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Companies (CSR) Policy Rules 2021

Companies (CSR) Policy Rules 2021

Recently, the Government of India brought into effect the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 .

The Rules amended the exiting Companies (Corporate Social Responsibility Policy) Rules, 2014 .

What is Corporate social responsibility (CSR) 

  • Corporate social responsibility (CSR) is a type of business self-regulation with the aim of being socially accountable.                              Amendment on Companies (CSR) Policy Rules 2021
  • There is no one “right” way companies can practice CSR; many corporate CSR initiatives strive to positively contribute to the public, the economy or the environment.
  • Every qualifying company requires spending of at least 2% of its average net profit (Profit before taxes) for the immediately preceding 3 financial years on CSR activities in India.
  • Corporate social responsibility is a broad concept that can take many forms depending on the company and industry.
  • Contributions to the PM CARES Fund or any other fund set up by the Central government for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women will also be considered for CSR.            Companies (CSR) Policy Rules 2021

Overview New Amended Rules: [ Companies (CSR) Policy Rules 2021]

The Rules have amended the definition of Corporate Social Responsibility (“CSR”) to clarify that activities undertaken in pursuance of normal course of business of the company shall not be included under the ambit of CSR.

  • Mandatory registration: Entities have to register itself with the Central Government and fill the CSR-1 Form
    electronically with the Registrar of Companies from April 1, 2021.
  • The Rules have completely amended Rule 4 in the Existing Rules. The amended Rule 4 states that a Company can undertake CSR activities by itself or through any
  • (a) company incorporated under Section 8 of the Act;
  • (b) registered pubic trust;
  • (c) registered society under Sections 12A and 80G of the Income Tax Act, 1961
  •  (d) any entity established under an Act of Parliament or a State legislature; o
  • (e) any company incorporated under Section 8 of the Act, registered pubic trust, registered society under Sections 12A and 80G of the Income Tax Act, 1961                    Companies (CSR) Policy Rules 2021
  • Any donation to a political party under Section 182 of the Companies Act, 2013 or any activities carried out for fulfilment of any other statutory obligations under any law4 shall not be considered as CSR.
  • Any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23 as CSR. 
  • Impact assessment: Any corporation with a CSR obligation of Rs 10 Cr or more for the 3 preceding financial
    years would be required to hire an independent agency to conduct impact assessment of all of their projects
    with outlays of Rs 1 Cr. or more.              Companies (CSR) Policy Rules 2021
  • Mandatory disclosure of CSR projects: It would be placed on the website of the company to ensure accountability  of companies and a closer check on the compliance of rules.
  • Any activity undertaken by the company outside India shall not be considered as CSR unless such an activity pertains to training of Indian sports personnel representing the country at an international level or representing any state or union territory at a national level.
  • Administrative overheads: Board of company needs to ensure administrative overheads do not exceed 5% of
    the total CSR expenditure for a financial year.            Companies (CSR) Policy Rules 2021

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