New Delhi: Two months after it made the announcement, the Ministry of Corporate Affairs has finally notified that donations made by companies to the Prime Ministers Citizens Assistance and Relief in Emergency Situations Fund (PM-CARES Fund) will be considered as expenditure on corporate social responsibility.
The ministry late on May 26 notified that it has amended Schedule VII of the Companies Act, 2013 by including contributions to PM-CARES Fund as valid CSR activity along with the earlier insertion of Prime Minister’s National Relief Fund.
However, to the relief of corporate contributors, the notification had clarified that changes will be deemed to have come into force March 28, 2020 to allow for all the corporate contributions to PM-CARES Fund made in last two months to qualify as CSR spend.
Finance Minister Nirmala Sitharaman had tweeted on March 29 that CSR Funds can now donate to PM CARES Fund. A ministry of corporate affairs circular issued then had also said the same suggesting that the Fund has been set up to provide relief to those affected by any kind of emergency or distress situation. But, a formal notification of the proposal never came in March.
Sources said delay in notifying the circular was primarily over the issue of whether such changes would require an amendment to Companies Act or can be done through amending the rules. Legal opinion gave a nod to the notification.
Corporate spending for various activities related to COVID-19 including promotion of healthcare, preventive healthcare, sanitation, disaster management would qualify for treatment as CSR, as per a previous circular by the ministry.
The corporate social responsibility rules make it mandatory for large Indian firms to set aside at least 2 per cent of their average net profit for socially responsible expenditures. The norms are applicable to firms with at least Rs 5 crore net profit or Rs 1,000 crore turnover or Rs 500 crore net worth. The list of activities included under CSR is decided by the government.
Companies have off late announced donations to the PM-CARES Fund along with several other initiatives to combat the coronavirus pandemic.
The total corporate social responsibility (CSR) spending by the top 500 companies in the country since the applicability of mandatory CSR in 2014 is likely to cross Rs 60,000 crore by the end of the month as per industry reports.