligations.

Eligibility for CSR Filing

A company is required to comply with CSR provisions if it meets any of these criteria in the immediately preceding financial year:

• Net worth ≥ ₹500 crore, or
• Turnover ≥ ₹1000 crore, or
• Net profit ≥ ₹5 crore.

CSR Expenditure Requirement

At least 2% of the average net profits of the last three financial years must be spent on CSR activities.

The CSR activities must fall under the Schedule VII of the Companies Act, which includes areas like education, health, environment, rural development and gender equality.

Filing Process for CSR 1

Filing CSR 1 involves submitting details of CSR projects before their implementation. Here’s a step-by-step process:

1. Log in to MCA Portal: Use the company’s credentials for the purpose of log in to the MCA portal.
2. Download the CSR 1 Form: Available under the ‘MCA Services’ → ‘Forms’ section.
3. Fill Company Details: Include CIN, registered office address and financial year.
4. Provide CSR Committee Details: Name of members, designation and CSR committee approval.
5. Enter CSR Projects Details: Project name, sector, geographical area, budget allocation, implementation schedule and implementing agency.
6. Attach CSR Policy: Upload the company’s CSR policy as approved by the Board.
7. Certification: Ensure certification by the company secretary or authorized signatory.
8. Submit Form: Upload and submit the form on the MCA portal.
9. Acknowledgment: Once submitted successfully, download the acknowledgment for records.

Note: CSR 1 must be approved by the Board before submission.

Filing Process for CSR 2

CSR 2 is filed after the completion of CSR activities. The process is as follows:

1. Log in to MCA Portal: Access the portal with company credentials.
2. Download CSR 2 Form: Found under ‘Annual Filing Forms’ or ‘CSR Forms’.
3. Enter Company and Financial Year Details: Provide CIN, name and relevant financial year.
4. Report CSR Activities: Mention project name, sector, budgeted amount, actual expenditure, project status and outcomes achieved.
5. Attach Financial Statements: Include CSR-related financial documents for verification.
6. Certification: Certified by the company secretary or authorized signatory.
7. Submit Form: Upload and submit the form online.
8. Acknowledgment: Download the acknowledgment for company records.

Key Tip: - CSR 2 must indicate the actual expenditure which is incurred and be consistent with the annual financial statements.

Importance of CSR Compliance

• Legal Compliance: Non-compliance attracts penalties under Section 134 and 135 of the Companies Act.
• Transparency: Filing CSR forms ensures the element of transparency in CSR fund utilization.
• Reputation: Timely compliance boosts company reputation and trust among stakeholders.
• Social Impact: Proper planning and reporting help in measuring social impact effectively.

Common Mistakes to Avoid

• Filing CSR 2 without completing the CSR activities.
• Inaccurate reporting of CSR expenditure.
• Delays in filing forms leading to penalties.
• Submitting CSR 1 without Board approval.
• Not maintaining proper documentation and financial records of CSR projects.

Conclusion

CSR 1 and CSR 2 forms play a vital role in ensuring that companies in India comply with the legal requirements for Corporate Social Responsibility. While CSR 1 is focused on project registration and prior approval, CSR 2 is aimed at reporting and accountability for CSR activities undertaken.

Understanding the differences, eligibility criteria and filing process is important for businesses to avoid penalties and contribute effectively to social development. Companies that adopt a structured approach to CSR not are only comply with the law but also boost their reputation and create a meaningful and productive social impact. If you are seeking for professional help then must contact to CRSPL Business Consultants, they will guide you with their experience.

By maintaining proper documentation, following the filing process carefully and aligning CSR projects with Schedule VII activities, companies can ensure smooth CSR compliance and maximize their positive contribution to society.