CSR- Corporate Social Responsibility
CSR is all about corporate giving back to Society.
| SL No | Questions | Answers |
| 1. | What is CSR | The Act introduces the culture of corporate social responsibility (CSR) in Indian corporate requiring companies to formulate a CSR policy and spend on social upliftment activities. CSR is all about corporate giving back to society |
| 2. | Which Companies falls under purview of CSR | Every Company Satisfying any of the below mentioned criteria in the PREECEDING FINANCIAL YEAR is required to company the provisions of Section 135 along with its rules: –
· company having net worth of rupees five hundred crore or more OR · Company having turnover of rupees one thousand crore or more OR · Company having net profit of rupees five crore or more.
Clarification: – it is to be noted here that the company satisfying any of the above criteria will fall under the purview of CSR. |
| 3. | How Much CSR Expenditure Company needs to do.
Areas of Spending |
Where the company completed the period of 3 Financial Years: – 2% of Average Net Profits of the Company during the immediately preceding three Financial Years
Where the company has not completed the period of 3 Financial Years: 2% of average net profits during such immediately preceding financial years.
Clarifications: – PROFIT BEFORE TAX needs to be considered in Calculations (Adjusted as per section 198, if required)
The company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities |
| 4. | When CSR Expenditure needs to be done and treatment of unspent CSR Amount | In relation to Other than Ongoing Projects:
– Till 31st March of the year in which spending needs to be done. If not, Transfer of Unspent CSR amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year i.e till 30th September of next FY.
In relation to Ongoing Projects (“Ongoing Project” means a multi-year project undertaken by a Company in fulfilment of its CSR obligation having timelines not exceeding three years excluding the financial year in which it was commenced, and shall include such project that was initially not approved as a multi-year project but whose duration has been extended beyond one year by the board based on reasonable justification): –
Spending till 31st march and if remains unspent then transfer of unspent CSR amount to Special Bank Account (Opened specifically for this purpose) within a period of thirty days from the end of the financial year and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy as per the policy and timeframe of its ongoing project approved by the Board with recommendation of CSR Committee. And no ongoing project could be extended for a period more than 3 years excluding the year of its commencement.
In crux funds allocated for ongoing project needs to be spent till completion of that ongoing project within the timeframe of 3 years set under rules and regulations of CSR.
**A company needs to open a separate “Unspent CSR Account” for each financial year but not for each ongoing project. |
| 5. | What is the meaning of the term ‘administrative overheads? What is the maximum permissible limit for administrative overheads? | Administrative overheads are the expenses incurred by the company for ‘general management and administration’ of CSR functions. However, the expenses which are directly incurred for the designing, implementation, monitoring, and evaluation of a particular CSR project or programme shall not be included in the administrative overheads
Example: – Salary and training for the employees working in the CSR division of a company, stationery cost, travelling expenses, etc. may be categorised as administrative overheads. However, salary of school teachers or other staff, etc. for education-related CSR projects shall be covered under education project cost.
The maximum permissible limit for administrative overheads is five per cent of the total CSR expenditure of the company for the financial year.
Clarification: – 5% of the actual Expenditure to be taken into account, not on the proposed expenditure. |
| 6. | Modes of Spending CSR | · Either by the companies itself
· Through Section 8 Company/ Society/ Trust registered under section 12A and Approved 80G of the Income Tax Act , 1961 established by the Company · Through Section 8 Company/ Society/ Trust established by the Central Government or State Government · Through Implementing Agencies
It is to be noted that all entities mentioned above needs to register itself with Central Government by filing the form CSR-1 electronically with the Registrar |
| 7. | Which Companies are required to Form CSR Committee
What is the composition of the CSR Committee?
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Companies whose obligation of expenditure is above 50 lacs.
Companies who fall under the purview of Appointment of Independent Directors under section 149(4):- Three or more Directors out of which one shall be an Independent Director
Companies who does not fall under the purview of Appointment of Independent Directors under section 149(4):- Two or More Directors. No independent directors are required as mentioned in the proviso under section 135(1)
Foreign Company: – At least two persons out of which: (a) one shall be as specified under clause (d) of subsection (1) of section 380 of the Act, and (b) another shall be nominated by the foreign company
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| 8. | Functions of CSR Committee | (a) Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII
(b) Recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and (c) Monitor the Corporate Social Responsibility Policy of the company from time to time |
| 9. | Disclosure Requirement by Board/Responsibilities of Board | · Approve CSR policy after taking recommendation from CSR Committee
· Board Report/Annual Report shall disclose the composition of the Corporate Social Responsibility Committee · Disclosure of Content of CSR policy in Board’s Report · Disclosure of Composition of the CSR Committee, CSR Policy and Projects approved by the Board on the website of the Company |
| 10. | Penalty for Non-Compliance | The company is liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case may be, or one crore rupees, whichever is less.
On every Officer in Default:- one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less |
Disclaimer: – This article has been prepared on the basis of information available till date. But professionals are advised to study the laws and compliance thoroughly before carrying out CSR Activities.
We provide Service for CSR Registration, Compliances and Advisory to Companies on CSR.
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J. K. Gupta & Associates
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