Corporate Social Responsibility (CSR) in India mandates companies to allocate 2% of their average net profits from the preceding three years toward social, environmental, and economic development activities, and it is governed under the Companies Act, 2013

Applicability: Applies to companies meeting any of these thresholds in the prior financial year:

  • Net worth of ₹500 crore or more.
  • Turnover of ₹1,000 crore or more
  • Net profit of ₹5 crore or more.
  • Qualifying firms must form a CSR Committee (with at least three directors, including one independent), formulate a CSR policy, and spend the mandated amount on Schedule VII activities.

Key Provisions

  • Companies spend at least 2% of their average net profits annually.
  • Unspent amounts go to specified funds or accounts, with reporting mandatory in annual reports.
  • The 2019 Amendment introduced penalties for non-compliance (up to twice the unspent amount), and allowed contributions to central schemes like PM CARES.
India is the first country to enforce quantified CSR spending legally, integrating corporate contributions into national development goals.

 

Source: The Hindu