We have launched our mobile app, get it now. Call : 9354229384, 9354252518, 9999830584.  

Current Affairs

Government orders on CSR expenditure

Date: 01 September 2021 Tags: Miscellaneous

Issue

The excessive Corporate Social Responsibility (CSR) expenditure before FY21 could not be set off against future expenditure, according to Ministry of Corporate Affair.

 

Background

The government explanation came after several companies intended to avoid CSR citing their previous expenditure.

 

Details

  • Companies having net worth of Rs 500 crore, having turnover equal or above Rs 1,000 crore or net profit of Rs 5 crore have to spend 2% of their profits on CSR activities.

  • Expenditure above the compulsory limit of 2% can be set off against future expenditures for three subsequent fiscals.

  • The donations made by corporate to government schemes cannot be considered as CSR. Earlier, government had allowed contributions to PM CARES considered under CSR.

 

Key clarifications made

  • For counting as CSR expenditure, companies have to ensure that funds transferred to implementing agencies are actually utilised for the purpose they were intended.

  • The clarification regarding CSR towards government schemes will impact the donations made by the corporate to state government.

  • The money earmarked by company for CSR but not utilized will have to be transferred into a separate bank account and cannot be used for business purposes.

  • This also means that the interest gained on the funds that have been kept separately in bank account will also have to be used for CSR purposes.

 

Corporate Social Responsibility (CSR)

  • It is a management practice in which corporate uses their economic resources to implement projects that can bring social changes.

  • The aim behind CSR is to take up other pro-social objectives apart from just increasing profits.

  • These practices improve relations between the company and society. It enhances image and reputation of the brand.