Corporate Social Responsibility (CSR):
Every Company, meeting the following criteria, shall constitute a CSR Committee of the Board, consisting of three or more directors, out of which, at least one director shall be an independent director.
Tests are either the net worth touches Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or net profit of Rs. 5 crore or more, during any financial year.
Functions of the CSR committee shall be formulation, recommendation and monitoring of CSR policy, as under:
Functions of the Board shall be approval of the CSR policy, as recommended by CSR committee, its disclosure in the board’s report and displaying it on the company’s web site, if any, and ensuring that the activities included in the CSR policy, as aforesaid, are undertaken by the company.
The Board of every company, shall ensure that the company spends at least two percent, in every financial year, of its average net profits made during three immediately preceding financial year for pursuing its CSR policy.
If the company fails to spend such amount, the board shall specify the reasons for not spending the amount and disclose it in its report.
If you are unsure of how to apply these rules (CSR Rules), make sure you speak to your Chartered Accountant or Tax Adviser. Getting it wrong could result in serious reporting breaches.
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