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Shubham Chauhan
| Updated: 10 Apr, 2020 | Category: Latest News

MCA issues clarification on the spending of CSR funds for COVID-19

CSR funds

The Ministry of Corporate Affairs (MCA), recently on 23rd March, issued a circular to all stakeholders on the subject related to the spending of CSR funds for COVID-19. The issued circular allows Companies to spend their Corporate Social Responsibility (CSR) funds to fight the Coronavirus pandemic, a notified disaster. This decision was taken by MCA as a measure to combat the deadly virus. MCA’s circular aims at encouraging companies to spend their CSR funds towards activities that could assist in tackling the spread of Coronavirus.

MCA issued a circular stating:

“Given the spread of novel Corona Virus (COVID-19) in India, its declaration as a pandemic by the World Health Organisation (WHO), and, the decision of Government of India to treat this as a notified disaster, it is hereby clarified that spending of CSR funds for COVID-19 is eligible CSR activity.”

Details mentioned in MCA’s circular on the spending of CSR funds.

As per the circular, the activities falling under item nos. (1) and (Xii) of Schedule VII of Companies Act, 2013, undertaken due to COVID-19 shall qualify as  CSR activity. Activities that Companies may include in their Corporate Social responsibility are as follows:

  • Eradicating hunger, poverty, and malnutrition, (promoting health care including preventive health care) and sanitation (including the contribution made to the Swach Bharat Kosh set-up by the Central Government for promotion of sanitation) and making available safe drinking water.
  • Activities related to Disaster Management

Additionally, the Ministry of Corporate Affairs (MCA) on Sunday further added that the donations made by Companies to the Prime Minister’s emergency fund that has been set up to fight the COVID-19 pandemic would also qualify as Corporate Social Responsibility (CSR) expenditure under item (Viii) of Schedule VII of Companies Act, 2013.

Prime Minister Narendra Modi created the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) to combat the COVID-19 pandemic in India. The fund will be used for containing the spread of Coronavirus and provide relief to those affected by COVID-19 pandemic.

Prime Minister said, “People from all walks of life expressed their desire to donate to India’s war against COVID-19, and adding the fund has been constituted respecting that spirit.”

Over the years, it has been observed over that a large sum of CSR money remains unspent owing to multiple reasons cited by Companies. As per Companies Act[1], the businesses with a net worth of at least 500 crores or revenue of 1000 crore or net profit of 5 crores should spend at least 2% of their profit on CSR. Any lapse in meeting this obligation should be explained in the annual financial statement. Currently, India is in a state of lockdown with all business activities at a halt because of the outbreak of COVID-19

 Currently COVID-19 pandemic has reached more than 100 countries, including India. Lately, the number of positive coronavirus cases has been increasing incidentally in India, resulting in scarcity of resources for healthcare and related systems. In such hard times, Companies are expected to step forward and utilize their unspent CSR budgets. The contributions made by Companies from their CSR funds would provide huge support to healthcare sector and boost the relief measures.

Take Away

In the wake of rapidly spreading Coronavirus, MCA recently issued a circular giving clarification on the spending of CSR funds stating that Funds spent by the Companies to combat the deadly virus will count as CSR spending. This clarification by the MCA involving private sector more deeply in containing the spread of the virus is a timely and welcome step. Here it is to be noted that the amount spent by Companies on their employees for the preparedness of COVID-19, such as giving masks, sanitizers, or other measures, will not be regarded as a part of CSR spending.

Read our article: MCA Eases Norms for Companies and LLPs amid Coronavirus

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Shubham Chauhan

A passionate legal content writer, a nature enthusiast, an avid reader, and a part-time thinker. By means of conducting in-depth research on industry related topics, Shubham often builds flawless and intelligible legal content for populace from all walks of life.

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