The Indian CSR laws specifies social sectors and work areas which fall under the ambit of Corporate Social Responsibility (CSR) in the country. This means that corporates need to spend their CSR budget on these specific areas only. The corporate spent on other than these specific activities are not considered to be eligible CSR activities as per the Indian CSR laws.
Read more to know which activities do not fall in the ambit of eligible CSR activities in India…
Q: Which activities do not qualify as eligible CSR activity?
A: The following activities are specifically excluded from being considered as eligible CSR activity:
(i) Activities undertaken in pursuance of normal course of business of the company.
However, exemption is provided for three financial years, till FY 2022-23, to companies engaged in R&D activities for new vaccines, drugs, and medical devices in their normal course of business, related to COVID-19.
(ii) Activities undertaken outside India, except for training of Indian sports personnel representing any State or Union Territory at national level or India at international level;
(iii) Contribution of any amount, directly or indirectly, to any political party
(iv) Activities benefitting employees of the company
(v) Sponsorship activities for deriving marketing benefits for products/services;
(vi) Activities for fulfilling statutory obligations under any law in force in India.
Q: Whether the companies can undertake any CSR activity mentioned under Schedule VII of the Act for the exclusive benefit of their employees, workers and their family members?
A: Any activity benefitting employees of the company is not considered as eligible CSR activity.
As per the rule, any activity designed exclusively for the benefit of employees shall be considered as an "activity benefitting employees" and will not qualify as permissible CSR expenditure. The spirit behind any CSR activity is to benefit the public at large and the activity should be non-discriminatory to any class of beneficiaries. However, any activity which is not designed to benefit employees solely, but the public at large, and if the employees and their family members are incidental beneficiaries, then, such activity would not be considered as "activity benefitting employees" and will qualify as eligible CSR activity.
Q: What is the meaning of sponsorship activities deriving marketing benefits for company’s products or services?
A: Sponsorship activities of an event are done with an aim of deriving marketing benefits for a company’s product or services. The intent of CSR is to encourage companies to undertake the activities in a project or programme mode rather than as a one-off event. Companies cannot use CSR purely as a marketing or brand building tool for their business, but brand building as a collateral benefit does not vitiate the spirit of CSR.
Q: Are activities undertaken by companies outside India for the benefit of resident Indians, permitted as eligible CSR activity?
A: The Companies (CSR Policy) Rules, 2014 clearly states that any activity undertaken by the company outside India shall not be an eligible CSR activity. The only exception is training of Indian sports personnel representing any State or Union Territory at national or international level.
Q: How can companies with small CSR funds take up CSR activities in a project mode?
A: A well-designed CSR project can be managed with small CSR funds as well. Further, there is a provision in the Companies (CSR Policy) Rules, 2014 that enables such companies to collaborate with other companies for undertaking CSR activities by way of pooling their CSR resources.
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