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Frequently Asked Questions
There are some basic queries: What is CSR? Who practices it? What are the rules? Our readers have sent myriad questions about the topic. So, in our FAQs on CSR, read on for answers to the most frequently asked questions about corporate citizenship.
What is CSR?
The full form of CSR is Corporate Social Responsibility. CSR is a law in India. Under this law, corporates in the country have to do social work. CSR is included in social work, which is necessary for the upliftment of society, to uplift the needy sections of society.
Which companies qualify for CSR in India?
In order to do business in India, any company has to get itself registered according to the Companies Act. But not every company in India comes under CSR. Small companies with very limited earnings are not obliged to spend on CSR. Corporate Social Responsibility has become mandatory through the provisions under Section 135 of the Companies Act, 2013. Every company that is private limited or public limited, has a net worth of Rs. 500 crore or more, or a turnover of Rs. 1,000 crore or more, or a net profit of Rs. 5 crore or more during any financial year has to spend a minimum 2% of the average net profits made during the 3 immediately preceding financial years.
Who can be the beneficiary of CSR?
Industrial houses and conglomerates spend crores of rupees on CSR every year. Monies directly benefit society and the community. The beneficiary of CSR is the common man, but only when he belongs to a community.
Can companies spend their CSR funds on an individual person?
No. According to the directive by the Ministry of Corporate Affairs (MCA), companies cannot directly bestow CSR funds on any individual. For example, if you are struggling with water shortage, then the company can plan an intervention to provide safe drinking water for your entire village. If the CSR initiative will solve the problem of drinking water in the village, and you are also a resident of the village, then you become one of the beneficiaries.
Do government-owned companies practise CSR like private companies?
Yes. Corporate social responsibility has been made mandatory through the provisions of section 135 of the Companies Act, 2013. Every company – private or government-owned – which comes under the purview of this rule has to spend on CSR. In fact, PSUs (Public Sector Undertaking) like Bharat Petroleum, Indian Oil, NTPC, are government-owned companies that practice CSR on a large scale.
Do companies contribute their CSR funds to government schemes?
Of course, the Government of India runs various welfare schemes across the country. The government spends crores of rupees to implement campaigns like Make in India and Beti Bachao, Beti Padhao. Large corporations work closely with the government to make these campaigns a success. Various government campaigns like Namami Gange and Swachh Bharat Abhiyan are showing impressive results due to corporate support.
How do companies decide which CSR activities to take up?
Companies have to conduct their CSR-related activities in accordance with clear guidelines set by the Ministry. According to the rule, every company must have a CSR committee. This committee and the Board of the company decide which activities to take up, when and in which locations. Most companies conduct these activities in the regions where they operate.
Which activities are considered as CSR?
This is among the most frequently asked questions by corporates. There are strict rules regarding what constitutes corporate social responsibility. The Companies Act prescribes the kind of social activities, which come under the purview of CSR. This list is included in the 7th schedule of the rule. Companies can choose from the following:
1. Protection of national heritage, art and culture, including buildings and sites and artworks of historical importance.
2. Promotion and development of traditional arts and handicrafts.
3. Establishment of public libraries.
4. Establishment of orphanages and hostels, construction of buildings for them, their maintenance and operation.
5. Establishment of old age home, construction of buildings for them, their maintenance and operation.
6. Establishment of day care centres, construction of buildings for them, their maintenance and operation.
7. Setting up of houses and hostels for women.
8. Training to promote rural sports, nationally recognized sports, Olympic Games and Paralympic Games.
9. Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly and Persons with Disabilities (PwDs) and livelihood enhancement projects.
10. Funding for technology incubators located in educational institutions recognized by the Central Government.
11. Activities to provide safe drinking water.
12. Activities to maintain soil, air and water quality.
13. Conservation of natural resources.
14. Ensuring ecological balance.
15. Conservation of flora, fauna, animal welfare, agricultural forestry.
16. Rural Development Projects.
17. Livelihood related projects.
18. Promoting health and hygiene.
19. Working for socially and economically backward groups.
20. Interventions for the benefit of the widows of war martyrs, and their dependents.
21. Contribution to the Prime Minister’s Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) or any other fund set up by the central govt. for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women.
Did companies in India spend on CSR before it became mandatory by law?
The CSR law was enshrined in the Companies Act on 1 April 2014. Since then, CSR became mandatory in India but even before that, a few Indian companies used to do social welfare of their own volition.
Which activities are not considered as CSR expense?
According to Section 135 of the Companies Act, those CSR activities which only benefit the employees of the company and their families will not be considered as CSR activities. Programmes like marathons / awards / charitable contributions / advertising / sponsorship of TV programmes will not be eligible for CSR expenditure.
Can companies donate to political parties under CSR?
No, CSR budgets are meant for the good of society and not for any political party. Contribution of any amount directly or indirectly to any political party is not considered as CSR activity.
Are disaster relief operations eligible for CSR?
During the COVID-19 pandemic, the MCA declared that companies can now directly donate their CSR funds to the PM CARES Fund. The central government has clearly stated that the money donated to state governments will not come under the purview of CSR.
Can the amount spent on COVID-19 relief work be considered as CSR expenditure?
The Ministry of Corporate Affairs in General Circular No. 10/2020 dated 23 March 2020 clarified that spending for COVID-19 related activities would be valid within the scope of CSR. Apart from relief work, the circular noted that expenditure on healthcare in the prevention of COVID-19 is also considered as CSR.
This wraps up our frequently asked questions about corporate social responsibility. Do you have any more questions for us? We would be happy to satisfy your queries regarding corporate citizenship.