7/27/2014 Key Aspects of Indias Corporate Social Responsibility Mandate Clarified - India Briefing News

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Key Aspects of Indias Corporate Social
Responsibility Mandate Clarified
Posted on June 25, 2014 by India Briefing
DELHI The Ministry of Corporate Affairs (MCA) released a new circular last Wednesday that clarifies
certain aspects of Indias corporate social responsibility (CSR) mandate.
General Circular No. 21/2014 (dated June 18, 2014) clarifies a number of aspects of the CSR
mandate, including specifying items that can be included under Schedule VII of the Companies Act
and what can and cannot be considered a CSR expenditure.
Among the provisions outlined in Section VII of Indias Companies Act 2013, the CSR requirement
has received the most attention by far from domestic and foreign firms.
Often referred to as the 2 percent requirement, Indias CSR requirement has made India the first
country in the world to mandate that qualifying companies contribute at least 2 percent of their
average net profits from the preceding three years to CSR.
RELATED: Indias Corporate Social Responsibility Mandate: The Companies Act 2013
Most notably, Circular No. 21/2014 clarifies:
One-off events such as marathons, awards, charitable contributions, advertisements,
sponsoring TV programs, etc. do not qualify as CSR expenditures and should be checked
against Rule 4(1) of the Companies CSR Rules, 2014.
Expenses incurred for the fulfillment of any Act/Statute do not count as CSR expenditures.
Salaries paid to CSR staff and volunteers participating in CSR activities can be factored into a
CSR project cost as party of the CSR expenditure.
Expenditures incurred by a foreign holding company for CSR activities in India will qualify as
CSR expenditure of that companys Indian subsidiary.
Entries in Schedule VII of the Companies Act 2013 should be interpreted liberally to capture the
essence of the items when determining if an activity in pursuance of CSR policy relates to an activity
listed in Schedule VII. The Circular provides the following table for guidance on this point:
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7/27/2014 Key Aspects of Indias Corporate Social Responsibility Mandate Clarified - India Briefing News
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