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The intention behind CSR is Corporates can do better social activities as compared to the other individuals and organisations. This has been evidenced and proved so far. This will create a Brand Image for the Corporate at the same time; it gives special status in the people's mind. It is a pride to do service to the society and the nations.

Though this should be voluntary or optional at the discretion of the Corporate, Government of India now moving it to a mandatory. In India, unless it is compulsory, no one will do it except few.

Ministry of Corporate Affairs ( MCA) notified New CSR Rules. This Article tries to recapitulate provisions relating to CSR Compliances in a short manner.

1. Companies covered under CSR

  • Net Worth Rs.500 Cr
  • Turnover Rs.1000 Cr
  • Net Profit (Profit Before Tax) Rs.5 Cr

During the immediately preceding financial year. The Company has to take steps to Comply the CSR Provisions.

Dividend Income and any profit arising from any overseas branch or branches of the company can be excluded for the calculation of the above said limits.

2. Amount to spent towards CSR

2% of the average net profits of the company made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years.

Recapitulation And Update On CSR

3. Activities eligible for CSR

  • eradicating hunger, poverty and malnutrition
  • promoting health care including preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation.
  • making available safe drinking water.
  • promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects.
  • promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.
  • ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.
  • protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional art and handicrafts;
  • measures for the benefit of armed forces veterans, war widows and their dependents, Central Armed Police Forces (CAPF) and Central Para Military Forces (CPMF) veterans, and their dependents including widows;
  • training to promote rural sports, nationally recognised sports, paralympic sports and olympic sports
  • contribution to the prime minister's national relief fund or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund)] or any other fund set up by the central govt. for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women;
  • Contribution to incubators or research and development projects in the field of science, technology, engineering and medicine, funded by the Central Government or State Government or Public Sector Undertaking or any agency of the Central Government or State Government; and Contributions to public funded Universities; Indian Institute of Technology (IITs); National Laboratories and autonomous bodies established under Department of Atomic Energy (DAE); Department of Biotechnology (DBT); Department of Science and Technology (DST); Department of Pharmaceuticals; Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH); Ministry of Electronics and Information Technology and other bodies, namely Defense Research and Development Organisation (DRDO); Indian Council of Agricultural Research (ICAR); Indian Council of Medical Research (ICMR) and Council of Scientific and Industrial Research (CSIR), engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).
  • Rural development projects.
  • Slum area development.
  • Disaster management, including relief, rehabilitation and reconstruction activities.

4. Activities not eligible for CSR

  • activities undertaken in pursuance of normal course of business of the company
  • any activity undertaken by the company outside India except for training of Indian sports personnel representing any State or Union territory at national level or India at international level
  • contribution of any amount directly or indirectly to any political party;
  • activities benefitting employees of the company
  • activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services;
  • activities carried out for fulfilment of any other statutory obligations under any law in force in India;

5. Where to spend?

The company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities.

6. How to spend?

CSR can be spend either directly by the Company or through -

(a) Section 8 Company or a registered public trust or a registered society established by the company, either singly or along with any other company, or

(b) Section 8 Company or a registered trust or a registered society, established by the Central Government or State Government; or

(c) any entity established under an Act of Parliament or a State legislature; or

(d) Section 8 Company or a registered public trust or a registered society having an established track record of at least three years in undertaking similar activities.

However, the above said entities who intends to undertake any CSR activity, shall register itself with the Central Government by filing the form CSR-1 electronically with the Registrar, with effect from the 01st day of April 2021

7. What are the consequences if the company fails to spend?

The Board shall, in its report, specify the reasons for not spending the amount and, unless *the unspent amount relates to any ongoing project transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.

If a company is in default in amount spent or transfer to the fund , the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case may be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less.


8. *Transfer of unspent amount

Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in persuance of its Corporate Social Responsibility Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.

*Yet to be notified

9. Can excess amount spent be set off against the succeeding financial year?

Where a company spends an amount in excess of requirement, such excess amount may be set off against the immediate succeeding three financial years subject to the conditions that (i) the excess amount available for set off shall not include the surplus arising out of the CSR activities (ii) the Board of the company shall pass a resolution to that effect.

10. Is it Compulsory to Constitute CSR Committee?

Where the amount to be spent by a company (i.e. 2% of the Average Net Profit) does not exceed fifty lakh rupees, the requirement for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee shall be discharged by the Board of Directors of such company

11. Is it compulsory to have CSR Policy?

The Company shall have CSR policy recommended by the CSR Committee and approved by the Board or when there is no requirement of CSR Committee, Policy shall be approved by the Board.

12. What are the information’s to be placed in the website of the Company?

The Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website, if any, for public access.

13. What are the reporting requirements?

  • The Board's Report of a company covered under these rules pertaining to any financial year shall include an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable.
  • Every company having average CSR obligation of ten crore rupees or in the three immediately preceding financial years, shall undertake impact assessment, through an independent agency of their CSR projects having outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.
  • The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR.
  • A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed five percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less."

14. Whether CSR expenditure of a company can be claimed as a business expenditure?

The amount spent by a company towards CSR cannot be claimed as business expenditure. The Finance Act, 2014 provides that any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.

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Category Corporate Law, Other Articles by - Eswaramoorthy P