Amount to be contributed as specified under Companies Act, 2013?

Section 135 provides that the companies, which are mandatorily required to spend towards CSR, shall spend at least 2% of their Average Net Profit (Calculated under section 198, and shall be exclusive of such sums as provided under CSR rules) of the preceding 3 Financial Years. However, if 3 FY are not completed since incorporation then average of profit earned during such period.

Set off if more than 2% contributed?

If a Company spends more than 2% in any FY then such excess can be set off in the immediate next 3 FY against the amount required to be contributed under Section 135 of the Companies Act, 2013 in the Succeeding years.

If not contributed or amount remains unspent other than in case of ongoing projects?

Failure to spend shall be explained by the Board in its Report under Section 134, and transfer such unspent amount, within 6 months of the end of FY, to a fund specified under Schedule VII.

Amount remain unspent in case of ongoing project?

“Ongoing Project” means a multi-year project undertaken by a Company in fulfillment of its CSR obligation having timelines not exceeding three years excluding the financial year in which it was commenced, and shall include such project that was initially not approved as a multi-year project but whose duration has been extended beyond one year by the board based on reasonable justification.”

Amount remain unspent on account of Multi-Year project shall be transferred to the “UNSPENT CSR ACCOUNT” within 30 days form the end of Financial year, and which can be spend within 3 FY.

If amount remain unspent even after aforementioned 3 FY, then such amount shall be transferred to the fund as specified under Schedule VII within a period of 30 days from the end of 3rd FY.

ADMINISTRATIVE OVERHEADS?

“Administrative overheads” means the expenses incurred by the company for general management and administration of Corporate Social Responsibility functions in the company but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or programme.”

Administrative overheads shall not exceed 5% of the Total CSR amount for the Financial Year.

CREATION AND ACQUISITION OF CAPITAL ASSETS?

Yes, a Company can spend CSR amount for the above assets, but such asset shall be held by:

(a) a company established under section 8 of the Act, or a Registered Public Trust or Registered Society, having charitable objects and CSR Registration Number under sub-rule (2) of rule 4; or

(b) beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities; or

(c) a public authority:

Deduction under Income Tax Act?

Section 37 of the Income Tax Act, 1961 categorically refuses to provide any deduction of the amount spent as CSR under Section 135 of the Companies Act, 2013.

However, if amount spent under CSR falls under section 30-36 of the Income Tax Act, 1961 then such expenditure shall be allowed to be deducted.

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2 Comments

    1. Anurag Saharawat says:

      Dear Subodh,

      Yes you correctly pointed out 80G deduction. Unfortunately while writting taxation part I forgot to mention that.

      Thank you for highlighting it.

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