Both the Central & State governments have appealed to corporates & citizens to donate to the respective funds in order to help the governments combat COVID-19. Contributions are pouring into these funds. However, unlike the contributions to the PM CARES or the PMNRF, contributions made to CMRF at the state level are not treated as CSR expenditure. We look into this issue in detail. Thegovernment of India has on 28 March 2020, announced the constitution of a new trust fund called ‘PM CARES’ as part of fight against COVID-19. Therationale of creating a new Trust fund to handle an epidemic, when PMNRF alreadyexists for the same purpose, has been questioned by many. Factly has earlier writtena story on this issue. The press release that followed the tweet of the Prime Minister, hadscant details of ‘PM CARES’. Subsequently, clarifications were issued by thegovernment about some of the aspects related to this new Trust fund. One suchis the memorandum issued by Ministry of Corporate Affairs (MCA), regarding the eligibility ofcontributions made towards PM CARES as CSR spending. As per this memorandum,all the contributions that are made to PM CARES shall qualify as CSRexpenditure under the Companies Act 2013. What is CSR expenditure? Section 135 of the Companies Act 2013 mandates qualifying companies to spend astipulated amount under Corporate Social Responsibility (CSR). As per the existing provisions, every companythat fulfils any of the below criteria (during a financial year) is required toconstitute a CSR Committee. Thecompany is required to spend every financial year, at least 2% of the averagenet profits made during the three immediately preceding financial years towardstheir CSR activities. Companies (Corporate Social Responsibility Policy) Rules, 2014 later notified by the Central Governmentstate that CSR expenditure includes expenditure made towards the CSR activitieswhich are approved by the board and recommended by CSR committee and are inline with the permissible activities listed in Schedule VII of Companies Act 2013. Contribution to relief fund set up Central Government is part of the approved list Inthe clarification issued post the announcement of PM CARES fund by the PrimeMinister, the MCA alluded to item (viii) under Schedule VII of Companies Act 2013to justify the qualification of contribution to PM CARES as permissible CSR expenditure. SectionVII of Companies act 2013 provides the list of activities that are eligible to be considered as CSR activitiesand any expenditure incurred towards these activities will be counted as CSRexpenditure. As per this list, item (viii) refers to the contributions that are made to PMNRF or any other fund which is setup by the Central government for Socio-economic development, relief, welfare of SC, ST, BC, minorities and women. SincePM CARES fund is established to provide relief for emergency & distresssituations, the contributions made to it are eligible to be treated as CSRexpenditure by companies. Contributions to State relief funds not qualified as CSR expenditure Whilethe purpose of creating a PM CARES despite the existence PMNRF has not clearlyexplained by the government, one of the points being put forward informally is thatit would be a more dedicated fund to be used for the epidemic on hand and anyothers that arise in the future. Sincethe respective State governments are at the fore-front of tackling the current epidemic, there are suggestions around the need forcontributions to be made to support the state efforts. CM relief funds andother State relief funds are few sources through which the states can raise therequired resources to be utilized for relief activities. Apartfrom the individual contributions, donations from corporates form a major part ofthe contributions made to such relief funds. Sincethe contributions to the new fund i.e. PM CARES will be considered as permissible CSR expenditure, there werequeries around the eligibility of contributions being made to Chief Minister’sRelief Fund (CMRF) at the state level. To provide clarity, on 10April 2020,MCA released ‘COVID-19 related Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR)’ . As per these FAQs: While the rationale for theinclusion of PM CARES has already been discussed, the eligibility ofcontributions to State Disaster Management Authority is in reference to MCA’s clarification issued on 23 March 2020. However, the reason for notincluding contributions made to CMRF or other State Relief funds is that theseare not included in Schedule VII of Companies Act 2013, which was the basis forinclusion of PM CARES fund.