CORPORATESOCIAL

RESPONSIBILITYFor Corporate India

w.e.f. 1ST April, 2014

• Sec. 135 of the Companies Act, 2013• Applicability :

Every Company in India,if one of the following condition is met–

Net Worth of ₹ 500 Crore or more Turnover of ₹ 1,000 Crore or more Net Profit of ₹ 5 Crore or more

at any time during the financial year.

MINISTRY OF CORPORATE AFFAIRS, NOTIFIED

Sec. 135 & SCHEDULE VII OF THE COMPANIES ACT, 2013

• Companies falling under this section shall constitute a CORPORATE SOCIAL RESPONSIBILITY COMMITTEE.

• The committee shall consist of 3 or more directors,

out of which at least 1 shall be independent.

• CSR committee would be responsible to formulate CSR Policy, recommend the CSR activities as specified in Schedule VII & monitor the CSR expenditure.

• Board would be mandatorily required to disclose its CSR Policy in its report and on the company’s website.

Sec. 135 OF THE COMPANIES ACT, 2013

• The CSR contribution would be at least 2% of the average net profit made during the immediately preceding financial years.

• NET PROFIT = Net profit as per the financial statements of the

company as per section 198.BUT

Excludes:1. Profits generated outside India through

overseas branches & subsidiaries. 2. Any dividend received from other

companies in India that are complying the CSR provision u/s 135

QUANTUM OF PROFIT TO BE SPENT ON C.S.R. ACTIVITIES

• Once a company is covered under the CSR provisions as per sub section (1) of Section 135, the company will have to comply with the rules for 3 consecutive financial year, even if in the subsequent years these provisions do not apply to them.

• CSR activities must be undertaken in India only.

• Group companies or associates or even two or more independent companies can collectively set up a registered trust /society / separate company to undertake the CSR activities.

However reporting on CSR activities would be done separately.

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014

• Private & Unlisted companies are exempted from the requirement of appointing an Independent Director on the CSR committee.

• The expenditure incurred by the companies on CSR activities should not be ones incurred in the normal course of business. Clear distinction must be made between the two.

• The surplus arising of any CSR activities is not to be considered as business profits of the company.

• The CSR Policies & activities undertaken must be displayed on the website of the company as well as in the Board Report.

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014

• Foreign companies covered under CSR provision, would require to contribute on the profits from the operations in India.

The Net Worth / Turnover / Net Profit of a Foreign Company would be computed as per the Financial Statements prepared in accordance with the provisions of clause (a) of sub section (1) of Section 381 and section 198 of Companies Act, 2013.

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014

CSR Rules for FOREIGN COMPANIES

• Foreign companies covered under CSR provision, would require to contribute on the profits from the operations in India.

The Net Worth / Turnover / Net Profit of a Foreign Company would be computed as per the Financial Statements prepared in accordance with the provisions of clause (a) of sub section (1) of Section 381 and section 198 of Companies Act, 2013.

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014

CSR Rules for FOREIGN COMPANIES

• Any contribution to a political party; directly or indirectly.

• CSR projects for the Welfare of its own employees & its families.

• Any CSR expenditure incurred outside India.

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014

CSR Activities

• MCA through a notification on 27th Feb., 2014 amended the schedule and widened the scope of CSR activities.

• Now the revised Sch. VII is as follows :-1. Eradicating hunger, poverty, and malnutrition, promoting

preventive health care, sanitation and making available safe drinking water.

2. Promoting education, including special education and employment enhancing vocation skills among children, women, elderly, and differently abled and livelihood enhancement projects.

3. 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 socially, and economically backward groups.

SCHEDULE VII OF THE COMPANIES ACT, 2013

ACTIVITIES WHICH MAY BE INCLUDED BY COMPANIES IN THEIR CSR POLICY

4. 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.

5. 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.6. Measures for the benefit of armed forces veterans, war

widows, and their dependents.

7. Training to promote rural sports, nationally recognized sports, paralympic sports and olympic sport.

SCHEDULE VII OF THE COMPANIES ACT, 2013

ACTIVITIES WHICH MAY BE INCLUDED BY COMPANIES IN THEIR CSR POLICY

8. Contribution to 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 and the Scheduled tribes and other backward classes, minorities, and women.

9. Contribution or funds provided to technology incubators located within academic institutions which are approved by the Central Government.

10. Rural Development Projects.

SCHEDULE VII OF THE COMPANIES ACT, 2013

ACTIVITIES WHICH MAY BE INCLUDED BY COMPANIES IN THEIR CSR POLICY

FORMAT OF THE ANNUAL REPORT ON CSR

ACTIVITIES TO BE INCLUDED IN THE BOARD REPORT.

1. A brief outline of the Company’s CSR policy.2. Composition of CSR committee.3. Average net profit of the last three financial years.4. Prescribed CSR expenditure (2% of the net profit).5. Details of CSR spent during the financial year:

a) Total amount to be spent for the financial year b) Amount unspent; if anyc) Manner in which the amount spent during the

financial year.

STATEMENT SHOWING THE C.S.R. EXPENDITURE

FORMAT OF THE ANNUAL REPORT ON CSR

ACTIVITIES TO BE INCLUDED IN THE BOARD REPORT. 6. In case the company has failed to spend the two percent 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 the CSR objectives and Policy of the company.

8. The report shall be signed by CEO / MD / Director of the company Chairman of CSR committee Person specified under clause (d) of sub section (1) of

Section 380 of the Act. (in case of foreign company)

• Notification for the applicability of Sec. 135 & Sch. VII of the Companies Act, 2013

http://www.mca.gov.in/Ministry/pdf/CompaniesActNotification1_2014.pdf__________________________________________________• Notification: Companies (Corporate Social

Responsibility Policy ) Rules, 2014 http://www.mca.gov.in/Ministry/pdf/CompaniesActNotification2_2014.pdf__________________________________________________• Notification amending Sch. VII of the Companies

Act, 2013.http://www.mca.gov.in/Ministry/pdf/CompaniesActNotification3_2014.pdf

LINK TO NOTIFICATION

Presently there is no circular or notification issued by CBDT regarding the

tax treatment for CSR expenditure.

TAX TREATMENT OF CSR EXPENDITURE

ANANND KANKNICOMPANY SECRETARY

+91-9707056733