Government modifies Regulations governing Corporate Social Responsibility

The government has required enterprises with any funds in their unspent corporate social responsibility accounts to set up a CSR committee. To this goal, the government has modified laws regulating corporate social responsibility (CSR), according to an official announcement published by the Ministry of Corporate Affairs. Under the Companies Act, 2013, certain groups of successful companies are expected to spend at least 2 per cent of their average net profit of the prior three financial years on CSR activities in a specific financial year

Under the CSR laws, money left unspent in a financial year linked to an ongoing project as well as any unutilised surplus originating from the CSR operations are obliged to be placed by the firm in a special bank

Prior to the modification, CSR laws restricted the spending of impact assessment that may be credited towards CSR responsibilities of a firm to 5 per cent of its CSR expenditure or Rs 50 lakh, whichever is lower. This ceiling has now been extended to the higher of 2 per cent or Rs 50 lakh, which would enable corporations to perform extensive impact assessment for large scale CSR initiatives and account for the same towards their CSR requirement.

Apart from this, the government has announced a new format for the annual report on CSR activities which is to be included in the board’s report for the financial year starting on or after April, 2020. Under the format, the composition of the CSR committee asks the firms to present the executive summary together with the weblinks of impact assessment of CSR initiatives carried out.

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