Government makes changes to CSR spending norms under the new companies law

The government has made changes to the norms governing expenses on Corporate Social Responsibility (CSR) activities under the new companies law.

Certain class of profitable companies are required to shell out at least two per cent of their three-year annual average net profit towards CSR works. The requirement is part of theCompanies Act, 2013, most of whose provisions came into effect from April 1.

Under the rules, companies are allowed to build CSR capacities for their own personnel through other institutions provided such expenses does not exceed five per cent of the total expenditure incurred on social welfare activities in one financial year.

Providing more clarity for stakeholders, the Corporate Affairs Ministry has said the five per cent cap would include “expenditure on administrative overheads”.

The changes have been made to the Companies (Corporate Social Responsibility Policy) Rules, 2014, through a notification dated September 12.

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