Spending by corporates to deal with the coronavirus outbreak will be considered as CSR activity under the companies law, the government said on Monday.
In India, over 400 people have been infected by the coronavirus and at least seven people have died, while many states have announced lockdown to curb spreading of the infection.
Under the companies law, certain classes of profitable entities have to shell out at least 2 per cent of their three-year annual net profit towards Corporate Social Responsibility (CSR) activities in a particular financial year.
"It is hereby clarified that spending of CSR funds for COVID-19 is eligible CSR activity," the corporate affairs ministry said in a circular on Monday.
The ministry is implementing the Companies Act.
CSR funds could be utilised for various activities related to COVID-19, including those relating to preventive healthcare and sanitation, as per the circular.
A senior official said the CSR funds could be used for direct expenditure to contain the spread, morbidity and mortality due to the disease.
Corporate Affairs Minister Nirmala Sitharaman tweeted the circular.
"In view of the spread of novel #CoronaVirus in India, its declaration as pandemic by the WHO, and decision of Government of India to treat this as notified disaster, it is hereby clarified that spending of CSR funds for COVID-19 is eligible CSR activity...," she tweeted.
Consultancy Corporate Professionals Group Founder Pavan Kumar Vijay said the ministry's clarification on CSR was a welcome step.
"For the purpose, it is suggested that the government may immediately create a portal on which specific requirements by way of equipment, medicines, etc may be posted and the corporates may be permitted to contribute in cash or kind towards those specific requirements. This will ensure coordinated efforts and avoid duplication," he said.
Under Section 135 of the Companies Act, 2013, every company having net worth of at least Rs 500 crore, turnover of Rs 1,000 crore or more, or a minimum net profit of Rs 5 crore during the immediately preceding financial year has to make CSR expenditure.