ICAI Issues Revised July 2025 CSR Accounting Guide

The Institute of Chartered Accountants of India (ICAI), through its Corporate Laws and Corporate Governance Committee, has released the Revised July 2025 Edition of the Technical Guide on Accounting for Expenditure on Corporate Social Responsibility (CSR) Activities. This third edition builds upon the earlier publications from June 2020 and January 2025 and comes at a time when CSR has transformed from being a mere compliance requirement into a strategic pillar of responsible business conduct. With growing emphasis on outcome-oriented projects such as the Prime Minister’s Internship Scheme, vocational training, skilling, and tech-driven community development, companies today need robust accounting frameworks to ensure transparent reporting and faithful representation of their CSR engagements. The revised technical guide is ICAI’s initiative to provide enhanced clarity and consistency in accounting for CSR expenditure, taking into account the evolving legal requirements, practical challenges, and stakeholder expectations.

This comprehensive guide provides detailed guidance on recognition, measurement, presentation, and disclosure of CSR expenditure as per the requirements of Section 135 of the Companies Act, 2013 and Schedule III. It delves into various practical scenarios such as CSR spending in cash and kind, creation of provisions for unspent amounts (for both ongoing and other than ongoing projects), accounting treatment of excess amounts spent, and the recognition of surplus generated through CSR activities. The guide also emphasises the correct treatment of income earned from CSR projects, such as interest or proceeds from the sale of materials, and mandates that such surpluses be ploughed back into CSR efforts instead of being recognised as business profits. With detailed illustrations and journal entries, the guide ensures that companies maintain accurate records and comply with all statutory obligations.

Furthermore, the guide incorporates essential aspects related to CSR expenditure made through implementing agencies, such as registered trusts, societies, or Section 8 companies. It clarifies when such amounts should be treated as advances versus actual CSR expenditure and lays down principles for determining whether the company has any further obligations. It also addresses the implications of capital asset creation from CSR funds, reaffirming that assets created must not be recorded in the company’s books but instead transferred to eligible entities or public authorities under Rule 7(4) of the CSR Rules. This is particularly relevant for entities that directly implement projects involving construction or infrastructure development, as the guide provides accounting clarity around derecognition of such assets.

In terms of disclosures, the guide provides detailed formats for reporting in the financial statements, including movement schedules for unspent and excess CSR amounts under Section 135(5) and 135(6). It recommends presenting CSR expenditure as a separate line item in the Statement of Profit and Loss along with granular disclosures in the notes regarding the nature of activities, related party transactions, reasons for shortfall (if any), and movements in CSR-related provisions. Additionally, it also offers guidance on tax treatment, stating that while CSR expenditure is not allowable as a deduction under Section 37(1) of the Income Tax Act, it may still be permissible under specific sections, such as Sections 30 to 36, if the nature of the expense so qualifies.

Overall, this revised Technical Guide serves as a vital reference tool for chartered accountants, auditors, company management, CSR teams, and implementing partners. It not only addresses compliance requirements but also supports ethical and accountable CSR practices that align with national developmental goals. ICAI’s continued focus on issuing such timely and practical guidance underscores its commitment to strengthening corporate governance and enabling professionals to serve as trusted advisors in India’s corporate ecosystem.

Click here to read the complete Technical Guide

Click Here To Read The Full Story