1. Applicability Criteria
Corporate Social Responsibility (CSR) provisions under Section 135 of the Companies Act, 2013 apply to every company—including holding, subsidiary, and foreign companies—having in the immediately preceding financial year any of the following:
• Net Worth of ₹500 crore or more; or
• Turnover of ₹1,000 crore or more; or
• Net Profit of ₹5 crore or more.
2. CSR Committee Requirements
A company meeting the CSR criteria must constitute a CSR Committee of the Board comprising:
• Three or more directors, including at least one Independent Director (where applicable).
• If the company is not required to appoint an Independent Director, then the Committee shall consist of two or more directors.
Relaxation:
If the CSR obligation is less than ₹50 lakh in a financial year, no CSR Committee is required. In such cases, the Board of Directors shall discharge all CSR-related functions.
3. CSR Policy
The CSR Committee shall:
• Formulate and recommend a CSR Policy.
• Recommend the amount of CSR expenditure.
• Monitor CSR projects and activities.
The Board shall approve the CSR Policy after considering the Committee’s recommendations. The CSR Policy must include:
1. List of CSR activities proposed to be undertaken.
2. Modalities of execution.
3. Monitoring and reporting mechanisms.
4. Details of any ongoing projects.
4. CSR Activities (Schedule VII of Companies Act, 2013)
CSR activities may include the following:
1. Eradicating hunger, poverty, malnutrition, promoting healthcare, sanitation, and safe drinking water.
2. Promoting education, special education, vocational skills, and livelihood enhancement.
3. Promoting gender equality, empowering women, setting up homes/hostels/orphanages, senior citizen facilities, and reducing social inequalities.
4. Environmental sustainability, protection of flora/fauna, ecological balance, conservation of natural resources, etc.
5. Protection of national heritage, art, culture, libraries, and handicraft development.
6. Measures for armed forces veterans, war widows, dependents, CAPF/CPMF veterans, etc.
7. Training and promotion of sports, including Paralympic and Olympic sports.
8. Contributions to PMNRF/PM CARES Fund and other government-notified welfare funds.
9. Contributions to government-funded incubators or R&D projects in science, technology, engineering, and medicine.
10. Contributions to public-funded universities, IITs, ICMR, ICAR, DRDO, and other notified research bodies.
11. Rural development activities.
12. Slum area development.
13. Disaster management, including relief, rehabilitation, and reconstruction.
5. CSR Spending Requirement
A company must spend, in every financial year:
Minimum 2% of the average net profit of the preceding three financial years, calculated as per Section 198 of the Companies Act, 2013.
6. Treatment of Unspent CSR Amount
A. If not related to an ongoing project
Unspent amount must be transferred to a Schedule VII Fund within:
• 6 months from the end of the financial year.
B. If related to an ongoing project
The unspent amount must be transferred to:
• Unspent CSR Account (special bank account) within 30 days from the end of the financial year.
Such amount must be spent within 3 financial years, failing which:
• It must be transferred to a Schedule VII Fund within 30 days of completing the third year.
7. Penalties for Non-Compliance
If a company:
• Fails to spend the required amount, or
• Fails to transfer the unspent amount to the specified fund/accounts,
Penalty on the Company
• Twice the unspent amount, or
• ₹1 crore, whichever is lower.
Penalty on Officers in Default
• One-tenth of the unspent amount, or
• ₹2 lakh, whichever is lower.
8. Income Tax Treatment
CSR expenditure:
• Is NOT allowed as business expenditure under the Income Tax Act, 1961.
• Contributions to specified funds/organizations may be eligible for deduction under Section 80G, subject to eligibility.
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