MCA issues FAQs on CSR MCA has been receiving several queries and reference seeking further clarifications on various issues relating to CSR provisions and in this regard list of FAQs has been issued.
The key FAQs are as under
i. Applicability: CSR provisions shall be applicable to all companies satisfying the criteria laid down under Section 135 of the Companies Act, 2013 and relevant Rules.
ii. Tax benefits: With regard to the Tax benefits, it has been clarified that no specific tax exemptions that has been extended to CSR expenditure per se, however it clarified that spending on certain activities like contributions to Prime Minister's Relief fund, Scientific research , Rural development projects, skill development projects, agricultural extension projects etc. prescribed in Schedule VII already enjoy exemptions under different provisions of Income Tax Act, 1961
iii. Computation of Average net profit: With respect to 'average net profit' criteria u/s 135(5), It has been clarified that computation of net profit shall be as per section 198, which is primarily 'profit before tax'
iv. CSR as business expenditure: MCA clarified that the amount spent by company towards CSR cannot be claimed as 'business expenditure'
v. Carry forward of CSR expenditure: Any excess amount spent (i.e. more than 2% as specified in section 135) cannot be carried forward to the subsequent years and adjusted against that year's CSR expenditure vi. Activities that are not covered under CSR: MCA specified some activities which would not qualify as CSR, which includes: (i) CSR Projects or programs or activities that are only for employees' benefit, (ii) one-off events such as marathons/awards/sponsorship of tv programmes etc, (iii) expenses incurred for compliance of any other Act / Regulation, (iv) Contribution of any amount directly or indirectly to any to political party, etc. vii. Section 8 Companies: Since no exemption is given to section 8 companies therefore, any such Company which is fulfilling the prescribed criteria, is also required to comply with CSR provisions. viii. Display of CSR policy on Co's website: Clarifies on mandatory display of CSR policy on company's website and reporting in Boards' Report.
The key FAQs are as under
i. Applicability: CSR provisions shall be applicable to all companies satisfying the criteria laid down under Section 135 of the Companies Act, 2013 and relevant Rules.
ii. Tax benefits: With regard to the Tax benefits, it has been clarified that no specific tax exemptions that has been extended to CSR expenditure per se, however it clarified that spending on certain activities like contributions to Prime Minister's Relief fund, Scientific research , Rural development projects, skill development projects, agricultural extension projects etc. prescribed in Schedule VII already enjoy exemptions under different provisions of Income Tax Act, 1961
iii. Computation of Average net profit: With respect to 'average net profit' criteria u/s 135(5), It has been clarified that computation of net profit shall be as per section 198, which is primarily 'profit before tax'
iv. CSR as business expenditure: MCA clarified that the amount spent by company towards CSR cannot be claimed as 'business expenditure'
v. Carry forward of CSR expenditure: Any excess amount spent (i.e. more than 2% as specified in section 135) cannot be carried forward to the subsequent years and adjusted against that year's CSR expenditure vi. Activities that are not covered under CSR: MCA specified some activities which would not qualify as CSR, which includes: (i) CSR Projects or programs or activities that are only for employees' benefit, (ii) one-off events such as marathons/awards/sponsorship of tv programmes etc, (iii) expenses incurred for compliance of any other Act / Regulation, (iv) Contribution of any amount directly or indirectly to any to political party, etc. vii. Section 8 Companies: Since no exemption is given to section 8 companies therefore, any such Company which is fulfilling the prescribed criteria, is also required to comply with CSR provisions. viii. Display of CSR policy on Co's website: Clarifies on mandatory display of CSR policy on company's website and reporting in Boards' Report.
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