Yeoman service

Ever since India was ruled by Kings, there has been history of charity and voluntary social work. After independence, the government being a welfare establishment took up the responsibility to provide a social umbrella to ‘have nots’ of the society. Major business houses like Tata, Birla and other big traditional business houses would carry out charity and social work on their own in the areas of their choice. It was a big boost to the social sector of the country which would look up to government for even a drop of water every time.

Ploughing back

It’s not possible for government alone to cater to all the basic social needs of growing population. Just then it thought of making it mandatory for companies and corporates to share their profit which they earn from the society. It enacted a law in the Section 135 of Companies 2013 and make it compulsory for all companies having sizeable business.   

Who all the Covered

As per the section 135 of Companies Act- 2013, the companies having Net worth of INR 500 crore or more; or Turnover of INR 1000 crore or more; or Net Profit of INR 5 crore or more during any financial year, shall be required to spend 2% of its average net profit in social activities.

Activities allowed under CSR—

• Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swachh Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.
• Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects.
• Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;
• Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga;
• Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts;
• Measures for the benefit of armed forces veteran, war widows and their dependents;
• Training to promote rural sports nationally recognized sports and Olympic sports;
• PM Relief fund: contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and women

Inserted vide Notification dated 24.10.2014

• Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government;
• Rural development projects.
• Slum area development

WHAT TO DO WHEN CSR IS APPLICABLE

• Once a company is covered under the ambit of the CSR, it shall be required to comply with the provisions of the CSR. The companies covered under the Sub section 1 of Section 135 shall be required to do the following activities:
• The companies shall be required to Constitute Corporate Social Responsibility Committee of the Board "hereinafter CSR Committee". The CSR Committee shall be comprised of 3 or more directors, out of which at least one director shall be an independent director.
• The Board's report shall disclose the compositions of the CSR Committee.
• All such companies shall spend, in every financial year, at least 2% of the average net profits of the company made.

Penal Action if not complied

• Among others, Section 134(8) provides for imposing a minimum fine of Rs 50,000 and the amount may go up to Rs 25 lakh for certain violations.
• The penal action is being initiated with respect to non- compliance.
• Recently, the corporate affairs ministry has initiated legal proceeding against around 15 companies in Rajasthan for shying away from CSR activities.