Corporate social Responsibility is a sense of understanding of the company towards the environment and the society, broadly refers to the work and activities undertaken by corporate towards issues related to social causes and development, environment, disaster relief and community support.
As commonly misunderstood, the CSR is not charity or mere donations. CSR is a way of conducting business, by which corporate entities visibly contribute to the social good.
Section 135 of the Companies Act 2013 deals with the provisions of CSR and their applicability on the respective companies, the companies which fall in the ambit of have of the following three criteria are required to spend on CSR. Such companies are required to do CSR spend amounting to 2 % of their average annual profit over last three years.
Here are the criteria for CSR eligibility for the companies:
- Net worth of the company to be Rs 500 crore or more; or
- Turnover of the company to be Rs 1000 crore or more; or
- Net profit of the company to be Rs 5 crore or more.
To make the compliance of the applicable and to update it with the due course of time required changes are being made by the respective authorities. Recently the Central Government came up the the new CSR Rules named Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022
In the previous rules naming Companies (Corporate Social Responsibility Policy) Rules, 2014 (hereinafter referred to as the said rules), in rule 3, the following additions have been made
1. In sub-rule (1), after the proviso, the following proviso has been inserted, namely:
That if a company has any amount lying in its Unspent Corporate Social Responsibility Account as per section 135 sub-sections (6) of the Companies Act 2013 shall constitute a CSR Committee and comply with the other applicable provisions if any.
2. In rule 4 sub-rule (1) the following substitutions have been made namely:
(1) The Board of Directors shall ensure that the CSR activities are undertaken by the company itself or through, the following permissible means:
(a) A company established under section 8 of the Act, or a registered public trust or a registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 or registered under section 12A and approved under 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, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 or registered under section 12A and approved under 80 G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities.
3. Every company having average CSR obligation of ten crore rupees or more in pursuance of subsection (5) of section 135 of the Act, in the three immediately preceding financial years, shall undertake impact assessment, through an independent agency, of their 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.
(b) The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR.
(c) A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed two percent(earlier five percent) of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is higher (whichever is lower).
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