The Indian government has mandated companies to plough back at least 2 per cent of its net profit for CSR purpose. This law is to apply to certain companies using the criteria of net profit, turnover and/or net worth within the country.
The companies are to spend this plough back on CSR activities in each financial year beginning 1st April. Rules have been put in place on how the activities would be formulated and monitored. Also, there are guidelines on what kind of CSR activities can be done. There is allowance to carry out these CSR activities through a society or a registered trust.
A part of the rule is that the CSR activity must be within India and foreign companies registered in India are not exempted. The rule also disallows donations to political parties or spending to benefit employees as a CSR activity. However, donations to healthcare, orphans and livelihood enhancement qualify as a CSR activity.
The technical Director, Sustainability and Climate Change, KPMG, Santhosh Jayaram has said that although the rules took a lot of time, the time has been justified by the clarity of the terms when compared to the draft.