New Delhi – The government has clarified that amended corporate social responsibility (CSR) laws are with prospective effect and companies have time until July 2024 to use accumulated CSR funds in projects of their choice, a media report said.
The Indian Parliament in July passed amendments to the Companies Act under which unspent CSR allocations would have to be transferred to a fund specified by the government.
The amended rules invite a three-year jail term and a penalty of Rs 50,000 to Rs 5 lakh or both for company executives and a penalty between Rs 50,000 and Rs 25 lakh could face for its employers for breach of the CSR rules.
Corporate affairs secretary Injeti Srinivas has allayed concerns that the government wants to appropriate unspent CSR funds to finance its own welfare programmes, the report said.
“The government’s intent is clear regarding the unspent CSR funds. It is neither to meet the budgetary gap nor for deficit financing. We will be too happy if companies utilise all unspent CSR money in projects of their choice and nothing is left [to be deposited in the proposed government fund],” the report said quoting Srinivas.
While leaving the window open until July 2024 for companies to use up their accumulated CSR money, the government is also working on setting up a national corpus with a “strong governance structure” to which unspent funds will need to be transferred if the deadline is not met, Srinivas further said as reported by the publication.
The corpus will be overseen by a body that will include industry representatives who are at the forefront of efforts to promote the causes of society and the environment, he said.
The companies are required to spend at least 2% of the amount of the net profit for the last 3 financial years under the Companies Act 2013.
The Act prescribes 17 areas of CSR activity in Schedule VII of the act. Section 135 of the Act lays down rules for CSR activity in India. The policy which became effective from 1 April 2014, mandates those companies for CSR activity which have net worth of Rs 500 crore or more; or turnover of Rs 1,000 crore or more; or net profit of Rs 5 crore or more during any financial year.
“Prosecution in 400 has already been ordered, but these cases have not been pursued as criminal cases ,and the matter can be settled through compounding. About 60 cases have already been settled through compounding. In some cases, extra time up to two years has been given to comply,” the report said quoting a ministry official.
