Coming Up…Corporate Social Responsibility-2 percent rule

Corporates in India would now have to give an average of 2 percent of their profits to projects related to corporate social responsibility. Corporate Social Responsibility refers to holistic action taken by companies to improve positive social or environmental impact on the society.

The companies on whom the provisions of the CSR shall be applicable are contained in Sub Section 1 of Section 135 of the Companies Act, 2013. As per the said section, the companies having Net worth of INR 500 crore or more; or Turnover of INR 1000 crore or more; or Net Profit of INR 5 crore or more during any financial year shall be required to constitute a Corporate Social Responsibility Committee of the Board “hereinafter CSR Committee” with effect from 1st April, 2014. The pictorial representation below gives the representation of Section 135 (1).

This a huge positive development and would attract $2.9B (INR 20,000 crore) in investments for the social sector, a game changer looking at the improvised state of affairs in India for less privileged people. The danger would always be there that many companies would run shell companies which act as fronts for CSR activities while siphoning the money back to their businesses. But, the act greatly promotes accountability and transparency within the corporate giving system.

To be continued…