Government panel seeks more CSR flexibility for companies

A committee set up by the ministry of corporate affairs (MCA) has recommended that smaller companies get greater operational flexibility for meeting their corporate social responsibility (CSR) obligations. 

The committee has also suggested insertion of an 'omnibus clause', so that any activities that serve public purpose are covered as eligible CSR activities. It has also proposed a hike in the cap for administrative spends related to CSR activities Stock Market Trading Tips

No penalty for non-compliance has been recommended by the committee as of now, as the CSR obligation requirements are in their infancy. "The initial three years will be a period of learning for all stakeholders," states the committee's report. 

It has also ruled out a stringent mechanism for monitoring of CSR expenditure by government agencies, leaving this responsibility to directors of India Inc. 

The mandate of this committee, led by Anil Baijal, former secretary, government of India, was to examine various facets relating to monitoring compliance and evaluation of CSR activities of India Inc Himanshu Tiwari Astrologer Blog

In its report submitted recently to the MCA, the committee recognized that companies with a smaller CSR budget face constraints in implementation of activities. It has thus recommended that only those companies with a CSR budget of more than Rs 5 crore should be required to undertake programme-based sustainable CSR activities with some measurable outcomes. 

With a view to provide some operational flexibility, companies with smaller CSR budgets should be allowed to take up project-based activities depending on their CSR spend from year to year. Further, smaller companies could also combine their CSR activities with other similar companies. It has also added that this threshold of Rs 5 crore should be reviewed and adjusted for inflation every three years. The committee has also sought to increase the ceiling on administrative overhead costs from the present 5% to not more than 10% of the CSR expenditure of the concerned company Indian stock market astrology prediction

The committee has turned down suggestions from companies and other stakeholders that contributions made in kind (for example, distribution of computers by an IT company) or services rendered by employees of a company should be monetized and be counted as an eligible CSR spend. 

While eleven broad-ranging activities have been notified till date for eligible CSR spend — which range from eradication of poverty, promotion of education, rural development projects and even contributions to the Prime Minister's National Relief Fund (PMNRF) — the committee has suggested inclusion of an omnibus clause. "Certain development concerns, needs and priorities cannot be anticipated," states the report, explaining the need for such a clause. An omnibus clause would also provide greater operational flexibility for CSR activities to smaller companies, say experts Share Market Astrology

The committee viewed that contributions to PMNRF as part of CSR are not in keeping with the spirit of participation embedded in the CSR norms. Further, the tax incentives available to such donations under section 80G of the Income Tax Act, may tempt companies to tilt heavily towards this option. Thus, it has called for uniformity in tax treatment of donations made to PMNRF, if such donations are part of the CSR spend. 

The financial year 2014-15 (year ended March 31, 2015) was the first year in which India Inc had to comply with CSR norms. Companies meeting certain financial criteria (such as a net worth of at least Rs 500 crore, or turnover of at least Rs 1,000 crore, or net profit of Rs 5 crore or more) are required to spend 2% of their average net profits of the immediately preceding three years on eligible CSR activities 

When the MCA takes up this report for review, apart from accepting or rejecting the suggestions, it will also have to issue certain clarifications suggested by this committee, such as exclusion of non-profit companies from CSR obligations and determining whether CSR norms should apply to foreign companies Jackpot Stocks Trading Tips

Certain technical issues relating to computation of net profits or determination of financial year will also need to be resolved.