CSR What

The concept of Corporate Social Responsibility was introduced into the Indian Business world through the Companies Act, 2013 (effective from the financial year 2014-15). Accordingly, all companies are required to spend a minimum of 2% of their  average net profits on CSR .

Companies are expected to carry out such CSR activities through registered NPOs . If  any income is invested in CSR by the companies themselves , it will be taxable.

 The Section 135 and Schedule VII of the Companies Act in particular along with the Companies (Corporate Social Responsibility Policy) Rules, 2014 makes it a statutory requirement for every Indian company including their holding company or  subsidiary company. It also applies to foreign companies having their branch office or project office in India.

The CSR law however has a financial criteria under sub section (1) of Section 135, it makes CSR compulsory for ‘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.’ Under Rule 5 all such companies are required to formulate a CSR committee of 3 members including one independent member. Such a committee will formulate, strategise, implement  and monitor the  CSR policy of the company. They are to ensure that any surplus generated from CSR activities are ploughed back to the CSR funds over and above the 2% contribution.

Under Rule 6(2) the CSR policy of every company is to specify that any surplus generated through such activities will be ploughed back to the CSR activities over and above the requisite 2%.

The Board of the Company are also considered legally accountable for CSR and have oversight function over  the CSR Committee. Under Section 134(3)(o) the Board is to disclose reason for non compliance or under spending on the compulsory 2% contribution. The Board is also to ensure that CSR activities and compliances are uploaded on the official website of the company. 

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