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Understanding the Applicability of CSR under the CSR Act 2013

Corporate Social Responsibility (CSR) is no longer just a voluntary gesture of goodwill by corporationsu2014it has become a legal obligation for eligible companies in India. With the introduction of the CSR Act 2013, CSR became an essential part of business governance in the country. But what exactly is the applicability of CSR, and how does it affect Indian companies?<br>This document explores the key provisions of the CSR Act 2013, explains the corporate social responsibility of business, and clarifies how and when CSR laws apply.

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Understanding the Applicability of CSR under the CSR Act 2013

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  1. Understanding the Applicability of CSR under the CSR Act 2013: A Guide for Indian Businesses Introduction Corporate Social Responsibility (CSR) is no longer just a voluntary gesture of goodwill by corporations—it has become a legal obligation for eligible companies in India. With the introduction of the CSR Act 2013, CSR became an essential part of business governance in the country. But what exactly is theapplicability of CSR, and how does it affect Indian companies? This document explores the key provisions of the CSR Act 2013, explains the corporate social responsibility of business, and clarifies how and when CSR laws apply. Whether you are a business owner, compliance officer, or corporate strategist, understanding these laws is crucial for lawful and ethical business operations. What Is Corporate Social Responsibility (CSR)? CSR refers to a company’s responsibility toward the environment and society in which it operates. The corporate social responsibility of business includes actions that contribute to sustainable economic development while improving the quality of life for employees, their families, the local community, and society at large. CSR activities can range from improving environmental standards and supporting education to empowering women and providing disaster relief. In India, CSR is now regulated by law, making it a core component of corporate accountability. Overview of the CSR Act 2013 The CSR Act 2013 was introduced under Section 135 of the Companies Act, 2013. It mandates certain qualifying companies to allocate a portion of their profits towards CSR activities. This move made India one of the first countries to make CSR spending compulsory for companies falling under defined thresholds. Key Provisions of the CSR Act 2013:

  2. ● Companies meeting the specified financial criteria must spend at least 2% of their average net profits (over the past three years) on CSR activities. ● The company must form a CSR Committee comprising board members to oversee and implement the CSR strategy. ● A detailed report of CSR activities must be included in the company's annual board report. ● Companies must disclose their CSR policy publicly and provide justification in case of non-spending. Applicability of CSR: Who Must Comply? The applicability of CSR is defined under Section 135 of the Companies Act, 2013. Companies that meet any one of the following criteria during any financial year are required to comply with CSR provisions: ● Net worth of ₹500 crore or more ● Turnover of ₹1,000 crore or more ● Net profit of ₹5 crore or more If a company meets these thresholds, it is required to spend 2% of its average net profits on CSR activities. The law applies to both private and public limited companies, including subsidiaries and holding companies. Even if a company falls below these limits in a subsequent financial year, it must continue CSR spending for that year if it met the criteria in the previous year. Corporate Social Responsibility of Business: Why It Matters In the current business climate, CSR is not just a legal formality but a key part of building a responsible and resilient brand. The corporate social responsibility of business goes beyond compliance to reflect a company’s values, culture, and commitment to social and environmental welfare.

  3. Benefits of CSR for Businesses: ● Builds brand trust and customer loyalty ● Enhances investor relations and confidence ● Improves employee engagement and retention ● Contributes to the long-term sustainability of operations ● Supports regulatory compliance and risk management Companies that actively engage in CSR initiatives are viewed more favorably by customers, employees, and investors alike. CSR Spending: Focus Areas As per Schedule VII of the Companies Act, companies can spend CSR funds in the following areas: ● Promoting education, especially among underprivileged children ● Promoting gender equality and empowering women ● Combating diseases and improving public health ● Ensuring environmental sustainability and conservation ● Contribution to disaster relief and pandemic recovery ● Eradicating hunger, poverty, and malnutrition These focus areas enable companies to align their CSR strategies with national development goals. Conclusion The applicability of CSR in India is clearly defined under the CSR Act 2013, and companies must carefully evaluate whether they fall under its ambit. CSR is not just a statutory requirement but a strategic opportunity for companies to align their operations with social development. As the expectations from businesses continue to grow, understanding and effectively implementing CSR practices will remain a key differentiator for companies operating in India.

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