Contributions to relief funds, social biz projects to be CSR
Sep 06 2013 , New Delhi
The new Companies Act 2013, which requires certain class of companies to make social welfare spending, has listed a set of activities that can be considered as CSR.
The current list of activities is not exhaustive and a clearer picture would emerge once the rules for the landmark legislation are finalised.
According to the new legislation, which has been gazetted, contribution by companies to the Prime Minister's National Relief Fund or any other fund set up by the central or state government for socio-economic development and relief would be classified as CSR activities.
Funds given for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women would also be included.
Besides, initiatives toward eradicating extreme hunger and poverty, promotion of education and promoting gender equality and empowering women, would come under CSR ambit.
As per the new Act, other activities that would fall under CSR net are reducing child mortlity and improving maternal health, combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases, ensuring environmental sustainability, employment enhancing vocational skills and social business projects.
Certain class of companies are required to shell out at least two per cent of their three-year annual average profit towards social welfare activities.
It would be applicable to companies having either net worth of Rs 500 crore or more; turnover of Rs 1,000 crore or more; or net profit of Rs 5 crore or more.
As per the new norms, the two per cent spending on CSR is not mandatory but reporting about it is mandatory. In case, a company is unable to spend the required amount, then it has to give an explanation for the same.
Companies, for whom these norms are applicable, should set up a CSR Committee, comprising three or more directors and among them, at least one person should be an independent director.