Legal Frameworks

Corporate Social Responsibility (CSR) in India has gained significant importance with the enactment of Section 135 of the Companies Act, 2013. This legal framework mandates certain companies to contribute towards societal development, ensuring that businesses play an active role in nation-building beyond profit-making.

What is Section 135 of the Companies Act, 2013?

Section 135 of the Companies Act, 2013, is the provision that governs CSR activities in India. It mandates companies meeting specific financial criteria to allocate a portion of their profits to social development activities.

Applicability of CSR Laws

As per Section 135, the CSR provisions apply to companies that meet any of the following criteria in the preceding financial year:

• Net worth of ₹500 crore or more, or
• Turnover of ₹1,000 crore or more, or
• Net profit of ₹5 crore or more.

If a company meets any of these conditions, it is required to comply with CSR regulations.

CSR Committee & Policy

Eligible companies must:

1. Form a CSR Committee consisting of at least three directors, including one independent director (for listed companies).
2. Draft a CSR Policy outlining the areas of intervention and strategies for implementation.
3. Ensure at least 2% of their average net profits (from the last three financial years) is spent on CSR activities.

Approved CSR Activities

The Companies Act, 2013, along with Schedule VII, outlines the broad areas where CSR funds can be allocated:

• Eradicating Hunger & Poverty: Contributions to food security and nutrition programs.
• Health & Sanitation: Support for healthcare, sanitation, and safe drinking water initiatives.
• Education: Promotion of education, including special education and vocational training.
• Gender Equality & Women Empowerment: Initiatives for women’s rights and equal opportunities.
• Environmental Sustainability: Investment in green energy, afforestation, and climate action.
• Protection of National Heritage: Restoration of historical sites and promotion of Indian arts.
• Support for Armed Forces Veterans: Welfare programs for war widows and their families.
• Rural Development Projects: Infrastructure and livelihood enhancement in rural areas.
• Disaster Relief & Pandemic Response: Aid during national emergencies like COVID-19.

CSR contributions can be made directly by companies or through registered trusts, societies, and NGOs.