CSR Updates

Government circular clarifies FAQs on CSR

Written by IDCL India August 27, 2021 0 comment

The Legal Side

Under the Companies Act, 2013, companies which have an annual turnover of Rs.1,000 crore or more or a net worth of Rs.500 crore or more or a net profit of Rs.5 crore are required to spend minimum 2% of their three-year average annual net profit towards CSR activities.

The Clarifications

The recently released FAQ document aims to clear some misconceptions regarding CSR and the first one prioritized is the expenditure excess of the 2% that can be set off for the next three years starting 2021. Government has also directed companies to ensure funds transferred are being utilized towards CSR based activities. Another vital interpretation regarding transferring unspent CSR funds to a separate bank account which cannot be used for other purposes. 

The circular also clarifies that funding government schemes cannot be counted as CSR, noting that “CSR should not be interpreted as a source of financing the resource gaps in government schemes.”

What next?

The FAQ document is aimed at strengthening the CSR environment by improving disclosures and simplifying compliances. It needs to be seen in the coming days the effectiveness of the same and the loopholes it has failed to address.  

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