Chapter 6 · Topic 6.3 · Prelims + Mains3 of 3
Development Processes & the Development Industry: Charities, CSR and donors
Key points
- CSR (Section 135, Companies Act, 2013): qualifying companies spend at least 2% of average net profit of the last three years.
- Spending that benefits only the company or its employees is not CSR.
- Trusts: State trust laws plus Income-tax exemption; strength in hospitals, schools and relief; risk of opaque accounts.
- Donors: World Bank, ADB, UN bodies; via government or FCRA; can sideline community priorities.
Prelims box: facts and traps
- Prelims 2024: statement 1 right, statement 2 wrong (there is a 2% minimum); answer (a).
Charities, CSR and donors
Like a village fair with an outside sponsor: helpful, but the sponsor should not decide what the village needs.
| Stakeholder | Rules |
|---|---|
| Public charitable trusts | State trust laws; tax exemption under the Income-tax Act |
| Companies (CSR) | Section 135, Companies Act, 2013: 2% of average net profit of the last three years |
| Donor agencies | World Bank, ADB, UN bodies, bilateral donors; channelled through government or FCRA |
Source: Companies Act, 2013 and related laws. FCRA: the law controlling foreign money.
Prelims 2024:
- Statement 1 (right): spending that benefits the company or only its employees is not CSR.
- Statement 2 (wrong), so answer (a): the law fixes a minimum: qualifying companies must spend at least 2% of their average net profit.
With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements : 1. CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities. 2. CSR rules do not specify minimum spending on CSR activities. Which of the statements given above is/are correct ?
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Show answer
Answer: (a) · UPSC official key
Mains 2024: trusts can make development more inclusive.
- Strengths: hospitals, schools, relief; they take risks the State cannot.
- Concerns: opaque accounts and misuse of tax benefits.
Public charitable trusts have the potential to make India’s development more inclusive as they relate to certain vital public issues. Comment.
Mains 2022 asked whether increasing dependence on donor agencies reduces community participation. Donor-designed projects may sideline local priorities. Participatory planning through gram sabhas (village voters’ meetings) keeps communities in charge.
Do you agree with the view that increasing dependence on donor agencies for development reduces the importance of community participation in the development process? Justify your answer.
What UPSC asks: Prelims: CSR: 2% of profit (Companies Act). Mains: trusts and tax. Next likely angle: donors vs community (FCRA Companies Act rules).
Mains box: analysis and answer points
- Mains 2024: trusts make development inclusive, but need transparent accounts.
- Mains 2022: donor dependence vs community participation; gram sabha planning keeps communities in charge.
Practice
Write an answer
In 150 words, explain the significance of Development Processes & the Development Industry with one recent example.
Flashcards (4)
CSR section?
Section 135, Companies Act, 2013.
CSR minimum?
2% of average net profit.
Does staff-only spending count as CSR?
No.
Trust tax benefit law?
Income-tax Act.
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