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General Circular No. 21/2014:Clarifications with regard to provisions of Corporate Social Responsibility under section 135 of the Companies Act, 2013.
June, 23rd 2014
                                                                       General Circular No. 21/2014
                                          No. 05/01/2014- CSR
                                          Government of India
                                      Ministry of Corporate Affairs

                                                                                   5th Floor, `A' Wing,
                                                                      Shastri Bhawan, Dr. R. P. Marg
                                                                                 New Delhi - 110 001
                                                                               Dated: 18th June, 2014

All Regional Director,
All Registrar of Companies,
All Stakeholders

Subject: - Clarifications with regard to provisions of Corporate Social Responsibility under
                  section 135 of the Companies Act, 2013.


             This Ministry has received several references and representation from stakeholders
seeking clarifications on the provisions under Section 135 of the Companies Act, 2013 (herein
after referred as `the Act') and the Companies (Corporate Social Responsibility Policy) Rules,
2014, as well as activities to be undertaken as per Schedule VII of the Companies Act, 2013.
Clarifications with respect to representations received in the Ministry on Corporate Social
Responsibility (herein after referred as (`CSR') are as under:-

       (i)      The statutory provision and provisions of CSR Rules, 2014, is to ensure that while
                activities undertaken in pursuance of the CSR policy must be relatable to Schedule VII
                of the Companies Act 2013, the entries in the said Schedule VII must be interpreted
                liberally so as to capture the essence of the subjects enumerated in the said
                Schedule. The items enlisted in the amended Schedule VII of the Act, are broad-based
                and are intended to cover a wide range of activities as illustratively mentioned in the


(ii)    It is further clarified that CSR activities should be undertaken by the companies in
        project/ programme mode [as referred in Rule 4 (1) of Companies CSR Rules, 2014].
        One-off events such as marathons/ awards/ charitable contribution/ advertisement/
        sponsorships of TV programmes etc. would not be qualified as part of CSR

(iii)   Expenses incurred by companies for the fulfillment of any Act/ Statute of regulations
        (such as Labour Laws, Land Acquisition Act etc.) would not count as CSR expenditure
        under the Companies Act.

(iv)    Salaries paid by the companies to regular CSR staff as well as to volunteers of the
        companies (in proportion to company's time/hours spent specifically on CSR) can be
        factored into CSR project cost as part of the CSR expenditure.

(v)     "Any financial year" referred under Sub-Section (1) of Section 135 of the Act read with
        Rule 3(2) of Companies CSR Rule, 2014, implies `any of the three preceding financial

(vi)    Expenditure incurred by Foreign Holding Company for CSR activities in India will
        qualify as CSR spend of the Indian subsidiary if, the CSR expenditures are routed
        through Indian subsidiaries and if the Indian subsidiary is required to do so as per
        section 135 of the Act.

(vii)   `Registered Trust' (as referred in Rule 4(2) of the Companies CSR Rules, 2014) would
        include Trusts registered under Income Tax Act 1956, for those States where
        registration of Trust is not mandatory.


   (viii)   Contribution to Corpus of a Trust/ society/ section 8 companies etc. will qualify as CSR
            expenditure as long as (a) the Trust/ society/ section 8 companies etc. is created
            exclusively for undertaking CSR activities or (b) where the corpus is created
            exclusively for a purpose directly relatable to a subject covered in Schedule VII of the

   2. This issues with the approval of Competent Authority.

                                                                             Yours faithfully,

                                                                                   (Seema Rath)
                                                                        Assistant Director (CSR)
                                                                            Phone No. 23389622
Copy to:
   1.   PSO to Secretary
   2.   PPS to Additional Secretary
   4.   DIR (AK)/DIR (AB)/DIR(NC)/DIR(PS)
   5.   e-Governance Cell for uploading on website of MCA
Annexure referred to at para (i) of General Circular No. 21/2014 dated 18.06.2014
SI.    Additional items requested to be included in          Whether covered under Schedule VII of the
No.     Schedule VII or to be clarified as already                             Act
       being covered under Schedule VII of the Act

1.       Promotion of Road Safety through CSR:
         (i)    (a)       Promotions of Education,             (a) Schedule VII       (ii)   under   "promoting
                "Educating the Masses and Promotion                education".
                of Road Safety awareness in all facets
                of road usage,

                 (b) Drivers' training,                        (b) For drivers training etc. Schedule VII (ii)
                                                                   under "vocational skills".

                 (c) Training to enforcement personnel,        (c) It is establishment functions             of
                                                                   Government (cannot be covered).

                 (d) Safety traffic engineering and            (d) Schedule VII       (ii)   under   "promoting
                    awareness through print, audio and             education".
                    visual media" should be included.

         (ii)    Social Business Projects :          (ii) Schedule VII (i) under `promoting health care
                 "giving medical and Legal aid, including preventive health care.'
                 treatment to road accident victims"
                 should be included.

2.      Provisions for aids and appliances to the Schedule VII (i) under `promoting health care
      differently- able persons - `Request for inclusion including preventive health care.'

3.         The company contemplates of setting up            Item no. (ii) of Schedule VII under the head of
      ARTIIC (Applied Research Training and                  "promoting education" and "vocational skills"
      Innovation Centre) at Nasik. Centre will cover the     and "rural development".
      following aspects as CSR initiatives for the benefit
      of the predominately rural farming community:

          (a) Capacity building for farmers covering         (a) "Vocational skill" livelihood enhancement
              best sustainable farm management                   projects.

          (b) Training Agriculture Labour on skill           (b) "Vocational skill"
         (c) Doing our own research on the field for       (c) `Ecological balance', `maintaining quality of
             individual crops to find out the most cost        soil, air and water'.
             optimum      and Agri       ­    ecological
             sustainable farm practices.       (Applied
             research) with a focus on water

         (d) To do Product Life Cycle analysis from the    (d) "Conservation of natural resource" and
             soil conservation point of view.                  `maintaining quality of soil, air and water'.

4.       To make "Consumer Protection Services"
     eligible under CSR. (Reference received by Dr.
     V.G. Patel, Chairman of Consumer Education and
     Research Centre).

         (i)     Providing       effective    consumer
                 grievance redressal mechanism.
         (ii)    Protecting consumer's health and Consumer education and awareness can be
                 safety, sustainable consumption,
                                                        covered under Schedule VII (ii) "promoting
                 consumer service, support and education".
                 complaint resolution.
         (iii)   Consumer protection activities.
         (iv)    Consumer Rights to be mandated.
         (v)     all consumer protection programs and
                 activities" on the same lines as Rural
                 Development, Education etc.

5.      a) Donations to IIM [A] for conservation of
           buildings and renovation of classrooms
           would qualify as "promoting education" and
           hence eligible for compliance of             Conservation and renovation of school
           companies       with  Corporate     Social buildings and classrooms relates to CSR
           Responsibility.                            activities under Schedule VII as "promoting
        b) Donations to IIMA for conservation of
           buildings and renovation of classrooms
           would qualify as "protection of national
           heritage, art and culture, including
           restoration of buildings and sites of
           historical importance" and hence eligible
           for compliance of companies with CSR.
6.        Non Academic Technopark TBI not located Schedule VII (ii) under "promoting education", if
      within an academic Institution but approved and approved by Department of Science and
      supported by Department of Science and Technology.

7.       Disaster Relief                                     Disaster relief can cover wide range of
                                                           activities that can be appropriately shown under
                                                           various items listed in Schedule VII.        For
                                                               (i)      medical aid can be covered under
                                                                        `promoting health care including
                                                                        preventive health care.'

                                                              (ii)    food supply can be covered under
                                                                      eradicating hunger, poverty and

                                                              (iii)   supply of clean water can be covered
                                                                      under     `sanitation   and     making
                                                                      available safe drinking water'.

8.    Trauma care around highways in case of road           Under `health care'.

9.    Clarity on "rural development projects"              Any project meant for the development of rural
                                                           India will be covered under this.

10.   Supplementing of Govt. schemes like mid-day       Yes. Under Schedule VII, item no. (i) under
      meal by corporates through additional nutrition `poverty and malnutrition'.
      would qualify under Schedule VII.

11.   Research and Studies in the areas specified in   Yes, under the respective areas of items
      Schedule VII.                                  defined in Schedule VII.   Otherwise under
                                                     `promoting education'.

12.   Capacity building of government officials and         No.
      elected representatives ­ both in the area of PPPs
      and urban infrastructure.
13.     Sustainable urban development and urban              Not covered.
      public transport systems

14.   Enabling access to, or improving the delivery of, Can be covered under both the heads of
      public health systems be considered under the "healthcare" or "measures for reducing
      head "preventive healthcare" or "measures for inequalities faced by socially & economically
      reducing inequalities faced by socially & backward groups", depending on the context.
      economically backward groups"?

15.      Likewise, could slum re-development or EWS
      housing be covered under "measures for reducing           Yes.
      inequalities faced by socially & economically
      backward groups"?

                                                             Under `Environmental sustainability, ecological
16.      Renewable energy projects                           balance and conservation of natural resources',

17.      (i)    Are the initiatives mentioned           in
                Schedule VII exhaustive?                        (i) & (ii) Schedule VII is to be liberally
                                                                interpreted so as to capture the essence of
         (ii)   In case a company wants to undertake            subjects enumerated in the schedule.
                initiatives    for    the    beneficiaries
                mentioned in Schedule VII, but the
                activity is not included in Schedule VII,
                then will it count (as per 2(c)(ii) of the
                Final Rules, they will count)?

18.      US-India Physicians Exchange Program ­                 No.
      broadly speaking, this would be program that
      provides for the professional exchange of
      physicians between India and the United States.

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