Indian Govt amends CSR rules to boost transparency

23 / 01 / 2021

By Times of India - -

The government on Friday amended the CSR spending rules under the Companies Act to provide greater transparency and flexibility to the corporate sector by allowing it to spend on projects that run for several years apart from permitting setting off excess expenses over three years.

At the same time, the detailed guidelines have prescribed the modalities of spending the funds that have to be earmarked from the profits. Besides, it has mandated registration of agencies implementing CSR activities on behalf of companies. The rules come after the government decriminalised the provisions related to CSR spending and exempted companies with under Rs 50 lakh annual obligation from setting up dedicated committees.

Under the Companies Act, 2013, a large number of profitable companies are mandated to earmark at least 2% of their three-year annual net profit towards corporate social responsibility (CSR) activities. To begin with, under the new norms, CSR funds can only be routed via notfor-profit companies registered under section 8 of the Companies Act, or public trusts or societies registered under the Income Tax Act or entities set up by the government or Parliament.

To provide flexibility, the ministry of corporate affairs has allowed companies to collaborate for CSR activities and also permitted them to create or acquire capital assets through CSR in the name of beneficiaries or a public authority or registered trust, among others.

Officials said the idea is to move from just looking at expenditure to focusing on impact of CSR projects implemented under the companies law. To boost transparency, agencies implementing CSR projects for companies need to register with the ministry’s MCA 21 portal and the system will automatically generate a unique CSR registration number. This will help track projects better and check false claims that are often made by companies.

Also, international organisations have been permitted to carry out designing, monitoring and evaluation of the CSR projects or programs.