Csr Amendments 2019

Corporate Social Responsibility (CSR) is an initiative for corporate entities to contribute positively to society and foster social welfare. In India, CSR was introduced under Section 135 of the Companies Act of 2013. The Act saw significant modifications in 2019 to better its application and ensure greater compliance. This article delves into the changes made to Section 135 and how they impact business operations in India.

Corporate Social Responsibility in India

Introduced under Section 135 of the Companies Act, 2013, CSR mandates certain profitable companies to allocated portions of their profits towards socially beneficial activities. Learn more about CSR policy amendments. Activities supported by CSR contributions include:

Eradicating hunger and poverty, and improving nutrition
Promoting health care, including preventive health care and sanitation
Supporting education and enhancing vocational skills
Encouraging gender equality and empowering women
Safeguarding the environment and promoting sustainability
Preserving national heritage, art, and culture
Providing aid and support to the armed forces
Promoting sports and providing necessary training
Participating in relief efforts during disasters

Companies that fall under the criteria need to set up a CSR committee to develop and monitor CSR projects. For insights into governance practices, visit Corporate Governance Basics.

Funding CSR Initiatives

Corporates specified by the Act must allocate at least 2% of their average net profits from the past three years to CSR activities. Such financial commitments ensure substantial contributions to societal wellbeing and sustainable economic growth. Discover more about governance related to CSR here: Enhanced Governance Practices.

Key Amendments of 2019

Applicability for Companies

The amendments to Section 135 apply to companies that have not yet completed three years but still meet certain financial criteria. New ventures equally share the obligation:companies with a net worth of INR 500 Crores or more, an annual turnover of INR 1,000 Crores or more, or a net profit of INR 5 Crores or more must contribute accordingly. For a deeper understanding of these key changes, see Key CSR Policy Changes.

Transfer to Section VII Funds

In instances where companies are unable to utilize CSR funds fully, the unspent amount must be transferred to a fund specified in Schedule VII, such as the Prime Minister's National Relief Fund, within six months after the financial year ends. This provision ensures greater accountability and aims to amplify community impact by redirecting unused balances effectively.

Transfer to Unspent CSR Account

Any unspent amounts designated for ongoing projects should be moved to a special account titled the "Unspent Corporate Social Responsibility Account" within thirty days of the financial year's end. This allocation must be used within three years; otherwise, the funds are transferred to a Schedule VII Fund allocation. Understand the protocols for unused funds: MCA Governance Guidelines.

Compliance and Penalties

If a company does not adhere to provisions prescribed under the newly amended Section 135, it faces penalties ranging from INR 50,000 to INR 25 Lakhs. Additionally, any officer responsible for non-compliance may face fines or imprisonment up to three years. Ensuring compliance with these regulations underscores the seriousness of the CSR mandate.

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Frequently Asked Questions

Common questions about CSR Amendments 2019.

Corporate Social Responsibility (CSR) is a way for companies to contribute to the welfare of society through various social activities. In India, CSR is governed by Section 135 of the Companies Act, 2013, which mandates certain profitable companies to spend a part of their profits on CSR initiatives.

The Companies Act lists several eligible CSR activities, including eradicating hunger and poverty, promoting education and healthcare, ensuring environmental sustainability, protecting national heritage, and contributing to the welfare of armed forces and sports development.

Companies with a net worth of INR 500 crores or more, an annual turnover of INR 1,000 crores or more, or a net profit of INR 5 crores or more during the immediately preceding financial year are required to constitute a CSR committee.

Companies are required to spend at least 2% of their average net profits from the immediately preceding three financial years on CSR activities.

The 2019 amendments clarified that companies not completing three financial years since incorporation must contribute CSR funds based on their profits from the available financial years. They also introduced provisions for transferring unspent CSR funds to specific accounts or funds.

Companies must transfer unspent CSR funds related to ongoing projects to a separate 'Unspent Corporate Social Responsibility Account' within 30 days of the financial year-end. These funds must be utilized within three financial years, failing which they must be transferred to a fund specified in Schedule VII of the Act.

Non-compliant companies may face a fine of INR 50,000 to INR 25 lakh, while their officers may face imprisonment up to three years, a fine of INR 50,000 to INR 5 lakh, or both.

The amendments clarify that companies not completing three financial years since incorporation must contribute CSR funds based on their profits from the available financial years, instead of being exempted from CSR obligations.

The purpose of transferring unspent CSR funds to funds specified in Schedule VII, such as the Prime Minister's National Relief Fund, is to ensure that the funds are utilized for social welfare purposes even if the company is unable to spend them directly.

No, companies must undertake CSR activities listed in Schedule VII of the Companies Act, 2013, which includes specific areas like education, healthcare, environmental sustainability, and national heritage protection.