Corporate Social Responsibility

CSR-spending, Tax Benefit ,reporting

Question:

A.CSR spending

(1)How do I decide how much I need to spent on CSR- I understand profitable companies must spend every year at least 2 per cent of their average net profit over the preceding three years on CSR. (1.a)My question is whether CSR amount is decided after taxation or before?. (1.b) How does it practical if it is calculated for three consecutive years as first two years’ taxation might have done already?

As per my understanding it is before taxation. I am not an expert about the law and its implication. You can look up details on the Ministry of Corporate Affairs: http://www.mca.gov.in/

(3)I understand CSR-spend rule will apply from fiscal 2014-15 onwards. My company so far not spent money. In this case, 3 consecutive financial years are calculated from 14-15/15-16/16-17 or 15-16/16-17/17-18?

Again, as per my knowledge, you can't transfer funds from one year to the other. You are expected to complete disbursement in the same financial year. If not disbursed, you may need to explain the reasons for not complying with the guidelines.

B. Tax Benefit

(4)How does a company get tax benefit through CSR ? Could you explain a bit in a very practical point of view to a company which starts CSR newly .

CSR is meant to be done without expecting anything in return, is my perspective. However, the organization can file for tax benefits under Section 80G.

(5)If my company wanted to transfer CSR money before 31st of March of this year to a charitable organisation , how will I get tax benefit ?

When you apply if when you get it and when the filing is made.

(6) Do I get tax benefit this financial year or next financial year considering CSR programs are implemented next financial year, though money is transferred by the end of present financial year? (7) How does tax exemption calculated?

Again, this is something your legal advisor or Finance team can help you better.

(8) If money is not transferred before march 31st of 2018, and transferring only next financial year, what would be the implications ? Consider, my company has so far not invested anything in CSR.

My understanding is that the amount lapses if you haven't spent it in the same year. It is not transferable. Do however, check the Ministry's website for more clarifications,

C.CSR reporting
(9)How does my company report to government of India on CSR spending ?

When you file your returns it is expected to be included in the reporting.

(10)Is there a reporting format available?

Yes, on the Ministry's website

(11) Who is supposed to report to government of India - Board or CSR department?

The company's Board is responsible.

(12) To which department of the ministry and which ministry?

Ministry of Corporate Affairs

(13) Is reporting done online ? –if then could you share that link ?

Yes, it is online. Do look up the website.

(14)What is the cut of date on which I need to report to government ?

March 31 every year

(15) Does government monitor companies on CSR spent and, if then- How ?

Yes, they do. They will audit and send notices if companies are not compliant.

Answer:

A.CSR spending

(1)How do I decide how much I need to spent on CSR- I understand profitable companies must spend every year at least 2 per cent of their average net profit over the preceding three years on CSR. (1.a)My question is whether CSR amount is decided after taxation or before?. (1.b) How does it practical if it is calculated for three consecutive years as first two years’ taxation might have done already?

As per my understanding it is before taxation. I am not an expert about the law and its implication. You can look up details on the Ministry of Corporate Affairs: http://www.mca.gov.in/

(3)I understand CSR-spend rule will apply from fiscal 2014-15 onwards. My company so far not spent money. In this case, 3 consecutive financial years are calculated from 14-15/15-16/16-17 or 15-16/16-17/17-18?

Again, as per my knowledge, you can't transfer funds from one year to the other. You are expected to complete disbursement in the same financial year. If not disbursed, you may need to explain the reasons for not complying with the guidelines.

B. Tax Benefit

(4)How does a company get tax benefit through CSR ? Could you explain a bit in a very practical point of view to a company which starts CSR newly .

CSR is meant to be done without expecting anything in return, is my perspective. However, the organization can file for tax benefits under Section 80G.

(5)If my company wanted to transfer CSR money before 31st of March of this year to a charitable organisation , how will I get tax benefit ?

When you apply if when you get it and when the filing is made.

(6) Do I get tax benefit this financial year or next financial year considering CSR programs are implemented next financial year, though money is transferred by the end of present financial year? (7) How does tax exemption calculated?

Again, this is something your legal advisor or Finance team can help you better.

(8) If money is not transferred before march 31st of 2018, and transferring only next financial year, what would be the implications ? Consider, my company has so far not invested anything in CSR.

My understanding is that the amount lapses if you haven't spent it in the same year. It is not transferable. Do however, check the Ministry's website for more clarifications,

C.CSR reporting
(9)How does my company report to government of India on CSR spending ?

When you file your returns it is expected to be included in the reporting.

(10)Is there a reporting format available?

Yes, on the Ministry's website

(11) Who is supposed to report to government of India - Board or CSR department?

The company's Board is responsible.

(12) To which department of the ministry and which ministry?

Ministry of Corporate Affairs

(13) Is reporting done online ? –if then could you share that link ?

Yes, it is online. Do look up the website.

(14)What is the cut of date on which I need to report to government ?

March 31 every year

(15) Does government monitor companies on CSR spent and, if then- How ?

Yes, they do. They will audit and send notices if companies are not compliant.

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