Giving Compass' Take:
- The Government of India amended the regulatory framework for corporate social responsibility to be more transparent about CSR spending and accounting.
- How will these amendments help CSR efforts become more effective?
- Learn more about CSR giving in India.
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On January 22, 2021, the Government of India amended the regulatory framework for corporate social responsibility in India (“New Rules”). The New Rules now cast the spotlight on the “responsibility” portion of CSR initiatives, increasing governance and transparency of CSR spends. At the same time, the New Rules signal a significant shift from the “name and shame” philosophy adopted previously, with the introduction of monetary penalties for non-compliance. In this post, we briefly highlight key changes of the New Rules and their impact on CSR spending and accounting.
- Strategic and deeper involvement by corporates: Firstly, the New Rules now require CSR Committees of corporates to frame more robust CSR policies, articulating in greater detail their CSR philosophies, potential spends and monitoring mechanisms.
- Transparent Implementation: The New Rules focus on both sides of the implementation coin, i.e., on not-for-profit implementing agencies as well as corporate grantors.
- Separation of Unspent CSR funds: The New Rules now require a corporate to transfer unspent amounts within the stated timelines, to (a) a separate bank account (Unspent CSR Account), if it relates to an ongoing project, which has to be spent on such project within the next three financial years, or (b) any fund specified in Schedule VII of the Companies Act (such as the PM CARES fund, disaster management fund, etc.).
- Penalties for non-compliance: The New Rules have introduced monetary penalties for a company and every officer in default for non-compliance with the provisions relating to undertaking of CSR expenditure and transfer to Unspent CSR Account/Schedule VII fund (as applicable).
Read the full article about CSR spending and accounting by Samheeta Rao at avpn.