Question 01: How is average net profit calculated for the purpose of section 135 of the Act? Whether 'profit before tax' or 'profit after tax' is used for such computation?
Answer: Average net profit for CSR spending is calculated using Profit Before Tax (PBT) as per Section 198 of the Act, excluding certain items like capital payments/receipts and income tax. This ensures a standardized metric for CSR expenditure calculation across companies.
Question 02: What is the meaning of administrative overheads? What is the maximum permissible limit for administrative overheads?
Answer: Administrative overheads refer to expenses incurred for general management and administration of CSR functions, excluding direct project expenses. Examples include employee costs, utilities, and office supplies. The maximum permissible limit for administrative overheads is set at five percent of the total CSR expenditure, ensuring prudent financial management.
Question 03: Are administrative overheads applicable only for expenses incurred by the company, or can they be applied to expenses incurred by the implementing agency as well?
Answer: Administrative overheads apply only to expenses incurred directly by the company in managing CSR functions, not to expenses incurred by implementing agencies. This ensures transparency in expenditure allocation and prevents double accounting of administrative costs.
Question 04: What is the meaning of surplus arising from CSR activities? How can this surplus be utilized?
Answer: Surplus refers to the excess income generated from CSR activities beyond the allocated expenditure. It includes interest income, revenue from CSR projects, and similar sources. This surplus must be utilized exclusively for furthering CSR objectives, ensuring efficient use of resources and sustained social impact.
Question 05: Whether contribution to the corpus of an entity is an admissible CSR expenditure?
Answer: No, contributions to the corpus of any entity are not considered admissible CSR expenditures. This amendment aims to ensure that CSR funds are utilized directly for social welfare projects and not for capital accumulation in other entities.
Question 06: Whether expenses related to the transfer of capital assets qualify as admissible CSR expenditure?
Answer: Yes, expenses like stamp duty and registration fees related to the transfer of capital assets qualify as admissible CSR expenditure. This provision encourages companies to invest in long-term CSR projects by facilitating asset transfers.
Question 07: If a company spends more than the required amount on CSR, can the excess be set off against the mandatory 2% CSR expenditure in succeeding financial years?
Answer: Yes, excess expenditure can be set off against the required 2% CSR expenditure in the next three financial years, subject to certain conditions. This provision promotes flexibility and efficiency in CSR planning and implementation.
Question 08: If a company cannot take the benefit of set off of excess amount spent in the previous financial year, will the excess amount lapse?
Answer: Yes, if the excess amount cannot be set off, it will lapse after three financial years. This ensures that companies adhere to the prescribed CSR expenditure limits and utilize surplus funds effectively.
Question 09: Whether it is mandatory for companies to carry out CSR in their local areas?
Answer: While preference is given to local areas, it's not mandatory. Companies should balance local area preferences with national priorities, ensuring broader societal impact and alignment with Sustainable Development Goals (SDGs).
Question 10: Whether CSR expenditure of a company can be claimed as a business expenditure?
Answer: No, CSR expenditure cannot be claimed as business expenditure for tax purposes. This provision ensures that CSR funds are utilized exclusively for social welfare projects and not for tax benefits.
Question 11: What tax benefits can be availed under CSR?
Answer: There are no specific tax exemptions for CSR expenditure. This clarifies that CSR spending does not form part of business expenditure for tax purposes.
Question 12: Whether contribution in kind can be monetized to be shown as CSR expenditure?
Answer: No, CSR contributions cannot be in kind and monetized. This ensures transparency and accountability in CSR expenditure reporting.
Question 13: Can CSR expenditure be incurred on activities beyond Schedule VII?
Answer: No, CSR expenditure must adhere to activities listed in Schedule VII. This ensures that CSR funds are utilized for socially relevant projects with tangible societal impact.
Question 14: What are the different modes of incurring CSR expenditure?
Answer: CSR expenditure can be incurred through direct activities, contributions to funds, or contributions to specific projects or institutes. This flexibility allows companies to align CSR initiatives with their core competencies and social objectives.
Question 15: Which funds specified in Schedule VII of the Act can be used for CSR contribution?
Answer: Funds like Swachh Bharat Kosh, Clean Ganga Fund, PMNRF, PM CARES Fund, and others specified by the Central Government can be used for CSR contributions. This ensures targeted allocation of CSR funds to priority areas of national development.
Question 16: Will contributions to any other fund set up for carrying out activities mentioned in Schedule VII of the Act be an admissible CSR expenditure?
Answer: No, only funds specifically mentioned in Schedule VII are admissible for CSR expenditure. This ensures that CSR funds are utilized for projects with clear social relevance and impact.
Question 17: Can CSR funds be utilized to fund Government schemes?
Answer: No, CSR should not be used to finance government schemes, but companies can undertake similar activities independently. This ensures independence and autonomy in CSR decision-making, aligned with corporate objectives and societal needs.
Question 18: Whether involvement of employees of a company in their CSR projects can be monetized and accounted for under the head of 'CSR expenditure'?
Answer: No, employee involvement cannot be monetized, but it promotes socially responsible corporate behavior. This emphasizes the importance of employee engagement in CSR activities for fostering a culture of corporate citizenship.
Question 19: What are the reporting requirements for CSR expenditure?
Answer: Companies are required to include a CSR report in their annual financial statements, detailing the amount spent on CSR activities, projects undertaken, and the impact achieved. This promotes transparency and accountability in CSR spending.
Question 20: Can CSR funds be utilized for capacity building and skill development programs?
Answer: Yes, CSR funds can be utilized for capacity building and skill development programs, especially those aimed at empowering marginalized communities and enhancing their employability. Such initiatives align with the inclusive growth agenda of CSR.
Question 21: Is there a provision for CSR expenditure carried forward from previous years?
Answer: Yes, companies can carry forward excess CSR expenditure from previous years for up to three financial years, subject to compliance with specified conditions. This provision ensures flexibility in CSR planning and implementation.
Question 22: What measures can companies take to ensure effective monitoring and evaluation of CSR projects?
Answer: Companies can implement robust monitoring and evaluation frameworks, including regular progress assessments, impact evaluations, and stakeholder consultations. This ensures accountability, transparency, and continuous improvement in CSR initiatives.
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