Nature of CSR spending rests with company’s board: Ministry of Corporate Affairs

Union Minister for Corporate Affairs Sachin Pilot clarified that, while the new Companies Act, 2013, stipulates the portion of profits that companies must spend on Corporate Social Responsibility (CSR) every year, they have the freedom to choose the specific activities to be funded. Though the law specifies the quantum of mandatory spending but it does not differentiate between charity, religious donations and sustainable philanthropy models for the purpose of delineating what mandatory CSR spending is.

What is Corporate Social Responsibility (CSR)?

Corporate Social Responsibility (CSR) is an obligation of companies as stipulated in the new Companies Act, 2013, passed by Parliament in August 2013.  According to this, profitable companies must spend every year at least 2% of their average net profit over the preceding 3 years on CSR activities. This mandatory CSR-spend rule will come into effect from fiscal 2014-15 onwards. Those companies that have a turnover of Rs. 1,000 crore or more or net worth of Rs. 500 crore or more or net profit of Rs. 5 crore or more will have to abide by this law.



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