INTRODUCTION
Corporate Social Responsibility (CSR) has emerged as a significant mechanism through which businesses contribute to social development in India. The introduction of mandatory CSR spending under the Companies Act, 2013 created a structured framework for companies to allocate a portion of their profits toward social welfare initiatives.
Non-Governmental Organizations (NGOs) play a crucial role in this ecosystem by acting as implementing agencies for CSR projects. Through partnerships with corporates, NGOs are able to execute initiatives in areas such as education, healthcare, environmental sustainability, rural development, and poverty alleviation. The collaboration between corporates and NGOs has significantly strengthened the impact and reach of development programs across the country.
CSR FRAMEWORK IN INDIA
The concept of CSR in India is primarily governed by Section 135 of the Companies Act, 2013 along with the Companies (Corporate Social Responsibility Policy) Rules, 2014.
Under these provisions, certain companies are required to constitute a CSR Committee and spend at least 2% of the average net profits of the preceding three financial years on CSR activities.
Companies fall within the CSR mandate if they meet any of the following criteria during the immediately preceding financial year:
- Net worth of ₹500 crore or more
- Turnover of ₹1,000 crore or more
- Net profit of ₹5 crore or more
Companies may undertake CSR activities directly or implement them through eligible NGOs or non-profit organizations.
ELIGIBILITY OF NGOS TO RECEIVE CSR DONATIONS
Not every NGO is eligible to receive CSR funding. Organizations must meet certain legal and regulatory requirements to act as implementing agencies for CSR projects.
An NGO eligible to receive CSR donations must generally be registered as one of the following entities:
- Public Charitable Trust registered under the Indian
Trusts framework
- Society registered under the Societies
Registration Act, 1860
- Section 8 Company incorporated under the Companies
Act, 2013
These forms of organizations are recognized as non-profit entities engaged in charitable or social activities.
MANDATORY REGISTRATIONS FOR NGOS RECEIVING CSR FUNDS
Registration under
Section 12A of the Income Tax Act, 1961 provides income tax exemption to
charitable organizations. This registration confirms that the NGO is engaged in
genuine charitable activities.
Registration under
Section 80G of the Income Tax Act, 1961 allows donors to claim tax deductions
on donations made to the NGO. This encourages individuals and corporates to
contribute to social causes.
To receive CSR funding,
NGOs must file Form CSR-1 with the Ministry of Corporate Affairs.
After verification, the
organization is allotted a CSR Registration Number, which enables it to act as
an implementing agency for CSR projects undertaken by companies.
CSR Rules also provide
that an NGO acting as an implementing agency should have a minimum track record
of three years in undertaking similar activities, unless the entity is
established by the company itself.
CSR funds must be utilized strictly for activities specified in Schedule VII of the Companies Act, 2013. Some of the key areas include:
1. Eradicating Hunger, Poverty and
Malnutrition
·
Eradicating
hunger, poverty and malnutrition
·
Promoting
healthcare including preventive healthcare
·
Promoting
sanitation including contribution to Swachh Bharat Kosh
·
Making
available safe drinking water
2. Promotion of Education
·
Promoting
education including special education
·
Employment
enhancing vocational skills especially among children, women, elderly and
differently-abled persons
·
Livelihood
enhancement projects
3. Gender Equality and Women
Empowerment
·
Promoting
gender equality and empowering women
·
Setting
up homes and hostels for women and orphans
·
Setting
up old age homes, day care centres and similar facilities for senior citizens
·
Measures
to reduce inequalities faced by socially and economically backward groups
4. Environmental Sustainability
·
Ensuring
environmental sustainability
·
Ecological
balance
·
Protection
of flora and fauna
·
Animal
welfare
·
Agro-forestry
·
Conservation
of natural resources
·
Maintaining
quality of soil, air and water
5. Protection of National Heritage,
Art and Culture
·
Protection
of national heritage, art and culture
·
Restoration
of buildings and sites of historical importance
·
Promotion
and development of traditional arts and handicrafts
6. Benefits for Armed Forces Veterans
·
Measures
for the benefit of armed forces veterans, war widows and their dependents
7. Promotion of Sports
·
Training
to promote rural sports
·
Nationally
recognized sports
·
Paralympic
sports and Olympic sports
8. Contribution to Certain Funds
·
Contribution
to the following funds established by the Central Government:
·
Prime
Minister’s National Relief Fund (PMNRF)
·
PM
CARES Fund
·
Other
funds set up for socio-economic development and welfare of Scheduled Castes,
Scheduled Tribes, Other Backward Classes, minorities and women
9. Support for Technology Incubators
and Research
·
Contribution
to technology incubators
·
Research
and development projects in science, technology, engineering and medicine
funded by Central or State Government or public sector bodies
·
Contributions
to public funded universities, IITs, and national laboratories engaged in such
research
10. Rural Development Projects
·
Projects
for rural development and improvement of rural infrastructure
11. Slum Area Development
·
Development
projects for slum areas notified by the Government
12. Disaster Management
· Disaster management including relief, rehabilitation and reconstruction activities (added by MCA notification in 2019)
NGOs receiving CSR funds must ensure strict compliance with the regulatory framework. This includes:
- Proper utilization of CSR funds
for approved activities
- Maintenance of financial records
and documentation
- Submission of project reports and
impact assessments
- Cooperation with the company’s
CSR monitoring mechanisms
Companies, in turn,
disclose CSR spending in their annual reports as required under the Companies
Act, 2013.
CSR funding has
significantly transformed the landscape of social development in India by
encouraging corporate participation in nation-building initiatives. NGOs act as
vital partners in implementing CSR projects and delivering tangible benefits to
communities.
By ensuring compliance with legal requirements such as 12A, 80G, and CSR-1 registration, NGOs can effectively collaborate with corporates and contribute to sustainable and inclusive development across the country.
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