Table to Compute Net Profit for CSR contribution as per Section 198 of Companies Act, 2013

  Particulars FY
  Net profit after tax*  
Add : Allowed Credits  
1 Profit on sale of immovable property
( Original Cost – WDV )
Less : Credits Disallowed  
1 Premium on shares or debentures
2 Profit on sale of forfeited shares
3 Profit on sale of immovable property
(Sale Value of Immovable Property – Original Cost )
4 Surplus in P&L on measurement of asset or liability at fair value
Less : Expenses Allowed  
1 All the usual Working Charges
2 Director’s Remuneration
3 Bonus or Commission paid to Staff
4 Tax on escess or abnormal profits
5 Tax on business profits imposed for special reasons
6 Interest on Debentures
7 Interest on Loans
8 Expenses on repairs ( other than Capital Expenditure )
9 Contributions made under section 181 ( Bonafide Charitable Trusts )
10 Depreciation
11 Prior period items
12 Legal liability for compensation or damages
13 Insurance Expenses
Add : Expenses Disallowed  
1 Income Tax
2 Compensations, damages or payments made voluntarily
3 Capital Loss on sale of undertaking or part thereof ( Not include losses on sale of asset )
4 Expenditure in P&L on measurement of asset or liability at fair value
* Net profit after tax is taken as base and accordingly the adjustments need to be considered.

(Compiled by CA Vivekanand Pote who is Working as Finance Professional in Automobile Industry and can be contacted at vcpote@rediffmail.com)

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16 responses to “Computation of Net Profit for CSR contribution as per Section 198”

  1. Srinivas Devathi says:

    Hi,

    Already deducted below expeses from profits, sec 198, excluded below expenditure

    Less : Expenses Allowed
    1 All the usual Working Charges
    2 Director’s Remuneration
    3 Bonus or Commission paid to Staff
    4 Tax on escess or abnormal profits
    5 Tax on business profits imposed for special reasons
    6 Interest on Debentures
    7 Interest on Loans
    8 Expenses on repairs ( other than Capital Expenditure )
    9 Contributions made under section 181 ( Bonafide Charitable Trusts )
    10 Depreciation
    11 Prior period items
    12 Legal liability for compensation or damages
    13 Insurance Expenses

  2. Rakesh Chaudhary says:

    Hi,
    We have Dividend income from Mutual Funds (Mutual Funds AMC company covered under CSR), while checking eligiblity, should we exclude that dividend income from net profit?

    Thanks,
    Rakesh

  3. Nitin Brahma says:

    Should we consider losses to calculate average net profits for working our % contribution? E.g. a company has shown the following results –
    Year 1 = Loss Rs. 200 Lacs
    Year 2 = Profit Rs. 150 Lacs
    Year 3 = Profit Rs. 200 Lacs
    Average of 3 years = (-200 + 150 + 200) / 3 = Rs. 50 Lacs.
    So should we consider 2% of Rs. 50 Lacs or we should consider only positive figures for average net “profits” by ignoring loss in year 1 and calculate average of last 3 years. I.e. (Ignore loss + 150 + 200) / 3 = 350/3 = Rs. 117 Lacs on which we calculate 2% for CSR spend.

    • Sunil Mangla says:

      Dear Nitin Brahma

      (Ignore loss + 150 + 200) / 3 = 350/3 = Rs. 117 Lacs

      This one is the right figure as per my opinion.

  4. Sumit says:

    If we are already starting calculation from PAT, then why are we deduction all usual expenses again?

  5. Tanni says:

    The above format is not the correct format, please do not refer the same .

  6. Abhay Bhudoli says:

    I want to know whether one time gain on sale of investment to be included for calculation of net profits for CSR.

  7. J.MAHESWARI says:

    expenses allowed – director’s remuneration or all director’s remuneration (ie. whether including Managing Director, Whole Time Director or not)

  8. PRASANNA ATHAVALE says:

    What is meant by
    ” All the usual working charges”

  9. Harshit mantri says:

    For Calculation of profit for FY 14-15,if dividend received from a company which is complying with the sec. 135…will the dividend will be deducted from calculation of avg. net profit of 3 yrs.???

  10. navin says:

    Hi,

    Pls tell me it is profit before tax or after tax for 5 crore limit and if I see Sec 198 of Companies act,2013 no where it is mentioned profit after tax.
    whatsoever profit we already deduct depreication or director remuneration so why we have to deduct again.

  11. pkacharya says:

    weather provision for deferred tax will be added back to net profitt like normal income tax for calculating profit for CSR expense eligibility

  12. Raja says:

    the formula say “Less : Expense allowed” e.g.usual working charges, Directors’ remuneration etc. to calculate the profit u/s 198 but when we say profit as per profit & loss account, these expenses have already been deducted. Pl. clarify.

    Regards

  13. CS NATASHA GOYAL says:

    PLESE SEND ME FORMAT IN EXCEL

  14. b shiva says:

    If the figure is negative after the aforesaid adjustments, would it be called net loss u/s 198. This is important as for determining 2 % limit for csr purposes, would net loss u/s 198 be considered if in one of the three years there is loss u/s 198 or would it be ignored.

  15. Nirmal says:

    Hi,
    As per the above calculation table, the profit is as per section 198. I would like to know whether subsection L of section198 “the excess of expenditure over income, which had arisen in computing the net profits….” is required to adjust towards current year profit.

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