Unspent CSR Account is a special account that companies are required to open in a scheduled bank to transfer the unspent amount of their ongoing CSR projects within 30 days from the end of the financial year, as per Section 135 (6) of the Companies Act, 2013 and the Companies (CSR Policy) Rules, 2014.
The purpose of this account is to ensure that the unspent amount of CSR projects is not diverted for any other purpose and is utilised for CSR activities within a period of three financial years from the date of such transfer.
Suppose the company fails to spend the amount within this period. In that case, it shall transfer the balance unspent amount to a fund specified in Schedule VII of the Act, such as the Prime Minister's National Relief Fund or the Clean Ganga Fund, within 30 days from the date of completion of the third financial year.
The provisions related to this account are as follows:
The account shall be named "Unspent Corporate Social Responsibility Account" and shall be disclosed under "Current Liabilities" in the balance sheet of the company.
Also Read: Directors Of Kony India Face Rs. 2 Lakh Penalty Each For CSR Lapse - India CSR
The company shall specify the nature and amount of expenditure incurred on CSR activities in its board report and on its website.
The company shall also disclose the details of such an account in its annual return filed with the Registrar of Companies (ROC).
The company shall be liable to a penalty of twice the amount required to be transferred to such account or one crore rupees, whichever is less, if it fails to comply with Section 135 (6) of the Act.
The officers in default of the company shall also be liable to a penalty of one-tenth of the amount required to be transferred to such account or two lakh rupees, whichever is less, if they fail to comply with Section 135 (6) of the Act.
CSR Provisions in India
CSR provisions in India refer to the legal framework that regulates the Corporate Social Responsibility (CSR) activities of companies in India. CSR is defined as the activities undertaken by a company in pursuance of its statutory obligation to contribute towards social and environmental welfare.
The main source of CSR provisions in India is the Companies Act, 2013, which was amended in 2019 and 2020 to introduce some changes in the CSR rules.
The Companies Act, 2013, along with the Companies (CSR Policy) Rules, 2014, and the Companies (Amendment) Act, 2019 and 2020, prescribe the following aspects of CSR in India:
Applicability: CSR provisions apply to every company registered under the Companies Act, 2013, or any previous company law, that has either of the following criteria in any financial year: net worth of Rs. 500 crore or more; turnover of Rs. 1000 crore or more; or net profit of Rs. 5 crore or more. These criteria apply only to business operations in India in the case of a foreign company having a branch or project office in India.
Obligation: Every company that meets the above criteria is required to constitute a CSR committee of its board of directors, consisting of at least three directors, out of which at least one shall be an independent director.
The CSR committee is responsible for formulating and recommending a CSR policy to the board, indicating the activities to be undertaken by the company as per Schedule VII of the Companies Act, 2013. The board of directors is responsible for approving and disclosing the CSR policy, ensuring its implementation, and monitoring its progress.
The board is also required to ensure that the company spends at least 2% of its average net profits made during the three immediately preceding financial years on CSR activities. If the company fails to spend the prescribed amount, it shall disclose the reasons for not spending in its board report and website.
Transfer: If the company has any unspent amount out of the prescribed CSR expenditure in a financial year, it shall transfer such amount to either of the following accounts within the specified time limit:
(a) Unspent Corporate Social Responsibility Account: This is a special account opened by the company in a scheduled bank for transferring the unspent amount relating to ongoing CSR projects within 30 days from the end of the financial year.
The amount transferred to this account shall be spent by the company on CSR activities within a period of three financial years from the date of such transfer.
If the company fails to spend the amount within this period, it shall transfer the balance unspent amount to a fund specified in Schedule VII within 30 days from the date of completion of the third financial year.
(b) Fund specified in Schedule VII refers to any fund set up by the central government for socio-economic development and relief and welfare of certain sections of society as mentioned in Schedule VII of the Companies Act, 2013.
The company shall transfer the unspent amount not relating to ongoing projects to such fund within six months from the end of the financial year.
Penalty: If a company fails to comply with any provision of CSR, it shall be liable to a penalty of twice the amount required to be transferred by it to either of the above accounts or Rs. 1 crore, whichever is less. Every officer of such company who is in default shall also be liable to a penalty of one-tenth of such amount or Rs. 2 lakh, whichever is less.
No comments:
Post a Comment