The legal provision on CSR: Industrial

Enterprise Act, 2076

 Corporate Social Responsibility

 Corporate social responsibility (CSR) is a company’s commitment

to manage the social, environmental and economic effects of its
operations responsibly and in line with public expectations.
Legal provisions by IEA Act, 2076

 CSR is made mandatory for industries, as governed by Industrial Enterprise Act

(IEA) [Chapter 9, Section 54]

Industry Type Fixed Capital Annual Turnover CSR Fund to be

Investment Requirement allocated

Small Scale Industry Less than NPR Greater than NPR    

150,000,000 150,000,000

Medium Scale Industry NPR 150,000,000- NPR No minimum turnover at least 1% of Annual
500,000,000 requirement (i.e. all Net Profit 
medium scale and large
Large Scale Industry Greater than NPR scale industries should
500,000,000 allocate fund for CSR
activities)
Sectors Of CSR (under Rule 37 of IEA)

 Natural calamities
 Community Health Centers
 Preservation of Nepalese Architect
 Culturally and  socially backward communities
 Community Schools
 Pollution Control
 Waste Management 
 Reforestation
 Preservation of Water Resource
Cont..

 Promotion of Alternative energy and environment protection

 Campaign for the preparation & Broadcasting of Documentary against Smoking,
Alcohol use.
 Rural Drinking Water, road, sewage & corresponding physical infrastructure for
the social benefit.
Other Provisions

 The Act further provides that the amount spent under CSR requirement can be
deducted for the purpose of income tax.
 The plans and programs related to CSR shall be submitted within the end of 6
months of every financial year to the Department of Industries (DOI).
 The plans formulated for CSR shall be implemented with the local authorities.
 Non-compliance of CSR, Fine equivalent to 0.5% of gross profit.
CSR for BFIs

 According to the circular for Bank and Financial Institutions (BFIs) issued by

Nepal Rastra Bank, BFIs should deposit at least 1% of their net profit in their
CSR fund. Unlike IEA, this circular has categorized sectors where the fund
should be utilized.
 The sectors are: social projects, direct grant expenses, sustainable development
goals or/and setting up a Child Day Care Center for employees.
 For non compliance to the NRB circulars, both fine and imprisonment sanctions
are defined according to Nepal Rastra Bank Act 2002(2058).
Company Act, 2013, India

 The Company Act, 2013   has formulated Section 135, Company (Corporate Social
Responsibility) Rules, 2014 and Schedule VII which prescribes mandatory provisions for
Companies to fulfil their CSR.
 at least 2% of the average net profits of the company made during the 3 immediately
preceding financial years, in pursuance of its CSR Policy.
 As per Schedule VII, the Sectors for CSR are:
 Eradicating hunger, poverty and malnutrition
 promoting health care including preventive health care and sanitation
 Promoting education, including special education and employment
 Promoting gender equality, empowering women
 Ensuring environmental sustainability, ecological balance
 Protection of national heritage, art and culture 
Cont..
 Measures for the benefit of armed forces veterans, war widows and their dependents
 Training to promote rural sports, nationally recognized sports
 Contribution to the Prime Minister’s national relief fund or any other fund set up by the
central govt. for socio economic development
 Slum area development.
 Rural development projects

Comparing the CSR of Company Act,2013 with the Nepalese CSR as

mentioned in IEA, most of the sectors for CSR are similar.