Understanding CSR Compliance Under Companies Act 2013

What is CSR under Section 135?

The Companies Act 2013 introduced mandatory Corporate Social Responsibility (CSR) for qualifying Indian companies. Under Section 135, companies with a net worth of Rs 500 crore or more, turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more during any financial year must constitute a CSR Committee and spend at least 2% of their average net profits on CSR activities.

Key Compliance Requirements

• CSR Committee: Form a committee of 3 or more directors, with at least one independent director.
• CSR Policy: Formulate and recommend a CSR policy to the board, including activities and implementation plans.
• Spending Requirement: Spend at least 2% of average net profits from the 3 preceding financial years.
• Annual Reporting: File CSR annual report in the Board's Report and with the Registrar of Companies.

Schedule VII Eligible Activities

Schedule VII of the Companies Act lists eligible CSR activities including education, healthcare, gender equality, environmental sustainability, rural development, and more. Companies can undertake these activities directly or through registered trusts, societies, or Section 8 companies.

Penalties for Non-Compliance

Companies that fail to comply with CSR requirements may face penalties including fines up to Rs 25 lakh for the company and Rs 5 lakh to Rs 25 lakh for officers in default. The company must also deposit unspent amounts to a specified fund within 6 months of the financial year end.