Corporate Social Responsibility Under Section 135 of

Companies Act 2013

Corporate Social Responsibility (CSR) implies a concept, whereby companies decide voluntarily to
contribute to a better society and a cleaner environment – a concept, whereby the companies integrate
social and other useful concerns in their business operations for the betterment of their stakeholders
and society in general in a voluntary way.

However, Section 135 of the Companies Act, 2013 ("Act") provides that certain companies must
mandatorily contribute a certain amount towards CSR activities. As per the Act, 'Corporate Social
Responsibility' means and includes but is not limited to:

 Projects or programs relating to activities specified in Schedule VII to The Act.

 Projects or programs relating to those activities which are undertaken by the Board of Directors
of a company in ensuring the recommendation of the CSR Committee of the Board as per
declared CSR Policy along with the conditions that such policy will cover subjects specified in
Schedule VII of the Act.

Which Company is required to constitute CSR committee:

Every company including its holding or subsidiary,

and a foreign company defined under section 2(42) of the

Companies Act, 2013 having its branch office or project office in

India, having

(1) Net worth:  `500 crores, or

(2) Turnover:  `1000 crores or

(3) Net profit:  `5 crore during the immediately preceding financial year shall constitute a Corporate
Social Responsibility Committee of the Board.

Any Company fulfilling the above criteria shall constitute a Corporate Social Responsibility Committee.

 The CSR Committee must comprise at least three directors, with at least one being an
independent director. If a company doesn't require an independent director, it should have at
least two directors in its CSR Committee.

Responsibilities of CSR Committee

The CSR Committee's responsibilities include:

 Formulating and recommending a Corporate Social Responsibility Policy (CSR Policy) to the
Board. This policy should outline the activities to be undertaken by the company in areas
specified in Schedule VII of the Companies Act.
 Recommending the amount of expenditure to be allocated to CSR activities.
  Monitoring the implementation of the CSR Policy over time.

Board's Responsibilities
 The Board must:

 Approve the CSR Policy recommended by the CSR Committee.

 Disclose the contents of the CSR Policy in the company's annual report and on its
website, if applicable.

 Ensure the execution of CSR activities as outlined in the CSR Policy.

Amount of contribution towards CSR:

In every financial year, the Board of every company shall ensure that the company spends:  2% of the
average net profits of the company made during the 3 immediately preceding financial years or where
the company has not completed the period of three financial years since its incorporation, during such
immediately preceding financial years in pursuance of its CSR Policy.

a) The company shall give preference to the local area and areas around it where it operates, for
spending the amount earmarked for CSR activities.

b) If the company fails to spend such amount, the Board shall, in its report, specify the reasons for not
spending the amount and, unless the unspent amount relates to any ongoing project, transfer such
unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the
financial year.

c) If the company spends an amount in excess of the requirements provided, such company may set off
such excess amount against the requirement to spend under this sub-section for such number of
succeeding financial years and in such manner, as may be prescribed. d) Any amount remaining unspent,
pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a
company in pursuance of its Corporate Social Responsibility Policy, shall be transferred by the company
within a period of 30 days from the end of the financial year to a special account to be opened by the
company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate
Social Responsibility Account.

Penal Provisions

If a company is in default in complying with the provisions, the company shall be liable to: Penalty: 2 X
the amount required to be transferred by the company to the Fund specified in Schedule VII or the
Unspent Corporate Social Responsibility Account, as the case may be, or 1 crore, whichever is less, and
every officer of the company who is in default: Penalty: 1/10th. of the amount required to be transferred
by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility
Account, as the case may be, or 2 lakh, whichever is less.
Where the amount to be spent by a company does not exceed 50 lakh rupees, the requirement for
constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions
of such Committee provided under this section shall, in such cases, be discharged by the Board of
Directors of such company.

Activities which may be included by companies in their CSR Policies (i.e.

Activities as specified under Schedule VII) are as follows:
(1) Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care
and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the
promotion of sanitation and making available safe drinking water;

(2) Promoting education, including special education andemployment enhancing vocation skills
especially among children, women, elderly, and the 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 by socially and economically backward groups;

(4) Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal
welfare, agro forestry, conservation of natural resources and maintaining quality of soil, air and water
including contribution to the Clean Ganga Fund set up by the Central Government for rejuvenation of
river Ganga;

(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 recognised sports, paralympic sports and Olympic sports;

(8) Contribution to the Prime Minister’s National Relief Fund or Prime Minister’s Citizen Assistance and
Relief in Emergency Situations Fund (PM CARES Fund) or any other -fund set up by the Central
Government for socioeconomic development and relief and welfare of the Scheduled Castes, the
Scheduled Tribes, other backward classes, minorities and women;

(9) Contribution to incubators funded by Central Government or State Government or any agency or
Public Sector Undertaking of Central Government or State Government, and contributions to public
funded Universities, Indian Institute of Technology (IITs), National Laboratories and Autonomous Bodies
(established under the auspices of Indian Council of Agricultural Research (ICAR), Indian Council of
Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR), Department of Atomic
Energy (DAE), Defence Research and Development Organisation (DRDO), Department of Biotechnology
(DBT), Department of Science and Technology (DST), Ministry of Electronics and Information Technology)
engaged in conducting research in science, technology, engineering and medicine aimed at promoting
Sustainable Development Goals (SDGs)

(10) Rural development projects;

(11) Slum area development

(12) Disaster management, including relief, rehabilitation and reconstruction activities