Govt notifies amendments in Corporate Social Responsibility (CSR) spending norms

The government has made alterations to the norms governing expenses on Corporate Social Responsibility (CSR) undertakings under the fresh Company Law (2013). Now a particular class of profitable companies are necessitated to spend minimum 2% of their 3-year yearly average net profit towards CSR works.

The obligation is part of the Companies Act, 2013, maximum of whose requirements came into effect from April 1, 2014. As per the rules, companies are permitted to build CSR capabilities for their own personnel via other institutions given that such expenses do not exceed 5% of the total expenditure incurred on social welfare activities in one financial year. This 5% cap would include “expenditure on administrative overheads”.

The changes have been made to the Companies (Corporate Social Responsibility Policy) Rules, 2014. As per earlier norms, companies were allowed to build CSR capacities of their own personnel as well as those of their implementing agencies via institutions with established track records of at least 3 financial years but such expenditure shall not exceed 5% of total CSR expenditure of the company in a single financial year.

The new CSR norms would be applicable on companies having at least Rs 5 crore net profit, or Rs 1,000 crore turnover or Rs 500 crore net worth. Such corporates would required to spend 2% of their 3-year average yearly net profit on CSR activities in each financial year, beginning 2014-15 fiscal.

Several activities including livelihood improvement and rural development projects, lessening inequalities faced by socially and economically backward groups, working towards safeguard of national heritage, art and culture, comes under the Corporate Social Responsibility (CSR) domain.

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