Corporate Social Responsibility (CSR) 

Corporate Social Responsibility (CSR)

Subject – Governance

Context –The Ministry of Corporate Affairs has clarified that excess Corporate Social Responsibility (CSR) expenditure prior to FY21 cannot be set off against future CSR expenditure requirements and that corporate donations to government schemes cannot be counted as CSR.

Concept –

• Companies with a minimum net worth of Rs 500 crore, turnover of Rs 1,000 crore, or net profit of Rs 5 crore are required to spend at least 2 per cent of their average profit for the previous three years on CSR activities every year.
• Excess of the mandated 2 per cent expenditure prior to FY21 is not eligible to be set off against future CSR requirements.
• The government had in May notified that donations made to the PM CARES fund on March 31, 2020 in excess of CSR requirements could be set off against CSR expenditure requirements for FY21.
• The FAQs also clarify that companies are required to transfer any unspent CSR funds to a separate bank account which cannot be used for business purposes.
• The clarification will also mean that any interest generated on unspent CSR funds will also have to be spent on CSR activities.

For more information on CSR, please refer to CSR.