Companies Act That Mandates CSR in India to Get Changes

Nov 16, 2015 6:15 PM ET

Companies Act That Mandates CSR in India to Get Changes

We’ve been following developments in CSR in India since 2013, when the passage of the Companies Act mandated expenditures on CSR. Under the Act, a class of companies with high revenues is required to spend at least two percent of their three-year annual average net profits on CSR activities. The act took effect in April 2014. Initial reports earlier this year were that many companies were filing explanations of why they could not comply rather than certifying compliance.

One of the principal stumbling blocks has been an ambiguous definition of what qualified as CSR activities. In June, the Corporate Affairs Ministry set up a committee to study this and other implementation problems, and to make recommendations for changes in the law. Now the committee has proposed several ideas, from changes in rules related to CSR activities to possible Amendments to the Act. Specifics include clarification of the definition of the term 'net profit' used for deciding CSR spending criteria and varying tax credits for varied CSR activities. These ideas follow some rule changes already made to the Act by the Ministry. A final report is due in December. Clearly, by trying to get its unprecedented mandated CSR law right, India means business.

I’m John Howell for 3BL Media.

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