Some Social Welfare Spending Can Give Tax Benefit
NEW DELHI: Money spent on all CSR works cannot be counted as business expenditure but certain social welfare spending activities could be considered for tax benefits, according to CBDT Chairman R K Tiwari. Under the new Companies Act, certain class of profitable entities are required to shell out at least two per cent of their three-year average annual net profit towards Corporate Social Responsibility activities.
The government has provided clarity on tax aspects of CSR in the Union Budget, which was presented by Finance Minister Arun Jaitley on July 10. Clarifying government stance on the issue of possible tax enefits for CSR activities, the Central Board of Direct Taxes (CBDT) chief said under certain Income Tax Act provisions deductions are allowed for some activities.
He noted that money spent on CSR works is not business expense. ‘But there are certain other Income Tax provisions where deduction is allowed like for farming, for education. "So our view is that there are many activities which are akin to CSR but they are not to be allowed as business expenditure," said Tiwari.
In the Union Budget, the government said that as the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing taxable income of the company.
However, deductions could be allowed for certain CSR activities."The CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfillment of conditions, if any, specified therein," Budget said.
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