Section 135 of the Companies Act, 2013 mandates every company above a certain threshold to formulate a Corporate Social Responsibility (CSR) Policy, and to ensure that the company spends at least 2% of its average net profits made during the preceding three financial years, on CSR activities. Schedule VII of the Act, enlists the activities that can be undertaken by the companies under their CSR policies. Item No. (viii) of Schedule VII covers ‘relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women’ as eligible CSR activities.

Section 135 of the Act, Schedule VII and Companies CSR Policy Rules, 2014 read with General Circular dated 18.06.2014 issued by the Ministry of Corporate Affairs, provide the broad contour within which eligible companies are required to formulate their CSR policies including activities to be undertaken and implement the same in the right earnest. The decision to allocate CSR fund across various items of Schedule VII is taken by the Board of the Company under the provisions of the Act.

This was stated by Shri Arun Jaitley, Minister of Corporate Affairs in written reply to a question in the Lok Sabha today.

Corporate Social Responsibility requirement: companies must adopt CSR policies and allocate prescribed profit proportion to eligible Schedule VII activities. Section 135 requires qualifying companies to adopt a Corporate Social Responsibility Policy and to allocate a prescribed proportion of average net profits to CSR activities. Schedule VII defines eligible activities, expressly including relief and welfare of Scheduled Castes, Scheduled Tribes, other backward classes, minorities and women. The Companies CSR Policy Rules and the Ministry circular provide guidance on policy formulation and implementation, and the company board decides allocation of CSR funds across Schedule VII items.