KPMG in India

Corporate Social Responsibility in India

The new landscape
As per the Companies Act, 2013, section 135, every company
having a net worth of rupees five hundred crore or more, or a
turnover of rupees one thousand crore or more or a net profit
of rupees five crore or more, during any financial year, shall
ensure that the company spends, in every financial year, at
least two per cent of the average net profits of the company
made during the three immediately preceding financial years,
in pursuance of its Corporate Social Responsibility policy.

KPMG in India has been doing significant amount of

work in the CSR space, helping clients articulate social
investment philosophy/vision and effectively
translating that into a robust and sustainable CSR
strategy and plan.
We work with a multi-disciplinary team involving

The application is to every company, including its holding or

subsidiary, and a foreign company having its branch or project
office in India.

personnel from the Development Sector, Sustainability,

The Ministry of Corporate Affairs (MCA) has vide its

notification dated 27 February 2014, and in exercise of powers
conferred by section 1(3) of the Companies Act, 2013 (the
Act), notified 1 April 2014 as the date on which the provisions
of section 135 and Schedule VII of the Act shall come into
force. The MCA has also notified the Companies (Corporate
Social Responsibility Policy) Rules, 2014 (the Rules) to be
effective from 1 April 2014.

methodologies and approaches on CSR.

1. How should a company enforce the requirement?

Tax, Accounting Advisory and Management Consulting

practices to proactively engage in finding efficient

3. What constitutes eligible CSR expenditure?

CSR expenditure shall include all expenditure including
contribution to corpus on projects or programs relating
to CSR activities, approved by the Board on the
recommendation of its CSR Committee, but does not
include any expenditure on an item not in conformity or
not in line with activities which fall within the purview of
schedule VII of the act.

Companies are required to constitute a CSR committee

consisting of three members, including one
independent Director with the following roles:
Formulate CSR strategy and activities through a CSR
policy

Company may meet CSR obligations by setting up a

registered Trust, Section 8 Company or Society

Recommend expenditure amount

Activities exclusively for the benefit of employees and

their families is not CSR

Regularly monitor CSR policy and activities.

The Board of Directors shall be responsible for
approving the CSR policy; disclosing its contents in the
Board Report; making it public on the companys
website and deploying the funds.
Companies otherwise not required to have Independent
Director under the Act need not have an Independent
Director on the CSR committee. Similarly private and
unlisted companies with a requirement of only two
directors can constitute a two member CSR committee.
Obligation to continue unless the company fails to meet
the eligibility criteria for three consecutive years.

Company may conduct CSR programmes through

established section 8 company, Trust or society (with
atleast three years experience)

Activities undertaken in pursuance of the normal course

of business of the company is not CSR
Only CSR activities within India will be taken into
consideration.
4. What needs to be reported on CSR?
In an annual CSR report, as per the template prescribed in
the Rules, the company needs to report the CSR projects
undertaken, the specific areas and also the amount spent
on the individual projects.
Display the CSR policy on the company website

2. What happens if a company fails to comply with the

requirement?
If a company fails to meet its CSR obligation, the Board
will have to specify reasons for non-compliance in its
report. Failure to report on CSR obligation may have
penal consequences for the company up to a maximum
of INR2.5 million (USD42,000).

5. What should be the content of the CSR policy?

The CSR policy, apart from the overall vision and
objective, should include the list of projects/programmes,
modalities of execution, implementation schedules and
monitoring process. It is not just a policy statement but
the policy framework.

2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

What qualifies as CSR activities?

It includes:

Eradication

Promotion

Equality

Ensure

Protect
National heritage, art
and culture

Hunger, poverty
and malnutrition

Preventive health,
sanitation, education,
vocational skills

Gender equality and

empowering women

Environmental
sustainability, protection
of flora and fauna,
ecological balance

Benefit

Train to promote

Contribute

Fund

Develop

Armed forces, war

widows and
dependents

Rural sports,
paralympics, Olympics
and nationally
recognised sport

Prime Miniter's National

Relief Fund or any other
funds set up by central
government

Technology incubators
within approved academic
institutions

Rural development
projects

Road map for companies and how KPMG in India can help
Stages

1
2
3
4
5

Building Blocks
Compliance Check

Analyse and define imperatives and

implications of the new CSR policy

Structuring Options
Analyse the funding, transaction/entity
structuring and Tax Implications

CSR Policy Drafting

Validate and refine the existing CSR
Policy

Program implementation
and monitoring

Review and Reporting

For further information or

queries please write to:

CSR Helpdesk

Expected Outputs

Analyse CSR policy, governance structures, and programmes

Articulate shifts and implications
Study the as is and potential projects for your company
Routing of spends Qualification of projects

Validate CSR Vision Statement

Validate the CSR policy
Define the maintenance of CSR policy
Determine CSR Budget
Define the CSR Objectives
Identify potential CSR Corporate Partnerships
Identify and streamline Implementation structure
Define the Monitoring, Evaluation and Reporting framework
Define CSR Governance Structure
Identify Tax Implications
Explore new ideas, if required

Develop Framework for Monitoring and Evaluation

Capacity Building of the staff
Define standard operating processes (SOPs)
Initiate data collection for CSR Reporting

Conduct Impact Assessment

Review the Effectiveness of Systems implemented
Identify opportunities for improvement
Report CSR activities as per the CSR guidelines

Compliant list of CSR

Projects identified
CSR Spends identified,
if applicable

Implementation Structure
streamlined
New Ideas Identified
CSR Policy drafted
Tax Implications Identified

M&E Framework
Defined SOPs
Reliable Data

Impact Assessment report

Annual CSR Report

The information contained herein is of a general nature and is not intended to address the
circumstances of any particular individual or entity. Although we endeavour to provide accurate
and timely information, there can be no guarantee that such information is accurate as of the
date it is received or that it will continue to be accurate in the future. No one should act on such
information without appropriate professional advice after a thorough examination of the
particular situation.
2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG
International), a Swiss entity. All rights reserved.

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