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Corporate Social Responsibility (CSR)

The 2013 Act aims to instill a corporate social responsibility (CSR) culture in Indian businesses by mandating them to have a CSR policy and spend at least a certain amount on social initiatives. CSR may be described as a concept or action that businesses engage in to benefit society.

Organizations bear some moral duty for society and should take action to help it. CSR refers to all of a company's operations aimed at improving society. They invest a portion of their profits on the well-being of society.

According to the Company Act of 2013, India is the very 1st nation in the world to make CSR obligatory for corporations. CSR requirements are addressed under S. 135 of the CA 2013. Every public or private limited (subsidiary or holding) company and a foreign company with a minimum net value of 500 crore, an annual turnover of 1000 crore, or a net profit of 5 crore is required to spend 2% of its average net profit over the previous three financial years on CSR operations.

To form a CSR committee, it should consist of at least three directors, one of whom must be an independent director. The company's CSR policy will be developed by the committee.

According to Schedule VII of the act, the following activities are eligible for CSR:
  • Trying to eradicate extreme poverty and hunger;
  • Improving the quality of education;
  • Enhancing maternal health, gender equity;
  • Environmental sustainability;
  • Preservation of national heritage, art and culture;
  • Measures for the benefit of armed forces veterans, war widows, and their dependents;
  • Promoting rural sports;
  • Making contributions to technology incubators;
  • Slum area development, rural development, and contingency planning.
Recently Finance Minister announced that a research can be carried out for evaluating the spending rate of CSR.

Importance of CSR: CSR is a broad phrase that refers to a company's attempts to benefit society in some way. It enhances a company's public image by publishing its efforts to make the world a better place, increasing the likelihood of consumers favouring them. CSR generates more media attention since it casts a favourable light on the organization. It also increases the value of a company's brand by establishing a socially strong link with its customers. When firms participate in any form of community service, CSR helps them stand out from the competitors.

Reasons for the induction of CSR: Companies in India now have a higher duty to establish a clear CSR structure as a result of the act. Many corporate companies such as TATA and Birla have been involved in doing CSR voluntarily. The Act establishes a corporate social responsibility (CSR) culture in India by forcing businesses to have a CSR policy and allocate funds to social upliftment programs. CSR refers to a company's contribution to society.

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