The India Companies Act (2013), also known as the "New Act", was passed by the Indian parliament in August 2013 and has imposed far-reaching changes to the governance of both India-based and foreign companies operating within the country.
The Corporate Social Responsibility (CSR) section of the New Act came into effect on April 1, 2014, and effectively declared that both domestic and foreign-owned companies must make CSR obligations to help remediate poverty and social problems.
Companies are subject to the CSR requirements if they have, for any financial year, in India:
Companies that meet these thresholds are required by the law to develop a CSR policy, spend a minimum amount on CSR activities and report on these activities in India.
A company that meets these thresholds is required to spend no less than two percent (2%) of its average net profit for its preceding three financial years.
Under the India Companies Act, companies are required to develop a CSR strategy and policy, select an implementation mechanism and partner, develop a project plan, and report on these CSR activities.