Amendment in CSR rules for impact assessment
Amendment in CSR rules – The Indian Ministry of Corporate Affairs (MCA) has revised the CSR regulations by loosening some requirements and strengthening effect evaluation for businesses covered by the CSR framework.
A clause stating, “Provided further that a company having any amount in its Unspent Corporate Social Responsibility Account as per sub-section (6) of Section 135 shall constitute a CSR Committee and comply with the provisions contained in sub-sections (2) to (6) of the said section” has been inserted under rule 3 sub-rule (1) by the new amendment.
The CSR provisions’ applicability is covered by Rule 3. For instance, rule 3’s subrule (1) states that CSR would be applicable to foreign enterprises that surpass the network, turnover, or profit criteria. Rule 3(2) of the same rule said that in order to determine whether CSR is applicable or not, you must look back three years.
Experts say that rule 3(2), which calls for a 3-year lookback, is no longer relevant.
The notification stated that the words “two percent” should be substituted for the terms “five percent” in rule 8’s sub-rule (3), clause (c),- I
In order to reflect this change, clause (c) will now read as follows: A Company undertaking Impact Assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed two percent rather than five percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is higher instead of whichever is less.
Amendment in CSR rules
Makarand Joshi, founding partner of MMJC and Associates, a corporate compliance consultancy, responded to the revised CSR guidelines by saying, “The revised rules have offered leniency to large firms implementing CSR and who are mandated to undertake impact assessment. The amount that can be spent on impact assessments is now permitted to be up to 2% of CSR obligations or Rs. 50 lacs, whichever is larger.
For instance, if a company’s CSR responsibility is worth Rs. 100 crore, only Rs. 50 lac could be spent on an impact assessment a year ago; this amount will now be increased to Rs. 2 crore, according to Joshi.
The amount of CSR funding for India Inc. is over Rs 25,000 crore per year, and proper assessment of the impact of these CSR activities in line with National Priority is done. According to him, the revised rules also exempt corporations from participating in CSR activities if they experienced losses in the previous financial year.
“Those businesses must, however, expend any unused or carryover CSR obligations from prior years. Previously, if a company had declared earnings of more than Rs 5 crore in any of the previous three financial years, even if it had losses in the most recent fiscal year, it was required to engage in CSR activity in the current fiscal year, Joshi said.