Every Company, having:
- Turnover of Rs 1,000 Crore or more, or
- Net Worth of Rs 500 Crore or more, or
- Net Profit of Rs 5 Crore or more, is covered under the provisions of CSR.
It could be a Listed or Unlisted Public Limited Company or a Private Limited Company. A foreign Company having its branch office or project office in India is also covered.
A Company, depending on whether it is listed/unlisted public limited company , private limited company or foreign , is required to constitute a CSR Committee, which will draw up the CSR Policy of the company for approval by the Board and thereafter monitor its implementation.
The Board of a covered company shall ensure that the company spends, in every financial year, at least 2% of the average Net Profits of the company, made during the 3 immediately preceding financial years, in activities covered by its CSR Policy.
Schedule VII specifies the activities which can be treated as eligible under CSR.
Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to:
- eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation 1including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.
- (ii) 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 2including 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 arts and handicrafts
- measures for the benefit of armed forces veteran, war widows and their dependents
- training to promote rural sports nationally recognized sports and Olympic sports
- contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women
- contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government
- rural development projects
- slum area development
Clarifications are given by Ministry of Company Affairs (MCA) “that while activities undertaken in pursuance of the CSR policy must be relatable to Schedule VII of the Companies Act 2013, the entries in the said Schedule VII must be interpreted liberally so as to capture the essence of the subjects enumerated in the said Schedule.”
It is further clarified that CSR activities should be undertaken by the companies in project / programme mode [as referred in Rule 4 (1) of Companies CSR Rules, 2014]. One-off events such as marathons/ awards/ charitable contribution/ advertisement/sponsorships of TV programmes etc. would not be qualified as part of CSR expenditure.
Contribution to Corpus of a Trust/ society/ section 8 companies etc. will qualify as CSR expenditure as long as (a) the Trust/ society/ section 8 companies etc. is created exclusively for undertaking CSR activities or (b) where the corpus is created exclusively for a purpose directly relatable to a subject covered in Schedule VII of the Act.
The relative Rules for CSR under Section 135 as amended till a recent date state as under:
- The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business.
- The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through
- a company established under section 8 of the Act or a registered trust or a registered society, established by the company, either singly or alongwith any other company, or
- 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 any entity established under an Act of Parliament or a State legislature
- A company may also collaborate with other companies for undertaking projects or programs 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 programs