Govt provides clarity on CSR activities under Companies Act

Giving more clarity on social welfare spending norms for corporates, the government has said that "one-off events" such as marathons and sponsorships of television programmes cannot be considered CSR expense.

Under new Companies Act, a certain class of profitable entities must shell out at least two per cent of their three-year annual average net profit towards Corporate Social Responsibility (CSR) activity.

Asking stakeholders to "liberally" interpret the provisions in Schedule VII (Companies Act) — that relates to CSR works — the government has said that CSR activities should be undertaken only in "project/programme" mode.

"One-off events such as marathons/awards/charitable contribution/advertisement/sponsorships of TV programmes etc would not be qualified as part of CSR expenditure," the Corporate Affairs Ministry has said.

According to the Ministry, salaries paid by the companies to regular CSR staff as well as to volunteers (in proportion to company's time/hours spent specifically on CSR) can be factored in as CSR expenditure.

Clarifying about the time period of three years for calculating CSR spend, the Ministry has said "any of the three preceding financial years" would be taken into account for the purpose.