CSR Laws

CSR Laws

The companies which fall in the ambit of the following three criteria are required to spend on CSR and must establish a CSR Committee. Such Companies are required to do CSR spend amounting 2 % of their average annual profit over the last 3 years .

Here are the criteria for CSR eligibility for the companies. Thus, section 8 companies must establish a CSR committee and comply with provisions when it meets the specified net worth , turnover or net profits .

• > Net worth of the company to be Rs: 500 crore or more or,
• > Turnover of the company to be Rs: 1000 crore of more or,
• > Net profit of the company to be Rs: 5 crore or more .

The Corporate Social Responsibility (CSR) provisions are governed under Section 135 of the Companies act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 (Rules) and Schedule VII thereto.

The Rules, which were last amended by the Ministry of Corporate Affairs (“MCA”) in January, 2021, have been amended by the MCA vide notification dated September 20, 2022. The amendments to the Rules are provided below for your reference: 1. Insertion of new proviso after the proviso to sub-rule 1 of Rule

Provided further that a company having any amount in its Unspent Corporate Social Responsibility Account as per sub-section

(6) of section 135 shall constitute a CSR Committee and comply with the provisions contained in sub-sections (2) to (6) of the said section. As per the amended Rules, constitution of a CSR Committee is mandatory where the Company has any amount in its Unspent CSR Account in terms of the provisions of Section 135(6) of the Act i.e., if the Company has any extant ongoing project, it is mandatorily required to constitute a CSR Committee. ADVERTISEMENT

Further, such company shall also comply with the provisions of Section 135(2) to Section 135(6) of the Act.

As per the earlier provisions, the CSR provisions ceased to be applicable on a company when it ceased to meet the criteria as specified as Section 135(1) for three consecutive financial years. Under the new Rules, this provision has been dispensed with. Once the CSR provisions become applicable on a company, they will continue to be applicable.

3. Substitution of sub-rule 1 of Rule 4:

The Board shall ensure that the CSR activities are undertaken by the company itself or through, – 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. Explanation- For the purpose of clause (c), the term “entity” shall mean a statutory body constituted under an Act of Parliament or State legislature to undertake activities covered in Schedule VII of the Act. Earlier, only those companies established under the provisions of Section 8 of the Act, or registered public trusts or registered societies who were registered under Sections 12A and 80 G of the Income Tax Act, 1961 were eligible under the said rule. Now, the scope has been widened to include those companies established under section 8 of the Act, or registered public trusts or registered societies which are 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. The word “entities” has also been defined by way of an explanation. 4. Amendment in clause c of sub-rule 3 of Rule 8: A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed two percent five percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is higher whichever is less. Companies were allowed to book expenditure on undertaking impact assessment up to 5% of the total CSR expenditure for that financial year or Rs. 50 Lakhs, whichever was less. Now, companies can book expenditure on undertaking impact assessment up to 2% of the total CSR expenditure for that financial year or Rs. 50 Lakhs, whichever is higher.

5. Amendment in format for the annual report on CSR activities to be included in the board’s report of a company.

The same is represented below for reference:

FORMAT FOR THE ANNUAL REPORT ON CSR ACTIVITIES TO BE INCLUDED IN THE BOARD’S REPORT FOR FINANCIAL YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2020

1. Brief outline on CSR Policy of the Company:

2. Composition of CSR Committee:

For more Information, please feel free to contact whatsapp or request to call back