ICAI pitches for tax deduction for CSR expenses

ICAI – The CA Institute has encouraged the Finance Minister, Nirmala Sitharaman, to include a provision in the 2019 budget that would permit corporations to deduct 100% of their Corporate Social Responsibility (CSR) expenditures from taxes.

Currently, Section 37 of the Income Tax Act of 1961 does not permit the deduction of CSR costs as a business expense.

There is an urgent need to review this clause, and businesses should be able to deduct 100% of their CSR expenses. In fact, the Institute of Chartered Accountants of India (ICAI) pre-budget memorandum given to the Finance Ministry stated that in an ideal world there should be no restriction on the allowability of CSR expenditure under the Act.

It emphasized that all CSR expenditures are related to social and philanthropic causes and are not made for any kind of profit or personal advantage. The ICAI has argued that it is just to permit the same as business expense.

Remember that the government modified the law in 2014 to state (in Section 37) that any expenses made by an assessee on CSR-related activities should not be recognized to be expenses incurred by the assessee for the purpose of business or profession and deduction would not be permitted.

ICAI

According to the Corporations Act of 2013, certain selected companies are required to devote 2% of their average profits to CSR. The costs associated with CSR incurred by businesses are now specifically

The combined spending of the top 300 big businesses in 2021–22 was almost Rs. 12,270 crore. Due to the pandemic effect of Covid-19. According to official data, India Inc.’s corporate social responsibility (CSR) spending for FY 2020-21 dropped significantly to $8,828.11 crore, a significant decrease from the cumulative spends of $20,150.27 crore in FY2018-19 and $24,688.66 crore in FY20.

The CSR architecture in India is disclosure-based, and only CSR-mandated businesses are obliged to file MCA 21 compliance.

According to the Companies Act, CSR is a board-driven process. Based on the recommendations of the CSR committee, the company’s board is given the authority to plan, decide, carry out, and monitor CSR activities. The government doesn’t give businesses any explicit instructions on how much money they should invest in any one thing.

The annual budget for CSR efforts at listed businesses is approximately 10,000 crore. The possible amount could be more if the qualified unlisted companies are considered.

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