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Basics of Corporate Social Responsibility (CSR) Spending in India

  • March 11, 2024

Basics of  corporate social responsibility ( CSR) spending in India 

1.    India is  the only country which mandates CSR  spending  by  law. 

2.    Section 135 of Companies Act 2013  is the law which mandates  CSR (Corporate Social Responsibility) spending.

3.    The following companies are mandatorily required to spend on CSR activities :

(i)    Company having net worth of rupees five hundred crore or more, or 
(ii)    turnover of rupees one thousand crore or more or 
(iii)    a net profit of rupees five crore or more during  the immediately preceding   financial year

4.    The  above  companies are required to spend  on CSR activities at least two per cent. of the average net profits of the company made during the three immediately preceding financial years.

5.    Following are the recognized  CSR activities (Schedule VII of the Companies Act ,2013):

a)    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] and making available safe drinking water. 

b)    Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects.

c)    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.

d)    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 4[including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.

e)    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; 

f)     measures for the benefit of armed forces veterans, war widows and their dependents, 9[ Central Armed Police Forces (CAPF) and Central Para Military Forces (CPMF) veterans, and their dependents including widows];

g)    Training to promote rural sports, nationally recognised sports, paralympic sports and Olympic sports;

h)     Contribution to the prime minister’s national relief fund 8[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;

i)     (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).]

j)    Rural development projects

k)    Slum area development  ( `slum area’ shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force) and

l)    Disaster management, including relief, rehabilitation and reconstruction activities.

6.    Every company which has to spend an amount exceeding Rs. 50 lakhs on CSR activities under  section 135 is applicable shall constitute a Corporate Social Responsibility Committee of the Board .

7.     CSR committee shall  have  three or more Directors, out of which at least one director shall be an independent director.  If  the company is one which need not appoint an independent director , CSR committee  shall  comprise of  two or more directors.

8.    The Corporate Social Responsibility Committee shall,—

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company 5[in areas or subject, specified in Schedule VII of the Companies Act 2013)

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company from time to time.
9.    If  a company fails to spend on CSR activities, it shall transfer such unspent amount to a Fund specified in Schedule VII of the companies Act 2013, within a period of six months of the expiry of the financial year.  But , in the case of a ongoing project , the unspent amount can be  kept with company in a spate bank account  and can be utilised for the project in the subsequent three years.

10.    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

11.     Every entity, covered under sub-rule (1), 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:

12.    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.

13.    Every company to which section 135 of the Companies Act 2013 is applicable shall disclose in the board’s report the details of  CSR committee , CSR policy etc.  & 

14.    The Companies (Corporate Social Responsibility Policy) Rules, 2014 supplements section 135 of the Companies Act 2013.