Introduction: Corporate Social Responsibility (CSR) is a pivotal aspect of modern corporate governance, mandated under Section 135 of the Companies Act, 2013. This concise guide offers a comprehensive overview of CSR obligations, including spending requirements, committee composition, penalties for non-compliance, and impact assessment criteria.
CORPORATE SOCIAL RESOPONSIBILITY {Section-135 of the Companies Act, 2013 read with Companies (CSR policy) Rules, 2014}
> Applicability: During the immediately preceding financial year any of the one following conditions
√ Net profit: 5 crore rupees or more ; or
√ Net worth: 500 crore rupees or more ; or
√ Turnover: 1000 crore rupees or more
> Spending requirement: 2 % of average net profit of previous 3 year or from the period of the incorporation (if incorporated in less than 3 years)
> If total obligation is exceeding 50 lakh constitute CSR Committee which shall comprise of
√ 3 Director out of 1 which shall be independent director (if not required ID comprise of only 2 directors)
√ If foreign company, comprise of 2 directors out of 1 shall be Indian resident
√ Private company: 2 director
> Spend amount in activities only which are specified in schedule-(VII) of the act & give preference to local area
> Any amount spent for employees or amount spent in foreign country shall not be counted for the purpose of CSR
- 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 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.
- Penalty for non-compliance
> Company: 2 times of amount of obligation or 10 lakh rupees. (whichever is lower)
> Office in default: 10 % of obligation or 10 lakh rupees (whichever is lower)
- If spent amount in excess of the obligation then allowed set-off in next 3 immediately succeeding financial year.
- Do CSR only through the section-8 company or trust registered under MCA
- 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.
- IMPACT ASSESSEMENT THROUGH INDEPENDENT AGENCY
> If obligation is 10 crore or more in preceding 3 F.Y. have to undertake an impact assessment of project having rupee 1 crore or more and having been competed at least 1 year.
- Net profit computation according to section-198 of the companies act, 2013.
- Entire CSR provision not applies to specified IFSC Company for the period of 5 years from the date of commencement of business.
If T/O >1000 or NW >500 and loss in company then just disclose in the report.
Conclusion: Navigating Corporate Social Responsibility obligations can be complex, but adherence to Section 135 of the Companies Act, 2013 is essential for ethical corporate conduct. By understanding spending requirements, committee structures, and compliance measures outlined in this guide, companies can effectively fulfill their CSR commitments while contributing positively to society and the environment.
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