Corporate Social Responsibility becomes mandatory for big companies in India

Greentech Lead India: Clause 135 of the new Companies Bill passed by the parliament makes it mandatory for big companies to contribute for a certain share of their profits to Corporate Social Responsibility (CSR) initiatives.

The new policy states that firms with net worth of Rs. 500 crore or a turnover of more than Rs. 1,000 crore or a net profit of more than Rs. 5 crore will have to spend 2 percent profit on CSR.

“This will eliminate the trust deficit between companies and the communities among whom they operate,” Sachin Pilot, corporate affairs minister, said.

According to the minister, CSR activities would benefit the companies themselves as they can foster better relations with society in the local region. However, companies will be given freedom to choose their areas of interest, seek help from their own foundations or trusts to carry out these activities.

The new law on CSR is based on the best global practices derived from the U.K., U.S and several other countries.

While the law makes CSR a statutory requirement, it will operate on self implementation and self-regulation basis, Pilot said. Companies have been doing it for many years, but with the new law it has become more structured and transparent.

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