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Govt. bows down to pressure, won’t go ahead with new Corporate Social Responsibility (CSR) rules (Relevant for GS Prelims & Mains Paper III; Economics)

Indian corporate heads can now breathe easy. The govt. won’t put them behind bars for not spending enough on public welfare activities.  It is also likely to bring down the CSR rate.

In a major relief to the corporate sector, the govt. will not implement the new Corporate Social Responsibility (CSR) provisions in the recently amended Companies Act. This comes after intense lobbying by corporates, as it’s violations would’ve been punishable by jail.

Background
The companies’ law was amended in the budget session to provide for imprisonment of up to three years for executives of companies that broke CSR rules.

It would have also attracted fines of Rs 50,000 to Rs 25 lakh. While such provisions already existed in the companies’ law, the introduction of specific ones for CSR worried the industry leaders, who demanded a rollback.

What changed the govts’ mind?
The govt. decided to withdraw♂ its decision after considering recommendations by a high-level committee on CSR.  It had suggested that violations should be regarded as civil offences that are only liable to monetary penalties.

Other major proposals
Currently, all companies with a net worthabove Rs 500 crore, turnover above Rs 1,000 crore or net profit over Rs 5 crore are required to spend 2% of their average profit of the previous three years on CSR activitiesevery year.

The panel has also suggested CSR spending should be eligible for tax deductions and companies are allowed to carry forward unspent balances for 3-5 years.



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