Section 135 - Corporate Social Responsibility

Applicability if

Networth 500 Crore or more, or
Turnover of 1000 Crore or more, or
Net Profit of 5 crore or more

• During immediately preceding financial year

Amount to be spent

• Spend during the FY, at-least 2% of average net profit of last 3 financial years.
• If existence of company is less than 2 years, then average of such years.

Net profit will not include following profits: Section 198

• Capital profits, profit from sale of Immoveable property (of capital nature),
• Profit from depreciating fixed assets, exceeding the original cost.

Net profit will be calculated excluding the following expenses

• Normal income tax
• Loss of capital nature

CSR committee (If CSR amount is over 50 lacs)

• Committee to have 3 or more directors (atleast 1 independent director, if independent director is appointed)
• Committee to have 2 directors in other cases

If CSR amount is less than 50 lacs then BOD to decide.

Directors Report

Disclose CSR committee composition, CSR policy, disclose reason if the amount is not spent.

Activities which form part of CSR

Eradicating poverty, promote education, empowering women, combating diseases, environmental sustenance, enhancing vocational skills, contribution to PM Relief fund, PM Cares fund, IITs, DRDO, etc.

 A company can join another company / can form trust / society / Not-for-profit Co. etc. for undertaking programmes or projects.

Non Compliance

• Fine on company of minimum 50000 up to 25 lacs.
• Officer in charge - imprisonment upto 3 years. Fine 50000 to 5 lacs.
• Or both.

Notes:

• If more than required expense made under CSR, then excess amount spent from FY 2020-21 can be set off against required 2% CSR expense upto immediately succeeding 3FYs. (subject to conditions under rule 7 (3) of Companies CSR policy Rules 2014.)
• Is CSR exp a business expense under Income Tax - No. Refer explanation 2 to section 37(1) of IT Act.
• Can CSR be in Kind - No.
• Can CSR be spent outside India - No.