CORPORATE SOCIAL RESPONSIBILITY

{SECTION-135 OF THE COMPANIES ACT, 2013 READ WITH COMPANIES (CSR POLICY) RULES, 2014}

APPLICABILITY (SECTION-135(1): 

To every company which fulfils any of the following conditions in the immediately preceding financial year:

1. Having turnover of Rupee 1000 crore or more
2. Having net-worth of Rupee 500 crore or more
3. Having net profit worth of Rupee 5 crore or more

SPENDING REQUIREMENT: 

Every company which fulfils any of the above mentioned conditions has to necessarily spent minimum 2 % of average net profit of previous 3 financial year or from the period of the incorporation (if company is incorporated for less than 3 financial years)

CSR COMMITTEE:

If total CSR obligation of the company is exceeding 50 lakh rupee then company has to mandatorily constitute CSR Committee which shall comprise of

- 3 Director out of 1 which shall be independent director (if company is not required to appoint independent director, CSR committee shall comprise of only 2 directors)

- If foreign company, the committee shall comprise of not less than 2 directors out of which 1 shall be Indian resident

- Private company: Not less than 2 director

If the total CSR obligation of the company is less than 50 lakh rupee then the obligation of the CSR committee shall be done by Board of directors of the company.

WHERE TO SPEND THE AMOUNT:

Company has to spend amount in activities only which are specified in schedule-(VII) of the act & shall give preference to local area first for the activities.

IF COMPANY NOT SPENT THE REQUIRED AMOUNT:

If does not relate to on-going project: Transfer the fund within 6 months of end of F.Y. in the fund specified in schedule VII of the act.

If relates to on-going project: Transfer the fund to bank account of on-going project within 30 days of end of F.Y. and spend it within 3 years from the date of transferring amount to the special account.

If not spent in 3 years, transfer the amount to fund specified in schedule VII of the act.

CESSATION:

Rule 3 of the CSR Rules, 2014 specify that every company which ceases to be a company covered under sub-section for the 3 consecutive financial years shall not require to

- Constitute a CSR committee

-  Comply with any provisions related to CSR obligation.

PENALTY FOR NON-COMPLIANCE

Company: 2 times of amount of obligation or 1 Crore rupees. (whichever is lower)

Office in default: 10% of obligation or 2 lakh rupees (whichever is lower)

IMPACT ASSESSMENT THROUGH INDEPENDENT AGENCY

If CSR obligation on the company is 10 crore rupee or more in preceding 3 F.Y., then it have to undertake an impact assessment of the project having outlays of rupee 1 crore or more and having been competed not less than 1 year through independent agency.

Expenditure for having impact assessment through independent agency shall not exceed 2 5 % of total CSR expenditure of that financial year or Rs. 50 lakh, whichever is lower.

OTHER POINTS:

- Any amount spent for employees or amount spent in foreign country shall not be counted for the purpose of CSR obligation.

- If spent amount in excess of the obligation then allowed set-off in next 3 immediately succeeding financial year.

- Company can fulfil the CSR obligation only through the section-8 Company or trust registered under MCA and not through any other mode.

- CSR policy shall be prepared by the committee and shall be disclosed on the website by  it.

- Administrative overheads shall not exceed 5 % of the total CSR expenditure of the company for the financial year.

- The net profit, net-worth and turnover shall be computed only in accordance with the section-198 of the companies act, 2013.

- Any surplus arising out of the CSR activity shall not form part of business profit of the company and shall be ploughed back into the same project or shall be transferred to the Unspent CSR Account and spent in pursuance of CSR policy

ACTIVITIES MENTIONED UNDER SCHEDULE VII:

Under Schedule VII of the Companies Act, 2013, the following activities are listed on which Corporate Social Responsibility (CSR) can be performed by companies:

1. Eradicating extreme hunger and poverty
2. Any other activity as amended from time to time
3. Slum area development
4. Rural development projects
5. Contribution to the Swachh Bharat Kosh set-up by the Central Government for the promotion of sanitation
6. Training to promote rural sports, nationally recognized sports, Paralympic sports, and Olympic sports
7. The contribution to the National Defence Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Armed Forces veterans, war widows, and their dependent
8. Contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities, and wome
9. Social business projects
10. Employment enhancing vocational skills
11. Ensuring environmental sustainability
12. Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria, and other disease
13. Reducing child mortality and improving maternal healt
14. Promoting gender equality and empowering women
15. Promotion of education