While companies with a CSR obligation under the Companies Act, 2013 must report on their CSR activities, there isn’t a separate filing solely dedicated to CSR with the Registrar of Companies (RoC). Instead, the details of CSR activities are required to be disclosed as part of the overall Annual RepoRead more
While companies with a CSR obligation under the Companies Act, 2013 must report on their CSR activities, there isn’t a separate filing solely dedicated to CSR with the Registrar of Companies (RoC). Instead, the details of CSR activities are required to be disclosed as part of the overall Annual Report and Directors’ Report.
Key Points:
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Disclosure in the Annual Report:
Companies must include a section on CSR in their Directors’ Report. This section should detail:- The CSR policy adopted by the company.
- Projects or programs undertaken.
- Amount spent on CSR activities.
- Reasons for any unspent CSR funds, if applicable.
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Filing with the RoC:
Since the Annual Report (which includes the CSR disclosure) is filed with the Registrar of Companies, CSR information is indirectly submitted to the RoC along with the company’s financial statements and annual return. -
Additional Public Disclosure:
Companies are also encouraged to publish details of their CSR activities on their corporate website, ensuring transparency for stakeholders.
When a company spends more on Corporate Social Responsibility (CSR) activities than the mandated amount, here's how such additional expenses are treated for tax purposes: 1. CSR Expenditure is Non-Deductible Mandatory and Additional CSR Spending:Whether the CSR expenditure is exactly at the mandatedRead more
When a company spends more on Corporate Social Responsibility (CSR) activities than the mandated amount, here’s how such additional expenses are treated for tax purposes:
1. CSR Expenditure is Non-Deductible
Mandatory and Additional CSR Spending:
Whether the CSR expenditure is exactly at the mandated level (as per Section 135 of the Companies Act, 2013) or exceeds it, the entire amount spent on CSR activities is not allowed as a deduction while computing taxable income under the Income Tax Act.
Reasoning:
The underlying principle is that CSR spending is intended to promote social welfare rather than to generate business income. As such, these expenditures do not qualify as business expenses incurred wholly and exclusively for earning revenue.
2. Additional CSR Spending
Extra Spending Beyond the Mandate:
Any extra amount spent on CSR activities—beyond the prescribed minimum requirement—is treated in the same way as the mandated CSR spend, meaning that it cannot be claimed as a tax deduction.
Implication for Companies:
While a company may choose to invest more in social initiatives to enhance its corporate image or for altruistic reasons, such additional expenditure will not reduce its taxable income. All CSR spending remains non-deductible, regardless of the amount.
3. Financial Reporting vs. Tax Reporting
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See lessFinancial Statements:
Companies will record their CSR expenditure in their financial statements as part of their corporate social responsibility initiatives.
Tax Computation:
However, when preparing the tax return, the entire amount spent on CSR (including any additional spending beyond the mandated requirement) is treated as a non-deductible expense. This means it will not be subtracted from the company’s profits for tax purposes.