In India, CSR is mandatory after the enactment of the Companies Act, 2013 by the Ministry of Corporate Affairs, Government of India. In lieu of this law, the companies are presented with an opportunity to participate in the development of the country by compulsory engagement in social welfare activities. In fact, India is the only country which has regulated and mandated CSR activities to be undertaken by certain categories of companies.
In the present times, the ambit of CSR activities has grown manifold and is playing an important part in achieving sustainable development goals and private-public partnership in nation-building. CSR has especially played a very important role in supporting the social and economic development of the country during the Covid-19 pandemic.
CSR is, therefore, an intrinsic part of operations of India Inc, and it is important to make sure that the resources spent on such activities are spent efficiently and transparently. Section 135 of the Companies Act, 2013 has made it mandatory for companies fulfilling certain criteria, to not only implement but also report CSR policies of the company. The rules framed under the Act and Notifications issued from time to time have provided extensive guidelines on the activities to be undertaken by the companies and the reporting of the same in the Annual Report of the Company.
Realising the necessity to provide guidance to ensure that there is transparency in the system and that resources are spent efficiently, the ICAI has released the technical guide to the industry and professionals on the accounting aspects of the CSR Expenditures. This Technical Guide is an effort made by the CSR Committee of ICAI towards meeting the expectations of the professionals and the stakeholders in this respect. This has effectively replaced the guidance note issued by the body earlier in 2015 on Accounting for Expenditure on Corporate Social Responsibility Activities.
The technical guidelines have set a standard framework to accounting for the CSR expenditures made by the companies, helping them maintain transparency, avail tax benefits and execute the projects more effectively. It has also facilitated the Chartered Accountants in filing and auditing taxes of the companies.