What is not CSR as per Indian law?

Corporate Social Responsibility (CSR) was declared mandatory by the Government of India on 1st April, 2014. As per the Companies Act of 2013, Section 135, companies that meet certain turnover and profitability requirements, will have to spend at least 2% of their average net profit of the previous three years on CSR activities. Companies will also have to mention in detail about their CSR initiatives in their annual reports. India, having the most elaborated CSR mechanism, has set a benchmark in attaining sustainability goals and stakeholder activism in nation building.

Today we are here to discuss what kind of charity/donations/philanthropic activities are not recognised as Corporate Social Responsibility (CSR) in India. However, before understanding what is not CSR as per the Indian Government, we must take a look at the activities which are counted as CSR in India. What kind of activities come under CSR as per the Indian law?

What is CSR as per Schedule VII

Here is a list of permitted CSR activities under Schedule VII of Companies Act 2013

In every company, the Board of Directors shall ensure that the activities included in its CSR Policy fall within the purview of the activities included in schedule VII of the Companies Act. The activities specified in Schedule VII which may be included by companies in their Corporate Social Responsibility Policies are as follows:

1.Eradicating poverty, hunger and malnutrition, promoting health care which includes sanitation and preventinve health care, contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.

2. Improvement in education which includes special education and employment strengthening vocation skills among children, women, elderly and the differently-abled and livelihood enhancement projects.

3. Improving gender equality, setting up homes and hostels for women and orphans, empowring women, setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.

4. Safeguarding environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining a quality of soil, air and water which also includes a contribution for rejuvenation of river Ganga.

5. Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts.

6.Measures for the benefit of armed forces veterans, war widows and their dependents, Central Armed Police Forces (CAPF) and Central Para Military Forces (CPMF) veterans, and their dependents including widows.

7. Training to stimulate rural sports, nationally recognized sports, Paralympic sports and Olympic sports.

8. Contribution to the Prime Minister’s National Relief Fund, Prime Minister’s Central Assistance and Relief in Emergency Situations Fund (PM CARES Fund) or any other fund set up by the Central Government for socio-economic development providing relief and welfare of the Scheduled Castes, the Scheduled and backward classes, other backward classes, minorities and women.

9. Contribution to incubators or research and development projects in the field of science, technology, engineering and medicine, funded by the Central Government, State Government, Public Sector Undertaking or any agency of the Central Government or State Government.

10. Contributions to public funded Universities, IITs, National Laboratories and autonomous bodies established under DAE, DBT, DST, Department of Pharmaceuticals, Ministry of AYUSH, Ministry of Electronics and Information Technology and other bodies, namely DRDO, ICAR, ICMR and CSIR, engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).

11. Rural development projects.

12. Slum area development. Slum area means any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force.

13. Disaster management, including relief, rehabilitation and reconstruction activities.

What is NOT CSR as per Indian law?

As per Rule 2(1)(d) of the Companies (CSR Policy) Rules, 2014, the following activities are excluded from being considered as eligible CSR activity:

Activities undertaken in pursuance of the normal course of business of the company are not CSR.

Activities undertaken outside India, except for training of Indian sports personnel representing any state/UT at the national level or India at the international level are not CSR.

Contribution of any amount, indirectly or directly, to any political party under Section 182 of the Act is not CSR.

Activities benefiting employees of the company are not CSR.
Sponsorship activities for deriving marketing benefits for products/services are not CSR.

Activities for fulfilling statutory obligations under any law in force in India are not CSR.

The Indian law does not consider any contribution made in kind as CSR as the law categorically mentions ‘spending’ wherein it states that ‘the Board of every company referred to in sub-section [1], shall ensure that the company ‘spends’, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.’

One-time events are also not considered CSR. Events like marathons, awards, charitable contributions, advertisements, sponsorships of TV programmes etc or which are aimed at generating marketing benefits for the company’s products/services.

Any contribution made to any political party directly or indirectly is not considered as CSR.

An international agency cannot act as an implementing agency for CSR programmes. However, a company is allowed to take their service for a few selected purposes like designing, monitoring and evaluating the CSR projects or programmes or for capacity building of the company’s employees who are involved in CSR activities.

Any donation of money contributed to the corpus of a Trust/Society/Section 8 company which is not created solely for undertaking CSR activities or for the purpose directly related to the activities covered in Schedule VII of the Act is not CSR.

CSR activities cannot be solely utilized as a tool for brand marketing by a company.

The maximum duration for an ongoing CSR project is three financial years, excluding the financial year in which it commences, which means 1+3 years.