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An Overview of Filing of Form CSR-1 for NGOs


As you all know, all the NGOs which wish to receive CSR funds from the corporates need to get themselves registered with MCA (Ministry of Corporate Affairs) with Form CSR-1. On successful registration, MCA will allot a unique CSR Registration Number. We will first take up the topic to understand the nexus between the NGOs and MCA, and then, will discuss various parts and components of the Form CSR-1 and at last on how to file Form CSR-1 with MCA and discuss the issues that are arising while filing the Form CSR-1.

Before we discuss Form CSR-1, let us first focus on the background of Form CSR-1. In other words, to say, why Form CSR-1, what is Form CSR-1, what is the rationale of getting registered an organization which is otherwise not regulated by the MCA in any manner, etc.

It is first better to discuss the rationale of an NGO’s registration with MCA when MCA is not its regulator of the NGOs. One can understand the rationale of registration with the income tax authority since such registration provides the exemption from the income of the NGO which is otherwise taxable. 

Almost 90% or maybe more than that, of the NGOs are either in the form of a Trust or in the form of a Society registered under the Societies Registration Act.

A company or a body corporate, on the other hand, is incorporated under the Companies Act and that Act is regulated by the MCA. Hence, MCA is a regulator of a company and not of a society or a trust.

Therefore there is no nexus between the MCA and the NGOs, so, one may wonder why there is a new regulation from the MCA over the NGOs now.

In this context, it is pertinent to note that actually MCA is not regulating NGOs but regulating the companies only, i.e. those companies which are spending their CSR expenditure through intermediaries or NGOs. 

The basic requirement is only to get the CSR registration with MCA. There are no further compliances like filing of any return or report or any provisions related to the audit of the books by the NGOs. Further, there is no impact on the governing body or management of the NGOs due to this registration. With CSR registration through Form CSR-1, no NGO will be converted into a company. An NGO will remain in its present form or structure.

The Form CSR-1 originated from recently announced CSR Amendment Rules, 2021 which was notified on 22nd January 2021.

So it is pertinent to discuss some of the provisions of New CSR Rules 2021 which have an impact on the functioning of the NGOs.

The thrust of the new Rules is that the new rules have expanded or enlarged the scope of reporting requirements of the companies. For this, companies are required to obtain more information from the implementing agencies or the NGOs.

Many reports, certificates etc. are already being given by the NGOs to its donor companies in some cases. Presently, these are done voluntarily but henceforth it will become statutory obligations of the companies spending CSR amount through NGOs.

Let us discuss these provisions from the CSR Amendment rules, 2021-

Regulation 4 of the CSR Amendment Rules, 2021

The first sub-rule states that the Board of the Company shall ensure that the CSR activities of the company are undertaken either by itself or through-

(i) a section 8 company,

(it's a non profit-making company or a company which is incorporated not for profit purpose

(ii) registered public trust

(iii) registered public society

And all of them must be registered under section 12A of the Income Tax Act as well as approved under section 80G of the Income Tax Act.

Most of the NGOs are in the form of society which is registered under the Societies Registration Act. Henceforth alone, a registered society is not sufficient to get the CSR funds. It must be registered under the Income-tax too. And remember, it must be registered under section 12A and not under section 10(23C). If any registered society is registered under Income-tax Act but under section 10(23C), it will not be eligible for CSR registration with MCA. Such institutions shall not file Form CSR-1.

Earlier, an NGO, whether income-tax registered or unregistered, was eligible for CSR funding. However, from 1-4-21, unregistered NGOs will not be eligible for obtaining funds from the corporates under CSR activities of the companies. Hence, they are required to register themselves with income-tax authority at the earliest.

It is to be noted that the MCA issued the draft CSR amendment Rules in 2020 when only a section 8 company was eligible for CSR activities. Registered Trusts or Societies were outside the purview then. But when the final Rules were released in January 2021, apart from section 8 companies, trust and societies were also included in the list but with the rider that it must be a registered society or a registered public trust both under their respective laws and Income-tax Act.

The intention of registration under the Income-tax Act is that the charitable activities of the NGOs cannot be questioned. Since there are rigorous provisions in the Income-tax Act for governing the charitable objectives of the NGOs, one can assure that the NGO is actually engaged in charitable activities. It is to be noted that if the charitable objectives are violated at any stage, their income-tax registration will be cancelled.

In this context, it is important to note that from 1-4-21, the registration procedure of NGOs under the Income-tax Act has been changed and a new registration procedure is introduced under section 12AB. Further, earlier, the registration once granted under the Income-tax Act was permanent and perpetual in nature, however, the new registration that will be granted under the new registration regime will be valid for 5 years only and needs to be renewed after every 5 years like the FCRA registration. The purpose of the renewal of registration is to enquire about the charitable activities of the NGOs. The migration to the new registration window will close on 30th June 2021. Further, those NGOs which are in existence for years but are not registered with Income-tax authorities are required to apply for provisional registration under the new registration scheme. They will be granted provisional registration and then thereafter a regular registration.

That is why MCA is comfortable in allowing income-tax registered societies/trusts for CSR funding. It gives a sense of comfort to anyone that the CSR fund is actually being used in charitable activities.

Now, sub-rule (2) of Rule 4 states that every NGO which intends to undertake any CSR activity shall register itself with the Central Government by filing Form CSR-1 electronically with effect from 1-4-2021.

Therefore under this rule, an NGO needs to file CSR-1. The filing is completely online, no manual interface is required with any government department or official. Once the file is uploaded, the CSR registration number will come by email within an hour. CSR Registration Number will be generated by the system automatically. Form CSR-1 shall be signed by the entity and shall be verified digitally by a Chartered Accountant in practice or a Company Secretary in practice or a Cost Accountant in practice. The CA or CS may be from any part of the country since the filing of the form is completely online without any manual interface with any government department.

Now coming to sub-rule (5) of rule 4.

This sub-rule says-

The Board of a company shall satisfy itself that the funds so disbursed have been utilised for the purposes and in the manner as approved  by  it and the Chief Financial Officer or the person  responsible for financial management shall certify to the effect.

Prior to the introduction of CSR Amendment Rules, 2021 there was no such requirement of reporting or certifying the utilization of disbursed amounts. This requires greater degree of control over the spending by the NGOs which will now be exercised by the companies.

The CFO of the company has to issue a certificate regarding the utilization of the CSR amount granted to the NGO. Not only utilization, but the certificate to be issued shall also specify that the amount is utilized in the approved manner. So there is more degree of control over the use of the fund. Though practically, presently this practice is followed by many companies, but still skipped by some companies. Since it is now codified in the law, the issue of a certificate by the CFO is now a statutory obligation.

In this context, one should note that it is not possible for the CFO of the company to come and visit each and every NGO to check that the funds have been actually used in the approved manner. So, the question arises how the CFO of the company shall satisfy himself that the funds so disbursed is actually used by the NGO on the CSR activities as directed by the company.

This necessitates the donor company to appoint an auditor and audit the accounts of the NGOs which will enable the CFO of the Company to issue the required certificate to the Board. Presently, many NGOs are required to submit Utilization Certificates or UCs to the donor companies. In most cases, it is audited. This voluntary practice of issuing UCs is now incorporated into the law.

In this context, the ICAI has issued an advisory for issuing UCs. It says wherever the company undertakes the CSR activity through a third party/NGO, it is advised that all such companies should obtain an Independent Practitioner’s Report on Utilisation of such CSR Funds from the auditor/CA in practice of the third party/NGO, to whom the funds are given by the Company for implementing CSR activity.

It is most likely that the company may appoint a third party CA and not the statutory auditor of the NGO to issue the UCs. Presently, third party CAs are auditing the UCs.

Another new aspect that the New rules have introduced is the capping of administrative expenditure out of CSR expenditure.

Rule 7 has capped the administrative overheads to 5% of the total CSR expenditure by the company. Thus, the administrative overheads of a company’s CSR expenditure cannot exceed 5%. This has been capped to ensure that the CSR expenditure is actually incurred for the welfare of society.

The definition of ‘administrative overheads’  is redefined [as per Rule 2(b)] to mean the expenses incurred by the company for ‘general management and administration’ of Corporate Social Responsibility functions in the company but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or programme.

The Board has to ensure that the administrative overheads of CSR activity shall not exceed 5 percent of total CSR expenditure of the company for the financial year.

Practically, most of the companies provide ‘Budget’ or line-items and the expenditure is limited within the budget heads. Now the Budget will cap the administrative expenditure at 5%. It may impact the functioning of some of the NGOs.

Further, henceforth, any capital assets acquired or created out of CSR funds cannot be held by the company. It shall be held in the name of beneficiaries or a public authority or registered trust, registered society or section 8 company. Hence, companies shall have no right over the capital assets so acquired out of CSR funds. In other words, companies cannot hold capital assets created by the CSR funds. [Rule 7(4)]

Impact Assessment: Every company having an average CSR obligation of Rs. 10 crore or more in the three immediately preceding financial years, will have to undertake an impact assessment study of its projects, through an independent agency. However, this is mandatory only for such projects having outlays of Rs. 1 crore or more and which have completed at least one year before such impact study.

What is impact assessment is not defined but it seems it is the benefit that has accrued to the society or gained by the community as a result of CSR expenditure. In this case, NGOs have to prepare various types of project reports to assist the company in assessing the impact.

New CSR rules have increased the disclosure requirements for companies. Every company has to mandatorily disclose its composition of CSR Committee, CSR Policy and Projects approved by the Board on its website for public access.

Now we are about to begin the discussion on Form CSR-1

As stated above, every NGO which intends to undertake any CSR activity shall register itself with the Central Government by filing the form CSR-1 electronically, with effect from the 1st day of April 2021.

Form CSR-1 shall be signed and submitted electronically by the entity and shall be verified digitally by a Chartered Accountant in practice or a Company Secretary in practice or a Cost Accountant in practice.

On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number shall be generated by the system automatically.

Documents required for CSR-1 Registration

The only documents required to be uploaded is a Copy of the registration certificate and a Copy of the PAN of the NGO with Form CSR-1.

We will discuss the rest while screening the Form CSR-1 PDF file.

Why to file CSR-1

As stated above one has to file Form CSR-1 to get itself registered with MCA for obtaining the CSR Registration Number. In case any NGO does not obtain the CSR registration number, any CSR expenditure of a company will be counted as spent towards CSR activities. Hence it is mandatory to get the registration from the MCA for receiving the CSR funds from the companies. It is a one time exercise.

How to Download Form CSR-1 from MCA website

One needs to download Form CSR-1 from the MCA website in the following described manner-

1. Visit MCA portal

2. Click on Forms & Downloads on the top of the webpage. See Pic-1.

3. Scroll down the page till the topic ‘Incorporation services’ is reached. Else, press Ctrl+F on the web page and write ‘CSR’ and hit the ‘Enter’ key. You will be taken to the desired location. See Pic-2.

4. Download the e-Form with or without Instruction. This will be downloaded in zip file format. Unzip it and extract the relevant pdf files.

Open the pdf file named ‘Form_CSR-1’. This is Form CSR-1 for registration of entities for undertaking CSR activities.

The e-Form CSR-1 is a fillable pdf form.

How to upload CSR-1

Form CSR-1 will be uploaded electronically with the DSC/digital signature of the Chief Functionary, say, Secretary, President of the NGO as well the DSC of a Practising Chartered Account or a Company Secretary. The form will be uploaded by the CA/CS from his own user account after logging in the MCA portal.

Immediately after successfully uploading the Form, the CSR registration number will be served in the email account provided in the form.

There are no charges for filing Form CSR-1. No fees are required to be paid to MCA for uploading this Form.

Time Limit to File Form CSR-1

There is no time limit by which Form CSR-1 needs to be filed by the NGO for obtaining the registration with the MCA. However, it is desired that existing NGOs which are receiving CSR funds shall get themselves registered ast earliest to avoid any interruption and smooth functioning.

Recommended Readings

Impact of New Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 on Trusts/NGOs

Understanding CSR Expenditure and Deductions under Income Tax

Form CSR-1 on MCA Website is Available for CSR Registration by NGOs

An Overview of Filing of Form CSR-1 for NGOs

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