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What is Corporate Social Responsibility for MCA registered Companies in India?
The term “Corporate Social Responsibility (CSR)” can be referred to as social welfare as a corporate initiative to assess and assess the impact on the company’s environment.
The term “CSR” generally applies to the efforts of companies that may require regulatory or environmental protection groups.
As companies use natural resources to make products, they promote pollution and fill their pockets, But various people living in the society have to bear the brunt of this bad pollution, Due to the productive activities of these companies, they have to use polluted air and water.
But these affected people are not given any direct compensation from the companies.
For this reason, it has been made mandatory for companies across the world, including India, to contribute a part of their income for the welfare of the people who have caused them inconvenience. This is know as Corporate Social Responsibility (CSR).
Who comes under corporate social responsibility in India?
The rules of Corporate Social Responsibility (CSR) in India come into force from 1 April 2014. Accordingly, companies whose annual net worth is Rs. 500 crore annual income Rs. 1000 crores or Rs. 5 crores per year, then it is necessary to spend on CSR.
This expenditure should be at least 2% of the average profit for three years. As per CSR rules, the provisions of CSR apply not only to Indian companies that have Company Registration with MCA but also to a branch of a foreign company in India and the project office of a foreign company.
Can the expenditure towards temporary staff specially appointed by the company to implement CSR activities be included in the expenditure prescribed for CSR activities?
CSR employees are paid regular salaries as well as employees of companies providing their services for CSR will be given a share of administrative overheads and total CSR spending as per Rule 4 (6) of CSR Policy, in Rule 2014 Must not exceed 5%.
Can a company’s CSR expense be claimed as a business expense?
The amount spent by a registered company towards CSR cannot be claimed as a business expense. The Finance Act, 2014 provides that any expenditure incurred by an assessed on activities related to corporate social responsibility specified in section 135 of the Companies Act, 2013 will not be treated as expenditure incurred by the assessed for business and professional purposes.
What tax benefits can be availed under CSR?
No special tax exemption has been increased more than CSR expenditure.
The Finance Act, 2014 also clarifies that expenditure on CSR is not a part of business expenditure.
We can see there is no special tax exemption on expenditure incurred on CSR, various activities such as contribution to Prime Minister’s Relief Fund, scientific research, rural development projects, skill development projects, agricultural extension projects, etc. which find a place in Schedule VII, Already enjoy exemption under various sections of Income Tax Act, 1961.
Which activities would not qualify as a CSR expense?
- CSR projects or programs or activities that only benefit the employees and their families of the company will not be considered as CSR activities as per Section 135 of the Act.
- Unilateral programs such as marathons/awards / charitable contributions/advertising/sponsorship of TV programs will not be carefully qualified as part of CSR.
- Expenditure incurred by companies for the fulfillment of any act/regulation (e.g. Labour Law, Land Acquisition Act, etc.) will not be counted as a CSR carefully under the Companies Act.
- Contribution of any amount directly or indirectly to any political party will not be considered as CSR activity.
- Activities are undertaken by the company in pursuance of its normal course of business.
Can a company donate money to a trust that can be considered as CSR expense of the company?
MCA General Circular No. 21/2014 dated June 18, 2014, clarifies that contributions to the fund of Trusts /Societies/Section 8 companies, etc. will be eligible for long term as CSR expenses:
- Trusts / Societies / Section 8 companies etc. specially created for CSR activities or undertakings
- Where a fund is made directly related to a subject covered in Schedule VII of the Act.
What activities of C.S.R. can happen in India?
Under C.S.R, the companies registered with MCA are obliged to participate in activities that are necessary for the welfare of the backward or marginalized sections of the society.
It includes the following activities:
- End hunger, poverty, and malnutrition
- Promoting education
- Improvement in maternal and child health
- Ensuring environmental sustainability
- Measures for the benefit of the armed forces
- Promoting sports activities
- Protection of National Heritage
- Prime Minister’s contribution to national relief
- Development of slum area
- Construction of toilets in schools
Is spending on disaster relief eligible for CSR?
A wide range of disaster relief activities can be covered under various items listed in Schedule VII. for example:
- Medical assistance may be covered under the promotion of health care, including preventive health care.
- Food supply can be covered under the eradication of hunger, poverty, and malnutrition.
- Clean water supplies can be covered and sanitation and safe drinking water can be provided.
Will CSR projects or programs become part of CSR activity for company employees and their families?
No, CSR projects or programs or activities that only benefit the employees and their families of the company will not be considered as CSR activities as per Section 135 of the Act. (May refer to Rule 4 (5) of CSR Policy, 2014)
Note: During the outbreak of COVID-19 (Coronavirus), the Ministry of Corporate Affairs has notified; That companies’ spending to fight the epidemic would be considered legitimate under CSR activities. Money can be spent on various activities related to COVID-19, Such as promoting healthcare, including preventive health care and sanitation, and disaster management.