CSR Approved Activities

CSR Law

  • Government of India made a historic legislation, a first of its kind in the world, in the new Companies Act 2013 by making Corporates falling above certain thresholds to mandatorily spend at least 2% of their profits on Corporate Social Responsibility (CSR).
  • Companies having either a net worth of over Rs.5000 Million, a turnover of over Rs.10,000 Million, or a net profit (before tax) of over Rs.50 Million must spend at least 2% of their last three year's annual profits on CSR. This mandatory CSR-spend rule will apply from fiscal 2014-15 onwards.
  • Though the new law has stipulated the portion of profits that companies must spend on Corporate Social Responsibility (CSR) every year, the discretion to choose the specific activities and causes to be funded will rest with corporate boards.
  • CSR activities qualifying for the mandatory spend shall include: eradication of hunger and poverty, promotion of education, promoting gender equality and women empowerment, reducing child mortality and improving maternal health, combating human immunodeficiency virus (HIV), acquired immune deficiency syndrome (AIDS), malaria and other diseases, ensuring environmental sustainability, employment enhancing vocational skills, social business projects, contribution to the Prime Minister's National Relief Fund.
  • In case the companies are unable to spend the money, they have to provide reasons and disclose the same. The regulation makes it mandatory for the Directors of the company to supervise these spends and to set up a CSR committee to plan, strategize, implement, document and disclose the activities.

EXTRACTS OF SECTION 135 OF COMPANIES ACT 2013 RELATING TO CSR SPEND

  • Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.
  • The Board's report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.
  • The Corporate Social Responsibility Committee shall
    • Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII;
    • Recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and
    • Monitor the Corporate Social Responsibility Policy of the company from time to time.
  • The Board of every company referred to in sub-section (1) shall
    • After taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company's website, if any, in such manner as may be prescribed; and
    • Ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company
  • The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy: Provided that 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: Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount. Explanation - for the purposes of this section "average net profit " shall be calculated in accordance with the provisions of section 198.

The following activities are approved U/S 135 of the Companies Act 2013 for CSR spend

  • Eradicating hunger, poverty, malnutrition and promoting preventive healthcare and sanitation and making available safe drinking water
  • Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly, and the differently-abled and livelihood enhancement projects
  • Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly, and the differently-abled and livelihood enhancement projects
  • Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agro forestry, conservation of natural resources and maintaining quality of soil, air and water
  • Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up libraries; promotion and development of traditional arts and handicrafts
  • Measures for the benefit of armed forces veterans, war widows and their dependents
  • Training to promote rural sports, nationally recognized sports, Paralympics sports and Olympic sports
  • Contribution to Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the SC/ST, other backward classes, minorities and women
  • Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government
  • Rural development projects

Contribution to any political party (directly/indirectly) will not be considered as a CSR activity