New CSR rules notified by Union Ministry of Corporate Affairs

Updated : 28-Feb-2014

Union Ministry of Corporate Affairs notified new Corporate Social Responsibility (CSR) rules for companies on 27th February 2014. 

These new CSR rules will become effective from 1st April 2014.

The new rules give effect to Section 135 and Schedule VII of the Companies Act, 2013.

Provisions : 

• Companies falling under ambit are required to spend 2 % of their 3 year average annual net profit on CSR activities in each financial year, beginning from the next fiscal year 2014-15.
• Company has to declare its CSR policy. This policy should mention plans/ activities /programmes or projects. These works should not be a part of routine business activities.
• Companies can undertake CSR activities as per the approval of the company’s board and decision of its CSR Committee in accordance with its CSR policy.
• Rules also define the manner in which CSR committee should formulate and monitor CSR policy, role of board of directors.
• A Company is permitted to collaborate with other companies in pursuing their CSR activities but they need to show their CSR reports separately.
• Companies are permitted to spend only 5% of the total CSR expenditure for manpower required for CSR activities in a single financial year. The manpower would include company’s own personnel and those of the implementing agencies.
• Company can also carry out CSR activities with a Society or a registered trust.
• Surplus from CSR activities cannot become a part of the profit of the company.
• Any type of contributions to any political party will not be treated as CSR activities. 
• Spending for the benefit of the company’s own employees also cannot be a part of CSR activity.
• All CSR activities will have to be within India.
• The new rules will be applicable to the foreign companies registered in India.