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Computation of Net Profit for CSR contribution as per Section 198

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)

Read Other Articles of the Author -CA Vivekanand Pote
Categories: Company Law

View Comments (18)

  • 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.

    • Dear Nitin Brahma

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

      This one is the right figure as per my opinion.

  • 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

  • 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

  • i want to that whether Loss on sale of immovable property/fixed asset considered in any of the above heads while computing the profits under section 198 ?

  • Hi,
    I want to ask whether loss on sale of immovable property/ fixed assets considered in any of the above heads while computing profit under section 198?

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