Corporate Social Responsibility (CSR)
Corporate social responsibility (CSR) is a company’s commitment to manage the social, environmental and economic effects of its operations responsibly and in line with public expectations.
It is part of a company’s approach to corporate governance and often touches every part of the business—operations, human resources, manufacturing, supply chain, health and safety, and more.
The purpose of CSR is to encourage businesses to conduct their companies in an ethical manner and work towards having a more positive impact on society through ensuring sustainable growth.
CSR activities may include:
- environmental management
- contributing to educational and social programmes
- Reinvesting profits in health and safety or environmental programs
- Supporting charitable organizations, etc
“Corporate Social Responsibility (CSR)” means the activities undertaken by a Company in pursuance of its statutory obligation laid down in the Section 135 of Companies Act,2013.
Activities allowed inCorporate Social Responsibility Policies:
- 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 sanitationand 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;
a) 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
b) 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.
Activities not allowed inCorporate Social Responsibility Policies:
- activities undertaken in pursuance of normal course of business of the company:
Exception: Any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23 as CSR activities subject to the following conditions
(a) such research and development activities shall be carried out in collaboration with any of the specified institutes or organizations
(b) details of such activity shall be disclosed separately in the Annual report on CSR included in the Board’s Report;
- 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;
CSR provisions are applicable to every company having
- Net worth of ≥ Rs 500 crores or
- Turnover of ≥ Rs 1000 crores or
- Net profit of ≥ Rs 5 crores during the immediately preceding financial year
|Where the company has completed the period of three financial years||at least 2% of the average net profits of the company made during the three immediately preceding financial years|
|Where the company has not completed the period of three financial years||at least 2% of the average net profit made from the date of its incorporation to the immediately preceding financial year.|
- The company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for CSR activities.
- Net Profit
Net profit” means the net profit of a company as per its financial statement prepared in accordance with the applicable provisions of the Act, but shall not include the following, namely: –
(i) any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise; and
(ii) any dividend received from other companies in India, which are covered under and complying with the CSR provisions
- The board shall ensure that the administrative overheads shall not exceed five percent of the total CSR expenditure of the company for the financial year.
- Administrative Overheads
“Administrative overheads” means the expenses incurred by the company for ‘general management and administration’ of Corporate Social Responsibility functions in the company but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or programme;
- The CSR amount may be spent by a company for the creation or acquisition of a capital asset, which shall be held by :
(a) A company established under section 8 of the Act, or a Registered Public Trust or Registered Society, having charitable objects and CSR Registration Number under Rule 4(2).
(b) Beneficiaries of said CSR project, in the form of self-help groups, collectives, entities; or
(c) A public authority.
Any capital asset created by a company prior to the commencement of the Companies CSR Amendment Rule 2021, shall within a period of one hundred and eighty days from such commencement comply with the requirement of this rule, which may be extended by a further period of not more than ninety days with the approval of the Board based on reasonable justification.
- CSR Committee of the Board shall consist of three or more directors, out of which at least one director shall be an independent director.
- Note: Where a company is not required to appoint an independent director under the Act, it shall have in its Corporate Social Responsibility Committee two or more directors.
- Where the amount to be spent by a company does not exceed fifty lakh rupees, the requirement for the constitution of the CSR Committee shall not be applicable and the functions of such Committee provided under this section shall, in such cases, be discharged by the Board of Directors of such company.
- CSR Committee shall formulate and recommend to the Board, an annual action plan in pursuance to its CSR Policy, which shall include the following:
- The list of CSR projects or programmes that are approved to be undertaken in the area of Schedule VII
- Manner of the execution of such projects
- Modalities of utilization of funds and implementation of schedule for the projects
- Monitoring and reporting mechanism for the projects or programmes; and
- Details of need and impact assessment, if any, for the project undertaken by the Company.
The Board of every company shall –
- After taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the CSR Policy for the company and disclose contents of such Policy in its report and also place it on the company’s website, if any.
- Ensure that the activities as are included in the CSR Policy of the company are undertaken by the company.The Board shall ensure that the CSR activities are undertaken by the company itself or through eligible entities.
- The Board of a company shall satisfy itself that the funds so disbursed have been utilized for the purposes and in the manner as approved by it and the Chief Financial Officer or the person responsible for financial management shall certify to the effect.
- In case of ongoing project, the Board of a Company shall monitor the implementation of the project with reference to the approved timelines and year-wise allocation and shall be competent to make modifications, if any, for smooth implementation of the project within the overall permissible time period.”
- The Board shall ensure that the CSR activities are undertaken by the company itself or through –
(a) a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80 G of the Income Tax Act, 1961 (43 of 1961), established by the company, either singly or along with any other company, or
(b) a company established under section 8 of the Act 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) a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities
- A company may engage international organisations for designing, monitoring and evaluation of the CSR projects or programmes as per its CSR policy as well as for capacity building of their own personnel for CSR.
- A company may also collaborate with other companies for undertaking projects or programmes or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programmes in accordance with these rules.
If a Company spends on CSR in excess of the requirement (i.e. 2%), such excess amount may be set-off against the requirement of the CSR Spending u/s 135(5) upto the immediate succeeding 3 financial yearsubject to the conditions that:
- The excess amount available for set-off shall not include the surplus arising out of the CSR Activities, if any and
- The Board of Directors shall pass a resolution to that effect.
If the Company fails to spend 2% of the Average net profit, then the following shall be the treatment of the unspent amount.
|If unspent amount not relating to an ongoing project||the Board shall, in its report, shall specify the reasons for not spending the amount; and’ unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year||Amount remaining unspent for the FY. 2020-21 shall be transferred to Schedule VII fund latest by September 30, 2021.|
|If unspent amount relating to an ongoing project||The amount be transferred 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 (UCSRA).||The amount remaining unspent (on ongoing project) for the FY 2020-21 shall be transferred to UCSRA latest by April 30, 2021 The amount remaining unspent transferred for f.y. 2020-21 to UCSRA, has to be utilized for the project upto FY 2023-24,|
|If company fails to spend on the ongoing project||If Company Fails to spend in 3 years, 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||The unspent amount shall be transferred to a fund specified in Schedule VII.|
Any Surplus arising out of the CSR activity shall not be a part of the business profit. Such surplus shall be used on the following within a period of 6 months of the expiry of the financial year.
- Ploughed back into the same project or
- Transferred to the Unspent CSR Account& spent in pursuance of the CSR policy and the annual action plan of policy or
- Transferred to a fund as specified in Schedule VII of the act
1) CSR Registration
- Every entity 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.
- Form CSR-1 shall be signed and submitted electronically by the entity and shall be verified digitally by a Chartered Accountant in practice or a Company Secretary in practice or a Cost Accountant in practice.
- On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number shall be generated by the system automatically.
2) Impact Assessment
- A company having the obligation of spending the average CSR amount of Rs 10 Crore or more in the three immediately preceding financial years in pursuance of Section 135(5) of the Act, shall undertake impact assessment.
- Impact assessment to be done by an independent agency.
- Impact assessment to be done in respect of 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. Impact assessment expenditure for a financial year shall not exceed five percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less.
3) CSR Reporting
- 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.
- In case of a foreign company, the balance sheet filed section 381(1)(b) of the Act, shall contain an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable
4) Website Disclosure
The Board of Directors of the Company shall mandatorily disclose the followings on its website (if any):
- Composition of CSR Committee
- CSR Policy
- Projects approved by the Board on their website
- 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.
- 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.
Services Offered :
- Consultancy on Applicability of CSR Regulations
- Advisory on formation of CSR Policy
- Advisory on formation and setting roles and responsibilities of CSR committee
- Advisory on list of activities that needs to be undertaken on CSR programme for a corporate
- Consultancy on documentations to be maintained while conducting CSR policy
- Performing Due Diligence for the organizations and Projects that are to be carried out under CSR policy
- Formation of a Trust or section 8 company or any other mode of organization (NPO) for performing CSR Activities
- Application u/s12A of Income tax Act for getting exemption on NPO formed for conducting CSR Activities
- Application for grant of approval u/s80G of Income Tax Act for the NPO
- Advising on Accounting and Tax Aspects
- Auditing of Books of Accounts