The document provides an overview of corporate social responsibility (CSR) requirements for companies in India according to the Companies Act of 2013. It discusses the definition of CSR, guidelines around CSR committees and policies, activities that qualify as CSR, expenditure and reporting requirements. Key points include: companies meeting certain criteria must spend at least 2% of net profits on CSR annually; eligible activities must relate to issues like poverty, health, education, and environment; and companies must report on CSR policies, activities, and expenditures in their annual Board reports.

1. CSR IN INDIA
An overview
By,
CS ANJAN KUMAR ROY, FCS
PAST CHAIRMAN – ICSI EIRC
ANJAN KUMAR ROY & CO. Company Secretaries. DPS Business Centre. 9A Sebak Baidya Street. Kolkata.
Ph. Nos 9830201949 and 9831891949

2. 2/24/2015 2
Social Responsibility –
certain basic issues
• What is the Social Responsibility of the
Government?
• What is the Social Responsibility of the
Corporate sector?
• Government Vs Corporate Sector
• What is the basic objective of taxation?
• What is the scenario in other countries?

3. Legislating Social
Responsibility – travel path
• Corporate Social Responsibilities
Voluntary Guidelines – 2009
• DPE guidelines for CPSUs
• National Voluntary Guidelines on Social,
Environmental & Economic
Responsibilities of Business - 2011
• Companies Act 2013 – 01/04/2013
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4. CA 2013 - Applicability
• Section 135 applicable to Companies with
- Net worth Rs. 500 crore or more,
- Turnover Rs 1000 Crore or more or
- Net Profit Rs. 5 Crore or more
during any financial year
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5. CA 2013 - CSR Committee
Composition
• At least 3 directors, one of whom should
be an independent director
• In a company where appointment of an
independent director is not mandatory
• CSR committee of a private company
having only two directors can have only
two members
• CSR committee would be a committee of
the board
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6. CA 2013 - CSR Committee
Composition
• CSR committee of a foreign company shall
have at least 2 members, one of whom
should be person resident in India,
authorized to receive documents, notice
etc {380(1)(d)}
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7. CA 2013 - CSR Committee
Role
- recommend the CSR policy
- recommend the amount of expenditure
-- Monitor CSR policy
- Institute transparent monitoring
mechanism
- Responsibility Statement to be submitted
along with Annual Report
- Chairman CSR Committee to sign the
Annual Report2/24/2015 7

8. CA 2013 – CSR Policy and
CSR committee
• CSR Committee to recommend the policy
• CSR committee to recommend the amount
of expenditure
• CSR committee to monitor the policy
• CSR committee to institute monitoring
mechanism
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9. CA 2013 – CSR Policy and
Board
• Board to approve the CSR policy
• Board to ensure implementation
• Contents of the policy to be disclosed in
the Board’s Report and to be displayed
on the company web site
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10. CA 2013 – CSR Policy
Contents
• Shall indicate the activities to be
undertaken by the company specified in
schedule VII
• Activities in CSR Policy to relate to Sch VII
• CSR policy to specify that the surplus of
the CSR projects shall not form part of
business profit
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11. CA 2013 – CSR expenditure
• At least 2% of average net profit of
preceding 3 financial years in every
financial year
• Average Net Profit shall be calculated as
per Section 198 of Companies Act 2013
• It shall not include the net profit of an
overseas branch or branches, whether
operated as separate company or
otherwise
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12. CA 2013 – CSR expenditure
• It shall not include dividend received form
such other companies in India, which are
covered under Section 135 and complying
with the applicable provisions
• In case Net profit calculated as per CA
1956, no need to recalculate
• Net profit of a foreign company shall be as
per Section 381 read with section 198
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13. CA 2013 – CSR Activities
• Must relate to Schedule VII – sec 135
• Not limited to activities specified in
Schedule VII – definition of CSR Rules
• Must relate to Schedule VII with wider
interpretations - General Circular No.
21/2014 dated 18/06/2014
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14. CA 2013 – CSR Activities
• Not be considered as CSR activity
- One of events, such as marathons,
awards, charitable contributions,
advertisements, sponsorships at TV etc.
- statutory payments
- Normal course of business
- for the benefit of employees/their families
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15. CA 2013 – CSR Activities
• Not to include
- direct/indirect contribution to political
parties under sec 182
- CSR activities out side India
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16. CA 2013 – CSR Activities
• To be considered as CSR activity
- as per approved CSR policy
- Ongoing activities falling within the ambit
of schedule VII would also qualify
- Approved CSR activities can be
undertaken by
- registered trust
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17. CA 2013 – CSR Activities
- registered society
- company set up by the company
- company set up by holding/subsidiary
- Collaborative CSR projects with other
companies, so that the respective CSR
committees are able to separately
report
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18. CA 2013 – CSR Activities
- Expenditure by Foreign holding co –
in India – routed through Indian
subsidiary – Indian subsidiary is
covered by sec 135
- contribution to corpus of trust / society
/ sec 8 company – formed exclusively
for CSR activities – corpus for activity
under schedule VII
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19. CA 2013 – CSR Activities
schedule VII
• eradicating hunger, poverty and
malnutrition, promoting preventive health
care and sanitation including contribution
to the Swach Bharat Kosh set-up by the
Central Government for the promotion of
sanitation and making available safe
drinking water; [vide Notification No.
G.S.R. 741(E), dated 24-10-14]
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20. CA 2013 – CSR Activities
schedule VII
• promoting education, including special
education and employment enhancing
vocation skills especially among children,
women, elderly, and the differently abled
and livelihood enhancement projects;
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21. CA 2013 – CSR Activities
schedule VII
• 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;
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22. CA 2013 – CSR Activities
schedule VII
• ensuring environmental sustainability,
ecological balance, protection of flora and
fauna, animal welfare, agro forestry,
conservation of natural resources and
maintaining quality of soil, air and water
including contribution to the Clean Ganga
Fund setup by the Central Government for
rejuvenation of river Ganga; [vide
Notification No. G.S.R. 741(E), dated 24-
10-14]2/24/2015 22

23. CA 2013 – CSR Activities
schedule VII
• protection of national heritage, alt 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;
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24. CA 2013 – CSR Activities
Schedule VII
• measures for the benefit of armed forces
veterans, war widows and their
dependents;
• training to promote rural sports, nationally
recognized sports, Paralympic sports and
Olympic sports;
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25. CA 2013 – CSR Activities
Schedule VII
• 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 Caste, the
Scheduled Tribes, other backward
classes, minorities and women;
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26. CA 2013 – CSR Activities
Schedule VII
• contributions or funds provided to
technology incubators located within
academic institutions which are approved
by the Central Government;
• rural development projects;
• slum area development [vide Notification
No. G. S. R 568(E), dated 06-08-14]
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27. CA 2013 - CSR Reporting
• By Indian Companies covered by 135
- w.e.f financial years commenced on or
after 01/04/2014, Board’s Report to
include report on CSR
• By Foreign companies covered by 135
- Balance Sheet under section 381 to
include an annexure on CSR activity
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28. CA 2013 – Reporting format
1. A brief outline of the company’s CSR policy,
including overview of projects or programs
proposed to be undertaken and a reference
to the web-link to the CSR policy and
projects or programs.
2. The Composition of the CSR Committee.
3. Average net profit of the company for last
three financial years.
4. Prescribed CSR Expenditure (two per cent.
of the amount as in item 3 above).
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29. CA 2013 – Reporting format
5 Details of CSR spent during the
financial year.
• (a) Total amount to be spent for the
financial year;
• (b) Amount unspent , if any;
• (c) Manner in which the amount spent
during the financial year is detailed below.
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30. CA 2013 – Reporting format
(1) (2) (3) (4) (5) (6) (7) (8)
S.No CSR project or
activity
identified.
Sector
In which
the Project
Is covered.
Projects or
programs
(1) Local area
or other
(2) Specify
the State and
district where
projects or
programs was
undertaken.
Amount
outlay
(budget)
project
or programs
wise.
Amount
spent on the
projects or
programs
Sub heads:
(1) Direct
expenditure
on projects
or programs.
(2) Overheads:
Cumulative
expenditure
upto to the
reporting
period.
Amount spent:
Direct or
through
Implementing
agency.
1
2
3
TOTAL
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31. CA 2013 – Reporting format
6. In case the company has failed to spend the
two per cent of the average net profit of the
last three financial years or any part
thereof, the company shall provide the
reasons for not spending the amount in its
Board report.
7. A responsibility statement of the CSR
Committee that the implementation and
monitoring of CSR Policy, is in compliance
with CSR objectives and Policy of the
company.2/24/2015 31

32. CA 2013 – signatories to CSR
Report
1 CEO or MD or Director and
2 Chairman CSR Committee and
3 Person specified under clause (d) of sub-
section (1) of section 380 of the Act
(wherever applicable)
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33. CSR Expenditure – Tax
implication
• Companies Act 2013 prescribes that
certain companies (refer slide 4), covered
by section 135 has to spend at least 2% of
average net profit of preceding 3 F Y.
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34. CSR Expenditure – Tax
implication
• Companies Act 2013 does not clearly
indicate whether CSR expenditure would
be part of PAT or PBT
• However, the honourable finance minister,
while delivering the Budget on 10/07/2014
made it absolutely clear by stating that
- “CSR expenditure, being an application
of income, is not incurred wholly and
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35. CSR Expenditure – Tax
implication
exclusively for the purposes of carrying on
business. As the application of income is
not allowed as deduction for the purposes
of computing taxable income of a
company, (the) amount spent on CSR
cannot be allowed as deduction for
computing the taxable income of the
company.”
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36. CSR Expenditure – Tax
implication
• Further the Finance Act 2014, vide Section
13, modifies Section 37 of the Income Tax
Act 1961, as follows;
• - In section 37 of the Income-tax Act, in
sub-section (1), the Explanation shall be
numbered as Explanation 1 thereof and
after Explanation 1 as so numbered, the
following Explanation shall be inserted
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37. CSR Expenditure – Tax
implication
• with effect from the 1st day of April, 2015,
namely:—
“Explanation 2.—For the removal of
doubts, it is hereby declared that for the
purposes of sub-section (1), any
expenditure incurred by an assessee on
the activities relating to corporate social
responsibility referred to in section 135 of
the Companies Act, 2013
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38. CSR Expenditure – Tax
implication
shall not be deemed to be an expenditure
incurred by the assessee for the purposes
of the business or profession.”.
• As such, with effect from assessment year
2015-16, CSR expenses can not form part
of business expenses.
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39. CSR Expenditure – Tax
implication
• However, contributions to PMRF and other
funds and other approved schemes would
qualify for deductions under 80G and other
applicable provisions of the Income Tax
Act 1961
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40. CSR – Certain Issues not
addressed in the act
• What would be the treatment of the
unspent amount?
• How many times in a year the CSR
Committee must meet?
• Who should be the Chairman of the CSR
Committee?
• What would be the quorum for a meeting
of the CSR Committee?
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41. CSR - Understanding the
Legislative Intent
• Legislation of CSR started in the year
2009. India is the first country in the world
to legislate CSR. Corporate Social
Voluntarily Guidelines, 2009 came in the
year 2009;
• Department of Public Enterprises (DPE)
issued Guidelines for CPSUs in the year
2009;
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42. CSR - Understanding the
Legislative Intent
• National Voluntary Guidelines on Social,
Environmental and Economic
Responsibility of Business, 2011 came in
the year 2011;
• Whereas policy for the Government for
Private Companies has been “ Do or
Explain Basis” for CPSUs it is strict
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43. CSR - Understanding the
Legislative Intent
• Corporate Social Responsibility Voluntary
Guidelines in 2009, softly proposed CSR
to the Corporate sector;
• National Voluntary Guidelines on Social,
Environmental and Economic
Responsibilities of Business, 2011 added
sustainability as a factor and bought the
concept near to the concept of CSR in the
International arena;
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44. CSR - Understanding the
Legislative Intent
• Companies Act, 2013 specify minimum
two percent as a CSR spend;
• Finance Act, 2014 confirmed without
ambiguity that expenditure on CSR would
be an appropriation of profit;
• Recently, MCA has constituted a high
power Committee to ensure CSR in India.
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45. BIG THANKS FOR BEING A
WONDERFUL AUDIENCE
Last but not the least……….
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