Key Aspects of India’s Corporate Social Responsibility Mandate Clarified - India Briefing News

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Key Aspects of Indias Corporate SocialResponsibility Mandate Clarified

Posted on June 25, 2014 by India Briefing

DELHI The Ministry of Corporate Affairs (MC A) releas ed a new cir cular last Wednesday that clarifies

certain aspects of Indias corporate social re sponsibility (CSR) m andate .

General Circ ular No. 21/2014 (dated June 18 , 2014) clarifies a nu mber of aspects of the CSR

mandate, including specifying items that can be included under Sc hedule VII of the Companies Act

and what can an d cannot be considered a CS R expenditure.

Among the provisi ons outlin ed in Section VII o f Indias Companies Act 2013 , the CSR requirement

ha s receiv ed the most attention by far from domestic and foreign firms.

Often referred to as the 2 p ercent requiremen t, Indias CSR requ irement has made India the first

country in the world to mandate that qualifying companies contribute at least 2 percent of their

average net profits from the preceding three years to CSR.

RELATED: Indias Corporate Social Responsibility Mandate: The Companies Act 2013

Most n otably, Cir cular N o. 21/2014 clarifies:

One-off events s uch as m a ra tho ns, aw ards, charitable contributions, advertisements,

sponsoring TV programs, etc. do not qualify as CSR expenditures and should be checked

against Rule 4(1) of the Companies CSR Rules , 2014.

Expenses i ncurred for the fulfillmen t of any Act/Statute do not count as C SR expenditures.Salaries paid to CSR staff and volunteers participating in CSR activities can be factored into a

CSR project cos t as party of the CSR expenditure.

Expenditures incurred by a foreign holding company for CSR activities in India will qualify as

CSR expenditure of that companys Indian subsidiary.

Entries in Schedule VII of the Companies Act 2013 should be interpreted liberally to capture the

essence of the items when determining if an activity in pursuance of CSR policy relates to an activity

listed in Schedule VII. The Circular provides the following table for guidance on this point:

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