Key Changes in 2019
Exemptions to Start-ups: Complying corporations which are freshly incorporated and have not completed 3 years of establishment, the amount to be spend on the CSR activities will be equivalent to 2% of the net profits made by the company in the previous financial year as compared to 2% of the average net profits made by the company in the 3 immediately preceding financial years.
Carry Forward: If there are any unspent CSR funds during a financial year in respect to the "ongoing project", the company must transfer the amount to a special CSR Unspent Account within 30 days from the end of the financial year. The proceeds from the account must be utilized by the company in the period of the next 3 financial years and if the company fails to do the amount must be transferred to the fund specified under the Schedule VII of the Companies Act, 2013 known as Prime Minister's National Relief Fund or any fund used or socio-economic purpose by the Central Government within 30 days from the date of completion of the third financial year. This is also linked to the disclosure on unspent amounts.
Penalty: If the company fails to comply with the provision relating to creation of the CSR Committee, the amendments provide for the imposition of a penalty of not less than INR 50,000 but which may extend upto INR 2.5 Million along with imprisonment upto 3 years or fine of not less than INR 50,000 which may extend to INR 500,000 or with both.1
Compliance Monitoring: The Central Government has been empowered to make rules and issue directions to ensure compliance. This provision is ambiguous and potentially dangerous.Could this legally permit Central Government to issue general or special directions to a company or class of companies (e.g. Public Sector Undertakings) to contribute towards a specific government program or project?
The factors which have been driving the companies so that they pursue CSR agendas are fairly consistent across the corporate world, however once a company makes the decision to adopt CSR oriented activities, a plan must be implemented to carry out the CSR programme. CSR Implementation Guide by the International Institute for Sustainable Development (IISD) structures what is considered to be the six key components which go towards a coherent CSR plan.2 Effectively deployed, CSR activities could offer support to the Government in areas where Government is facing difficulty in implementation.
One of the most vital issues about CSR spend remains that the spending corporate gets no specific tax exemptions as the same does not fall within the definition of business expenditure. The Finance Act, 2014 also clarifies this position.
 Section 135, Companies (Amendment) Act, 2019
 Steering Committee on CSR constituted, Ministry of Corporate Affairs 2018
December 17, 2019
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