The Companies Act, 2013 has introduced several provisions which would change the way Indian corporates do business and one such provision is spending on corporate social responsibility (CSR) activities which has assumed

The provisions of Corporate Social Responsibility are dealt under section 135 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 and clarifications issued by the Ministry from time to time. Some of the important provisions are as under: As per Section 135 of the Companies Act 2013, every company having net worth of ₹500 crores or more, or turnover of ₹1000 crores or more or a net profit of ₹5 crores or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors out of which at least one director shall be an independent director. There need not be any independent director on the CSR Committee if the Company is unlisted Public Company or a Private Company. In case of Private Company CSR committee can be formed with two members. CSR Committee shall formulate and recommend Corporate Social Responsibility Policy which shall indicate the activity or activities to be undertaken by the company as specified in Schedule VII and also recommend the amount of expenditure to be incurred on CSR activities. The Board of every company shall ensure that that the company spends in every financial year at least 2% of the average net profit of the company made during the three immediately preceding financial years in pursuance of its CSR policy. Net Profit of a company for the purposes of Section 135 of the Companies Act, 2013 does not include the profit arising from any overseas branch of the company and the dividends received from other companies in India which are complying with Section 135 of the Companies Act, 2013. Where the company fails to spend such amount, the Board shall in its report specify the reasons for not spending the amount. The approach is to comply or explain. The company shall give preference to local areas where it operates, for spending amount earmarked for CSR activities. The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business. The Board of a company may decide to undertake its CSR activities approved by the CSR committee, through a registered trust or a registered society or a company established by the company or its holding or subsidiary or associate company under section 8 of the Act or otherwise. The CSR projects or programs or activities undertaken in India only shall amount to CSR expenditure. The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with section 135 of the Act. Contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity. In case the company has failed to spend the two percent of the average net profit of the last three financial years or any part thereof, the company shall provide the reasons for not spending the amount in its Board report. The reporting on Corporate Social Responsibility is to be made with the Registrar in e-form AOC-4. The CSR Policy of the company is required to be displayed on Company's website. The term CSR is not defined under the Act but Schedule VII of the Companies Act 2013 requires that the CSR policy created by the CSR committee must involve atleast one of the focus areas as mentioned in that schedule. The CSR activities should be according to the stated CSR policy, as projects or programs or activities (either new or ongoing). The CSR activities may be decided by the board to be undertaken through a registered trust or a registered society or a company established by the company or its holding or subsidiary or associate company, provided that if such trust, society or company is not established by the company or its holding or subsidiary or associate company, it shall have an established track record of three years in undertaking similar programs or projects; the company has specified the project or programs to be undertaken through these entities, the modalities of utilization of funds on such projects and programs and the monitoring and reporting mechanism. A company may also collaborate with other company but the reports of such projects shall be separately made as per the rules. CSR projects or programs or activities undertaken in India shall amount to CSR expenditure. CSR projects that benefits only the families of the employees shall not be considered as CSR activities. Companies can either conduct CSR activities by mobilizing their own personnel or through institutions having a track record of at least three years but such expenditure must exceed 5% of total CSR expenditure in one financial year. Contribution made to the any political party shall not be considered as CSR activity.