WHAT IS CSR ?
Corporate Social Responsibility is often considered as a means of charity or donations. In practice, it is a successful approach for companies to engage themselves in activities that help society at large. Corporate Social Responsibility is a way of achieving a balance between profitable activities and social development. The Companies Act, 2013, envisioned that the private sector needs to contribute towards achieving the nation-building goals. With that, India is also the first country in the world to make corporate social responsibility mandatory.
If a company falls under the ambit of the Corporate Social Responsibility (CSR) compliance, it shall invest at least 2 percent of its average net profits in projects in the field of education, water supply, health care, environment, social empowerment, sports, culture, through a registered trust, a registered society or a non-profit company (section 8)
WHO IS LIABLE TO MAKE CSR EXPENDITURE ?
Under Section 135 of the Companies Act, 2013 , every company having net worth of at least Rs. 500 crore, turnover of Rs. 1,000 crore or more, or a minimum net profit of 5 crore during the immediately preceding financial year, has to make CSR expenditure.
For the above companies it is mandatory to spend at least 2% of the average net profits of last 3 years for the company’s Corporate Social Responsibility (CSR) policy. In case the said amount is not spent, the reasons for not doing so are to be disclosed in the Board’s Report. Activities which may be included in the CSR policy by the companies are specified in schedule VII of the Companies Act, 2013.
Section 135 along with Schedule VII and corresponding Corporate Social Responsibility Policy Rules have been notified on 27.02.2014 and have come into effect from 1st April, 2014.
WHY PM CARES FUND CREATED ?
In emergency a fund was created by Prime Minister, Mr. Narendra Modi after receiving several messages of requests for donations from people to support the government in its fight against COVID-19’s influence.
Companies can meet their Corporate Social Responsibility (CSR) obligations through the newly formed Prime Minister’s Civil Assistance and Emergency Situations Relief (PM CARES) fund, the Ministry of Corporate Affairs has already the clarified
DONATION BY COMPANIES TO PM CARES FUND WILL QUALIFY AS CSR.
On March 28, 2020, The ministry has clarified that any amount incurred by companies to PM CARE’S FUND to fight against corona virus or other critical situations would be considered CSR activity under company law. CSR funds can be used in activities such as prevention of Covid-19 or other critical situations including health and cleanliness.
According to a senior government official, corporates have spent Rs 52,000 crore for social welfare activities in the last five financial years and now contributing to the Prime Minister’s Relief Fund will help them fulfill their obligations.