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MCA Notifies PM CARES FUND as eligible for CSR Expenditure in Schedule VII of Companies Act, 2013


MCA Notifies PM CARES FUND as eligible for CSR Expenditure in Schedule VII of Companies Act, 2013: Ministry of Corporate Affairs (MCA) vide its Notification No. G.S.R. 313(E) [F. No. 13/18/2019-CSR] dated 26.05.2020 notified the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) as an eligible fund for CSR activities and included the same in Schedule VII of the Companies Act, 2013. The change would come into effect retrospectively from 28th March 2020.

Section 135 of the Companies Act, 2013, inter alia, provides for companies having-
> net worth of Rs. 500 crore or more, or
> turnover of Rs. 1,000 crore or more, or 
> a net profit of Rs. 5 crore or more in a financial year
to spend at least 2% of the average net profits of last 3 years for the company’s Corporate Social Responsibility (CSR) policy.

In case the said amount is not spent, the reasons for not doing so are to be disclosed in the Board’s Report. Activities that may be included in the CSR policy by the companies are specified in schedule VII of the Companies Act, 2013.

The mandatory provisions of CSR as envisaged in section 135 along with Schedule VII and corresponding Corporate Social Responsibility Policy Rules have been notified on 27.02.2014 and have come into effect from 1st April 2014.

Schedule VII (as amended) of the Companies Act, 2013 prescribes the following activities as CSR activities-

(See Section 135)

Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to:—

(i) Eradicating hunger, poverty and malnutrition, promoting health care including preventinve health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water. 

(ii) promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects.

(iii) promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.

(iv) ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.

(v) protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional art and handicrafts; 

(vi) measures for the benefit of armed forces veterans, war widows and their dependents;

(vii) training to promote rural sports, nationally recognised sports, paralympic sports and Olympic sports

(viii) contribution to the Prime Minister's National Relief Fund or [1]Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Caste, the Scheduled Tribes, other backward classes, minorities and women;

(ix) Contribution to incubators funded by Central Government or State Government or any agency or Public Sector Undertaking of Central Government or State Government, and contributions to public funded Universities, Indian Institute of Technology (IITs), National Laboratories and Autonomous Bodies (established under the auspices of Indian Council of Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR), Department of Atomic Energy (DAE), Defence Research and Development Organisation (DRDO), Department of Science and Technology (DST), Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).

(x) rural development projects

(xi) slum area development.

Explanation.- For the purposes of this item, the term `slum area' shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force.

(xii) disaster management, including relief, rehabilitation and reconstruction activities.

Amount spent in the above activities is qualified as CSR activities. The interpretation of Schedule VII is broad and open and its scope is wide to help the Corporates.
MCA vide its General Circular No. 01/2021 dated 13.01.2021 clarified that spending of CSR funds for carrying out awareness campaigns/programmes or public outreach campaigns on COVID-19 Vaccination programme is an eligible CSR activity under item no. (i),(ii) and (xii) of Schedule VII of the Companies Act, 2013 relating to promotion of health care, including preventive health care and sanitization, promoting education, and, disaster management respectively.

Under the Companies (Corporate Social Responsibility Policy) Rules, 2014, the CSR activities may be undertaken by the company itself or may undertake the charitable activities through a registered trust or a registered society or a company established by it or its holding or subsidiary or associate company under section 8 of the Act.

CSR Rules 2014 explicitly provides for the money to be spent. This means that if a company manufacturer masks, they cannot simply donate masks and count towards their CSR expenses.

Any contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity.

Further,  the CSR projects or programs or activities undertaken in India only shall amount to CSR Expenditure. The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with section 135 of the Act.

Section 135 of the 2013 Act, mandating CSR activities to corporates, is a new section and introduced for the time in India in the law itself. There was no corresponding provision in the Companies Act, 1956.

Earlier, Ministry of Corporate Affairs (MCA) issued a clarification vide General Circular No. 15/2020 dated 10.04.2020 in which certain clarifications were given related to the admissibility of expenditure in certain cases related to COVID-19 as Corporate Social Responsibility (CSR) expenditure of the companies. MCA has clarified that contribution to PM CARES FUND qualifies as CSR expenditure whereas contribution to Chief Minister Relief Fund does not qualify as CSR expenditure.

It clarifies that the contribution to PM CARES FUND shall qualify as admissible CSR expenditure which corroborates with a clarification issued by the MCA on 28.03.2020 and General Circular No. 10/2020 dated 23.03.2020. In those circulars, it was expressly stated that PM CARES FUND has been set up to provide relief to those affected by any kind of emergency and distress situation and hence any contribution made to the PM CARES FUND shall qualify as CSR expenditure under the Companies Act, 2013. 

In the Circular dated 23.03.2020, it was stated that any expenditure incurred for various activities related to COVID-19 under items (i) and (xii) of Schedule VII relating to promotion of health care including preventive health care and sanitation and disaster management shall qualify as CSR expenditure of the companies under the Companies Act, 2013.

Reference was also given to General Circular No. 21/2014 dated 18.06.2014 issued by MCA itself in which it was stated that items in Schedule VII are broad-based and may be interpreted liberally for this purpose.

At the time of issuing the clarifications by the MCA, it should be noted that the PM CARES FUND was not listed in the Schedule VII of the Companies Act, 2013 but a contribution to PM CARES FUND was allowed to be eligible CSR Expenditure. Only the Prime Minister’s National Relief Fund (PMNRF) was mentioned in Schedule VII of the Companies Act, 2013.

In this respect, it is to be noted that contribution or donation to the Prime Minister National Relief Fund (PMNRF) is already covered as spending for CSR activities in the Schedule VII. This provision was there in statute even before the outbreak of pandemic COVID-19. Therefore, any contribution to PMNRF by a corporate house will be counted towards its CSR expenditure.

Read the full text of the Notification No. G.S.R. 313(E) [F. No. 13/18/2019-CSR] dated 26.05.2020 issued by MCA



New Delhi, the 26th May, 2020

G.S.R. 313(E).—In exercise of the powers conferred by sub-section (1) of section 467 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following further amendment to Schedule VII of the said Act, namely:—

In Schedule VII, item (viii), after the words “Prime Minister’s National Relief Fund”, the words “or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund)” shall be inserted.

2. This notification shall be deemed to have come into force on 28th March, 2020. 

[F. No. 13/18/2019-CSR]

Note : The Schedule VII was brought into force with effect from the 1st April, 2014 and was amended (effective from the 1st April, 2014) vide notification number G.S.R. 130(E), dated the 27th February, 2014, Corrigenda number G.S.R. 261(E), dated the 31st March, 2014, notification number G.S.R. 568(E), dated the 6th August, 2014, notification number G.S.R. 741(E), dated the 24th October, 2014, notification number G.S.R. 390(E), dated the 30th May, 2019, notification number G.S.R. 776(E), dated the 11th October, 2019 and Corrigenda number G.S.R. 859(E), dated the 19th November, 2019.

Download Copy of Notification No. G.S.R. 313(E) [F. No. 13/18/2019-CSR dated 26.05.2020] issued by MCA in pdf format.

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