Central government amends Companies Act to make PM Cares Fund eligible for CSR expenditure.
The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The lockdown though necessary has led to a disastrous impact on the economy. The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare to sector related incentives and tax deadline extensions. Keeping in mind the need for having a dedicated national fund with the primary objective of dealing with any kind of emergency or distress situation, like posed by the COVID-19 pandemic, and to provide relief to the affected, a public charitable trust under the name of ‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund’ (PM CARES Fund)’ has been set up.
Objectives of the PM Cares Fund:
- To undertake and support relief or assistance of any kind relating to a public health emergency or any other kind of emergency, calamity or distress, either man-made or natural, including the creation or upgradation of healthcare or pharmaceutical facilities, other necessary infrastructure, funding relevant research or any other type of support.
- To render financial assistance, provide grants of payments of money or take such other steps as may be deemed necessary by the Board of Trustees to the affected population.
- To undertake any other activity that is not inconsistent with the above objectives.
MCA Notification No. G.S.R. 313(E) dated 26th May, 2020
- In exercise of the powers conferred by section 467(1) of the Companies Act, 2013, the Central Government amended Schedule VII of the Companies Act.
- 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.
- This notification shall be deemed to have come into force on 28th March, 2020.
- Through the new gazette notification, the government has added PM CARES fund as an eligible beneficiary of CSR funds.
- Due to this notification, donations made by a company to the PM Cares Fund will be included in the CSR expenditure.
COVID 19 impact of the notification
- The Government set up PM CARES Fund as a public charitable trust, As Covid-19 pandemic requires more and more resources.
- The Prime Minister is the ex-officio Chairman of the PM CARES Fund, and Minister of Defence, Minister of Home Affairs and Minister of Finance are ex-officio trustees of the Fund.
- It is a dedicated national fund with the primary objective of dealing with any kind of emergency or distress situation, like posed by the Covid-19 pandemic and to provide relief to the affected.
- The fund consists entirely of voluntary contributions from individuals/organisations and does not get any budgetary support.
- Donations to PM CARES Fund would qualify for 80G benefits for 100% exemption under the Income Tax Act, 1961.
- Earlier CSR activities included contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women.
- In the wake of the Covid-19 pandemic, the list was expanded to include the promotion of health care, expenses towards preventive health care and sanitation and disaster management. Now, the list has been expanded with PM CARES Fund.
How is Corporate Social Responsibility (CSR) covered under Companies Act?
As per Section 135(1), every company having net worth of Rs 500 crore or more, or turnover of Rs 1000 crore or more or a net profit of Rs 5 crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board.
The Board shall consist of three or more directors, out of which at least one director shall be an independent director.
The Board of Directors shall make sure that the company spends in every financial year, minimum 2% of the average net profits made during the 3 immediately preceding financial years as per CSR policy. In case of not spending the amount under CSR, the company will report why it has not done so.
The following activities can be performed by a company to accomplish its CSR obligations:
- Eradicating extreme hunger and poverty
- Promotion of education
- Promoting gender equality and empowering women
- Reducing child mortality
- Improving maternal health
- Combating human immunodeficiency virus, acquired, immune deficiency syndrome, malaria and other diseases
- Ensuring environmental sustainability
- Employment enhancing vocational skills, social business projects
- Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development, and
- Relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women and such other matters as may be prescribed.
Top businesses and celebrities had rushed in to pledge millions in new donations to the PM CARES fund. The disaster and the urgent need for mobilizing resources, donations to designated funds is a good option and many corporates have already contributed huge amounts to the PM CARES Fund.