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CSR Laws in India

CSR
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India is one of the very few countries in the world to have a proper corporate social responsibility act. India is the first country in the world to legally mandate corporate social responsibility, followed by the United Kingdom. It has been done by the amendment of Companies Act, 2013 on 1st April 2014. Section 35 in the Indian Companies Act 2013 makes it compulsory for the companies to contribute to the social responsibility program.

Meaning of Corporate Social Responsibility 

Corporate social responsibility means that the companies have to spend some amount on social and environmental activities to help the concerned parties having a stake in companies’ work. Corporate Social Responsibility is also referred to as the “triple bottom line approach” which means that to promote commercial interests. The companies have to fulfill the social responsibilities of society at large. All the small and medium enterprises should promote the Corporate Social Responsibility Program by taking into consideration their respective fiscal capacity. They had to contribute according to their respective resources. 

The concept of CSR is based on the ideology of giving and take. Because the company takes resources in the form of raw materials like human resources etc. from society, so it must perform CSR activities for the development of society.

Statistics

The numbers of companies that fall within the purview of this law are not clear. But it is estimated that 16,000 to 17000 Companies come under the ambit of the CSR law. Also, the estimated amount to be spent annually varies from Rs. 10,000 to Rs. 20,000 crores, (1.5 to 3 billion US dollars). 

Corporate Social Responsibility Laws in India

  • The Companies Act 2013 has made the CSR compulsory project for the companies. Under section 135, it has made it compulsory for all the companies whether public or private has to follow corporate social responsibility provisions if they satisfy any of the following criteria;
  • If the net worth of the company is Rs. 500 crores or more. 
  • If the annual turnover of the company is Rs. 1000 crores or more. 
  • If the annual net profits of the company are at least Rs. 5 crores.

If a company meets any of these three fiscal conditions then it is required to create a CSR mandate. Further, it has been provided that these CSR rules are not only applicable to the Indian companies but also to the branches and project offices of foreign companies that are working in India.

  • The company has to spend at least 2% of its average net profit for the immediately preceding three financial years on CSR activities in India. 
  • Also, there should be a committee in the company, which shall consist of 3 or more members to take the CSR related decisions.
  • The CSR law in India provides detailed guidelines regarding what kind of activities the companies should do. The Issues on which the company should focus include hunger, poverty, education, health, gender equality, women empowerment, environmental protection, promotion of rural and national sports, Slum area development, etc. 
  • As per the amendment bill of 2016 along with the development of the local area the company should also try to contribute to the development of different areas across the country.

The Companies (Amendment) Act, 2019

    • As per the amendment if the company was not able to fully spend its CSR funds in a particular year so that amount could be carried forward and spending the next fiscal year in addition to the money that was already allotted for that year.
    • Also, the companies are required to deposit the unspent CSR into a specific fund prescribed under schedule VII of the act before the end of the year. Also, that amount must be utilized within the three years of transfer otherwise it will be deposited into one of the specified funds.
  • In case a company doesn’t follow the rules, the defaulting officer of the company shall be liable to pay a fine up to 5 Lac rupees or imprisonment up to three years or both. 

Conclusion

Corporate social responsibility in India is a step that brings a change in the working of corporate institutions. It is a step for the development of society through the companies because the companies take all resources from society and they should give back to society. So with the implementation of CSR, there is a great change in the country but still, there is a need for improvement. Because the law has failed to set up a full-proof method for imparting CSR. 

However, they are some big companies in the country which are working towards the development of society. 

Tata group has organized various programs that are working towards poverty alleviation, rural areas development, providing scholarships to numerous students, woman empowerment, and various other social welfare activities. Ultratech Cement, Mahindra & Mahindra, ITC group, and many other organizations are working very hard towards societal development. 

References

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Written by Yashika Jindal

Yashika is a second-year law student at UILS, Panjab University Chandigarh. She wants to a Judge so that she can serve society and bring a revolutionary change in the legal framework. She is a passionate and hard-working person who loves to learn new and innovative things. Apart from the law, she has a great interest in social work and music. She is always on the hunt for great opportunities that can help to develop her personality and legal skills.

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