CSR Compliance for NRI Promoter-Controlled Indian Companies under the Companies Act, 2013

Professional Knowledge Series | CSR │ FEMA │ International Tax

In Brief

An Indian company remains an Indian company and its CSR obligation remains a domestic one, regardless of whether its promoters and directors are Non-Resident Indians based in the UAE or Singapore. The genuine complexity for such companies lies not in the CSR obligation itself, but in the governance mechanics of running a CSR Committee across time zones, and in a small number of specific points where CSR-adjacent capital allocation intersects with FCRA and DTAA considerations.

I. Executive Summary

An increasing number of Indian companies are promoted and managed by Non-Resident Indians based in the UAE and Singapore. These promoters usually visit India occasionally and run the company from overseas. If the company meets the criteria in Section 135(1) of the Companies Act, 2013, it must follow the same CSR rules as any other Indian company. This includes calculating net worth, turnover, and net profit as usual, and spending 2% of the average net profit on Schedule VII activities in India.

This article looks at a related issue: not whether CSR rules apply, but how a company controlled by NRI promoters should manage governance and capital planning under these rules. There are three main points. First, how to form the Board and CSR Committee when some directors are outside India. Second, how to approve the CSR policy and annual spending across different time zones. Third, when fund movements for CSR involve FCRA and the India-UAE or India-Singapore DTAAs, and when they do not.

Before discussing these topics, note that an Indian company's own CSR spending is not a cross-border transaction and does not get DTAA relief. This spending is domestic because the company is an Indian tax resident, regardless of where its promoters live. The real cross-border issues come up when an NRI promoter's personal contributions or overseas entities interact with FCRA, or when dividend repatriation planning under the DTAA affects the company's overall capital allocation, including CSR funds.

II. Legal and Regulatory Background

Section 135(1) of the Companies Act, 2013 applies CSR obligations to "every company" meeting the prescribed thresholds, without reference to the residency of its promoters, directors or shareholders. From that general rule, an Indian company remains an Indian company for this purpose regardless of whether its controlling shareholders are Non-Resident Indians, a materially different position from that of a foreign company under Section 2(42) operating through an Indian branch or project office, which is subject to a distinct applicability and computation regime of its own.

Against that statutory baseline, two further, separate strands of company law bear directly on NRI-promoter-controlled companies. Section 149(3) requires every company without exception to have at least one director who has stayed in India for a total of not less than 182 days during the financial year, a requirement that applies irrespective of that director's citizenship or NRI status. Separately, Section 173(2), read with the Companies (Meetings of Board and its Powers) Rules, 2014, governs the conduct of Board and committee meetings through video conferencing or other audio-visual means, including which matters, if any, may not be dealt with in this manner.

From there, the cross-border side is distinct. The Foreign Contribution (Regulation) Act, 2010 (FCRA) governs the receipt of contributions from a 'foreign source' by persons in India, while the India-UAE and India-Singapore DTAAs govern the withholding tax treatment of dividends and other passive income flowing from an Indian company to its NRI promoters. Neither framework applies to the Indian company's own CSR spend as such, but both are relevant to the broader financial planning that surrounds an NRI-controlled company's capital allocation decisions.

III. Key Provisions — Professional Analysis

3.1 CSR Committee and Board Composition: Resident Versus NRI Directors

At the committee level, the analysis begins with the ordinary composition rules under Section 135(1) and Rule 5 of the Companies (CSR Policy) Rules, 2014. For an Indian company, which is distinct from a foreign company operating through a branch or project office, the CSR Committee must have three or more directors, including at least one independent director where the company is required to appoint one, or two or more directors where it is not (including for a private company with only two directors on its Board). There is no NRI-specific carve-out analogous to the two-person structure prescribed for foreign companies; an NRI-promoter-controlled Indian company's CSR Committee is constituted exactly as any other Indian company's would be.

The key residency rule is Section 149(3), which applies to the whole Board, not just the CSR Committee. Every company must have at least one director who has spent 182 days in India during the financial year. This can be difficult for companies controlled by NRI promoters because NRI status alone is not enough.

In practice, companies controlled by NRI promoters handle this in one of two ways:

• They either ensure at least one promoter or director spends enough time in India each year, tracking this with a travel register, or
• They appoint a dedicated India-resident director. This director does not need to own shares or hold an executive role, but primarily meets the Section 149(3) requirement and serves as a local contact. If a company chooses this option, it often makes sense to include this person on the CSR Committee since they are based in India and can easily work with agencies, sign filings, and handle urgent compliance matters.

3.2 Approving CSR Policy Across Time Zones: The Video-Conferencing Framework

Companies (Meetings of Board and its Powers) Rules, 2014 originally restricted certain matters, including approval of annual financial statements, the Board's report, and matters relating to amalgamation, merger, or acquisition, from being dealt with solely through video conferencing, requiring physical quorum for these items. This restricted list, set out in Rule 4, was permanently removed effective 15 June 2021 (Companies (Meetings of Board and its Powers) Amendment Rules, 2021, Notification No. G.S.R. 409(E)).

Even though the restriction is gone, scheduling meetings remains a challenge. India Standard Time is four and a half hours ahead of the UAE and two and a half hours behind Singapore. This creates a smaller window of overlapping business hours for all three locations compared to a Board based only in India.

A Board or CSR Committee with directors in India, the UAE, and Singapore has an overlapping meeting window of about 11:00 AM to 4:00 PM IST. It is practical to set this window in the company's annual meeting calendar from the start, instead of negotiating meeting times every time a CSR approval is needed.

3.3 CSR Expenditure and DTAA: What Is, and Is Not, in Scope

To be clear, an Indian company's own CSR spending does not involve any DTAA issues. A company incorporated in India is an Indian tax resident, no matter where its shareholders, promoters, or directors live or where it is managed. Its CSR spending comes from its own after-tax profits and is used for Schedule VII activities within India, either directly or through a CSR-1-registered Indian agency. This is a domestic transaction, so the DTAA does not apply.

The real cross-border questions are not about the CSR obligation itself but about related issues. These include how an NRI promoter's personal or company funds interact with Indian regulations and taxes when supporting India-focused philanthropy outside the company's required CSR spending, and how dividend repatriation planning affects the company's retained earnings and overall capital allocation, including CSR.

Within that wider framework, a further distinction arises. Where an NRI promoter wishes to contribute personally toward an Indian NGO or implementing agency — whether or not connected to the company's own CSR programme — the FCRA treatment turns on a distinction that is frequently overlooked.

When an NRI promoter personally contributes to an Indian NGO or implementing agency, whether or not linked to the company's CSR program, FCRA treatment depends on a key distinction. Contributions from an Indian citizen residing outside India, made from personal savings through normal banking channels, are not considered 'foreign contribution' under Section 2(1)(h) of FCRA, 2010, and do not require FCRA registration. This is confirmed by the Ministry of Home Affairs' FAQs on FCRA. Recipients should still obtain and retain passport details as proof of Indian citizenship.

3.3.2 Dividend Repatriation Planning and CSR Capital Allocation

Where NRI promoters draw returns from the Indian company primarily through dividends, the applicable DTAA caps the Indian withholding tax that would otherwise apply under the Income-tax Act, 2025. Under Article 10 of the India-UAE DTAA, India's withholding on dividends paid to a UAE-resident beneficial owner is capped at 10% of the gross dividend. Under the India-Singapore DTAA, the capped rate is 10% when the recipient is a company holding at least 25% of the shares in the Indian company, and 15% otherwise. In both cases, the promoter must hold a valid Tax Residency Certificate from the relevant jurisdiction and file the prescribed self-declaration in Form 41 under the Income-tax Act, 2025 (the successor to the earlier Form 10F) to access the treaty rate rather than the higher domestic withholding rate.

This is where CSR planning and dividend decisions overlap. When the Board decides how much profit to pay out as dividends versus how much to keep in the company, it affects the funds available for company operations, including any extra CSR spending above the required 2% or for multi-year CSR projects. The DTAA rate does not change the CSR obligation, which is set by Section 135(5) regardless of dividend policy. However, considering dividend policy and available capital together helps NRI promoters make better decisions, rather than treating them as separate issues.

3.4 Digital Signature and Practical Signing Logistics

CSR-related filings, such as Form CSR-1 certification, Form CSR-2, and Board resolutions filed with the Registrar, require a valid Class 3 Digital Signature Certificate (DSC) from the signing director. Companies with only or mostly NRI boards should plan extra time to issue and renew DSCs, as these steps often take longer for overseas applicants than for those in India. Missing or expired DSCs at filing deadlines can cause avoidable delays.

IV. Business Implications

4.1 For NRI Promoters and Boards

Making Section 149(3) residency tracking a regular compliance task, reviewed quarterly using a travel register, is important. It should not be assumed a director meets this requirement just because they have Indian citizenship. The most common gap in NRI-promoter-controlled companies is missing this step. Appointing a resident director to meet this rule is a simple, low-cost solution.

4.2 For CSR Committee Scheduling

Including a realistic cross-time-zone meeting window in the company's annual governance calendar at the start of the financial year helps avoid delays in CSR policy approval or signing off on annual CSR spending. It also helps meet later deadlines, such as filing Form CSR-2. Discussing the annual dividend distribution together with the CSR budget, though governed by different rules, gives the Board a better understanding of the company's available capital for the year. This is especially useful when considering multi-year CSR project commitments.

4.4 For Recipients of NRI Promoter Philanthropy

Indian NGOs and implementing agencies working with an NRI promoter's personal philanthropy, separate from the company's CSR spending, should check at the start whether the contribution will come from the promoter's personal account or from an overseas company. This will determine if FCRA registration is needed to receive the funds.

V. Key Takeaways

VI. Conclusion

For an NRI-promoter-controlled Indian company, the CSR obligation is straightforward. It follows the same Section 135 rules as any other Indian company, with the same 2% requirement. The real need for careful planning is in the company's governance: making sure the Board meets Section 149(3) without just assuming NRI status is enough, scheduling CSR Committee and Board approvals within a practical cross-time-zone window now that video-conferencing restrictions are gone, and clearly separating the company's own domestic CSR spending from FCRA and DTAA issues that only come up when the NRI promoter's personal or company funds cross borders.

Since these issues are often mixed up in practice, such as treating NRI status as the same as Board residency or thinking CSR spending has DTAA implications, NRI promoters and their advisors should handle governance, meeting planning, and cross-border capital planning together. They should also seek professional advice that fits their specific situation and group structure.