Companies can spend up to 5% of their total CSR fund in building CSR capacities of their own personnel or those of implementing agencies
As companies prepare to file their annual reports and include the last financial year’s corporate social responsibility (CSR) expenditure as required by the Companies Act, 2013, more loopholes and grey areas emerge.
The CSR rules, which came into force on 1 April last year under Section 135 of the new Companies Act, state that every company with a net worth of Rs.500 crore or more or a turnover of at least Rs.1,000 crore or a net profit of Rs.5 crore in a given financial year should spend 2% of their profit of the last three years on activities listed in Schedule VII of the rules, as CSR activities.
Under these rules, companies can spend up to 5% of their total CSR fund in building CSR capacities of their own personnel or those of implementing agencies. But companies feel this allocation is not enough for them to put in place the required infrastructure, which in turn will enable them to meet the 2% target.
Ranjit Singh, general manager (CSR and sustainability) at Maruti Suzuki India Ltd says, “While it is good to have a cap on overheads, salaries and training costs to avoid misuse, the 5% limit needs to be reviewed.” According to Singh, firms that implement CSR programmes directly with a large in-house team may find the cap restrictive, whereas the same may be adequate for firms working primarily through not-for-profits.
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