CSR exemption for firms making losses; eligibility to be checked every year

Ministry of Corporate Affairs (MCA) has amended the CSR rules by relaxing certain provisions while giving more impetus to impact assessment for companies falling under the CSR ambit.

The amended rules have given relaxation to large companies doing CSR and who are mandatorily required to undertake impact assessment. Amended rules now allow up to 2% of CSR obligation or Rs. 50 lacs whichever is higher to be spent on Impact Assessment. This expenditure on impact study will be part of CSR obligation.”

For example, if CSR obligation of any company is Rs.100 crore in a year earlier only Rs.50 lac was allowed to be spent on impact Assessment which now will be allowed up to Rs.2 crore, Joshi said.

The quantum of CSR funds for India Inc is in the range of Rs 25,000 crore annually and proper Assessment of the impact done by these CSR activities is in sync with National Priority. The amended rules have also exempted companies from undertaking CSR activity if it has made losses in the immediate preceding financial year.

However, those companies will have to spend the carry forward or unspent CSR obligation of the previous years. Prior to these amended rules, companies having losses in the immediately preceding financial year, had to undertake CSR activity in the current financial year, if it had reported profits of over Rs 5 crore in any of the previous three financial years.

Views shared by our Partner – Makarand Joshi in Business Standard and India CSR.

https://www.business-standard.com/article/companies/csr-exemption-for-firms-making-losses-eligibility-to-be-checked-every-year-122092300004_1.html