Rule 4 delineates the scope of what is to be considered as CSR activities under the Companies Act, and provides that the CSR activities of a company shall not include:
(i) activities undertaken in pursuance of its normal course of business;
(ii) projects that benefit only the employees of the company and their families;
(iii) activities undertaken outside India; and
(iv) contributions to political parties.
The provision also provides that a company may not undertake CSR activities through an entity established by it or a group company, unless:
(i) that entity has an established track record of three years in undertaking those activities; and
(ii) the company specifies the project or programme to be undertaken through that entity, and the procedure for utilisation, monitoring and reporting in relation to the funds.
If the company chooses to implement its CSR activities through its own personal or through other agencies, expenditure incurred in this connection must not exceed 5% of the CSR expenditure of the company in a financial year. A company may collaborate with other companies in implementing CSR policies.
Rule 4. CSR Activities —
(l) The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business.
(2) The Board of a company may decide to undertake its CSR activities approved by the CSR committee, through a registered host or a registered society or a company established by the company or its holding or subsidiary or associate company under section 8 of the Act or otherwise:
(i) if such trust, society or company is not established by the company or its holding or subsidiary or associate company, it shall have an established track record of three years in undertaking similar programs or projects;
(ii) the company has specified the project or programs to be undertaken through these entities, the modalities of utilization of funds on such projects and programs and the monitoring and reporting mechanism.
(3) A company may also collaborate with other companies for undertaking projects or programs or CSR in such a manner that the CSR Committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules.
(4) subject to provisions of sub-section 5 of section 135 of the Act, the CSR projects or programs or activities undertaken in India only shall amount to CSR expenditure.
(5) The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered
as CSR activities in accordance with section 135 of the Act.
(6) Companies may build CSR capacities of their own personnel as well as those of their Implementing agencies through institutions with established track records of at least three financial years but such expenditure shall not exceed five percent of total CSR expenditure of the company in one financial year.
(7) Contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity.
Regulation /India / Companies Corporate Social Responsibility Policy Rules 2014
The Companies (Corporate Social Responsibility) Rules, 2014 came into effect on the 1st of April 2014, pursuant to the power given to the central government under sections 469 and 467 of the Companies Act (2013). The Rules set out specific requirements for the CSR activities and reporting duties of corporations in this area.