Since the enactment of the Corporate Social Responsibility Law in India, the government has brought out several public notices, clarifications and amendments to bring clarity to various clauses of the law.
Here is a quick look at what is not permitted under the CSR Law:
1. Contribution in kind is not permissible as the law categorically mentions 'spending' wherein it states that 'the Board of every company referred to in sub-section , shall ensure that the company 'spends', in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.'
2. Spending on programmes and activities that benefits employees of the company or their families
3. One-time events are also not considered CSR. Events like marathons, awards, charitable contributions, advertisements, sponsorships of TV programmes etc or which are aimed at generating marketing benefits for the company’s products/services.
4. Contribution to political parties directly or indirectly.
5. Activities undertaken outside India also do not fall in the ambit of CSR. However, there is an exception for the training of Indian sports personnel from any State or Union Territory at the national level or India at the international level.
6. An international agency cannot act as Implementing agency.
However, a company is allowed to take their service for a few selected purposes like designing, monitoring and evaluating the CSR projects or programmes or for capacity building of the company's employees who are involved in CSR activities.
7. Any donation of money contributed to the corpus of a Trust/Society/Section 8 company which is not created solely for undertaking CSR activities or for the purpose directly related to the activities covered in Schedule VII of the Act.
8. The expenses that companies need to make to comply with any Act or law.
9. Activities undertaken by the company in line with its normal course of business.
However, there is a three-year exemption, from 2020 to 2023, for companies engaged in researching and developing new vaccines, drugs, and medical devices related to COVID-19 as part of their regular business operations. This exception applies only if the companies are collaborating with organisations mentioned in item (ix) of Schedule VII for Research Development and disclose it in their Board reports.
10. While CSR activities cannot be solely utilized as a tool for brand marketing by a company, any brand-building as a result of CSR programmes and processes won't be considered a detraction from the core essence of CSR.
11. The maximum duration for an ongoing project is three financial years, excluding the financial year in which it commences, which is equivalent to 1+3 years.
Disclaimer: This article has been published by Give Discover, an information platform providing browsable and searchable information about social impact in India. The purpose of the article is to simplify information for NGOs and companies implementing Corporate Social Responsibility projects. The above article is no substitute for the legal interpretation of the Bill or Act. Legal advice on these matters is advised and recommended. Give Discover does not take any responsibility for any loss or damage caused to any organization or individual in any manner, due to any step taken, directly or indirectly, based on the above article.