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Corporate Social Responsibility in India

Introduction to CSR

Section 135 of the Companies Act is the applicable section containing provisions of Corporate Social Responsibility (CSR). It is a concept launched where the company decides to contribute for the betterment of the society and the welfare of the environment.

For the companies earning huge profits, it is an indication to hold a responsibility for the nation to play their part towards the society’s welfare.

What does Section 135 of the Companies Act 2013 includes?

Section 135 of the Companies Act talks about the eligibility factor, spending criteria, formulation and contents of CSR policy, role and functions of CSR committee and board of the company, treatment of unspent CSR amount, disclosure norms along with the penal provisions concerned to Corporate Social Responsibility.

Applicability of Corporate Social Responsibility

Every company having a net worth of rupees five hundred crores or more, or turnover of rupees one thousand crores or more or a net profit of rupees five crores or more during the immediately preceding 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.

Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee.

Net Worth > 500 Crores
Turnover > 1000 Crores
Net profit > 5 Crore

Legal Framework of CSR

The Government provides the broad framework of CSR through-

  1. Section 135 of the Companies Act 2013 enumerates the provisions regarding CSR,
  2. Schedule VII to the Companies Act 2013 indicates the activities to be undertaken by the company under CSR, and
  3. Companies (CSR Policy) Rules 2014 prescribes the manner in which companies shall comply with CSR provisions of the Act

Responsibilities of Corporate Social Responsibility Committee

The Corporate Social Responsibility shall-

  1. Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII;
  2. Recommend the amount of expenditure to be incurred on the activities referred to in clause(a); and
  3. Monitor the Corporate Social Responsibility Policy of the company from time to time.

List of activities which must be included according to Schedule VII of the Companies Act

These are the list of activities that companies can include in their Corporate Social Responsibility Policies.

  1. Eradicating poverty, hunger and malnutrition, promoting health care which includes sanitation and preventinve health care, contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.
  2. Improvement in education which includes special education and employment strengthening vocation skills among children, women, elderly and the differently-abled and livelihood enhancement projects.
  3. Improving gender equality, 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.
  4. Safeguarding environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining a quality of soil, air and water which also includes a contribution for rejuvenation of river Ganga.
  5. 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 arts and handicrafts.
  6. 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.
  7. Training to stimulate rural sports, nationally recognized sports, Paralympic sports and Olympic sports.
  8. Contribution to the Prime Minister’s National Relief Fund, Contribution to the Prime Minister’s National Relief Fund (PM-CARES) or any other fund set up by the Central Government for socio-economic development providing relief and welfare of the Scheduled Castes, the Scheduled and backward classes, minorities and women.
  9. Contribution to incubators or research and development projects in the field of science, technology, engineering and medicine, funded by the Central Government, State Government, Public Sector Undertaking or any agency of the Central Government or State Government.
  10. Contributions to public funded Universities, IITs, National Laboratories and autonomous bodies established under DAE, DBT, DST, Department of Pharmaceuticals, Ministry of AYUSH, Ministry of Electronics and Information Technology and other bodies, namely DRDO, ICAR, ICMR and CSIR, engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).
  11. Rural development projects.
  12. Slum area development.
  13. Disaster management, including relief, rehabilitation and reconstruction activities

CSR Mandatory

Corporate Social Responsibility is said to be mandatory for the companies covered under Section 135 of the Companies Act 2013.Thus, every company is required to spend a minimum of 2% of their net profit over the preceding three years as CSR.

What if the provision of CSR is not complied?

Where the companies obligated to follow the provision of CSR does not obey it or fails to comply with the provision of CSR spending, transferring and utilizing the unspent amount, the company will be punishable with a fine minimum of Rs. 50,000 that may be increased to Rs. 25 Lakhs.

Moreover, where the officer of such company defaults will also be liable for a punishment which is imprisonment for a term extending to 3 years or with a fine minimum of R.s 50,000 that may increase to Rs. 5 Lakh or both.

Conclusion

This was all the essential information about the concept of Corporate Social Responsibility. To know more of about, you can go throughCompendium on CSR“. Stay tuned with us and get interesting and out of the box knowledge. Keep learning and growing.

Contact EAdvisors regarding any query.

CSR Consultant

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