NEW DELHI: A high-level government panel on corporate social responsibility (CSR) has recommended that such spending be made tax-deductible for companies and jail term for executives who failed to transfer unspent amounts to a state fund be scrapped.
The panel, led by corporate affairs secretary Injeti Srinivas, submitted its report to corporate affairs minister Nirmala Sitharaman on Tuesday. Indian companies spend around ₹15,000 crore a year on CSR, according to the government.
Allowing CSR spending as a deduction while computing taxable income will come as a big relief to businesses, one of their long-standing demands. To give effect to such a provision, the Income Tax Act will have to be amended to include CSR spending among other classes of expenditure that are allowed as a deduction while computing taxable profits.
Sitharaman, who holds the portfolios of both corporate affairs and finance, could help in quicker implementation of the proposal, a government official said on condition of anonymity.
The panel also recommended roll-back of a provision for imprisonment of officers, who are in default if a company does not transfer unspent CSR funds to a designated government fund within a specified time, a controversial provision inserted into the Companies Act through amendments passed in Parliament during the budget session. The imprisonment provision had attracted criticism from the industry.
The 14-member panel recommended that there be only a monetary penalty, which should be 2-3 times the default amount with a cap of ₹1 crore.
The panel recommended that companies be given 3-5 years to use up funds meant for ongoing CSR projects before unspent amount is compulsorily transferred to the designated state fund. This is a relaxation from the maximum of three years allowed for spending CSR funds that was introduced as part of the Companies Act amendment this year. Sitharaman last week told industry executives at a meeting that the imprisonment clause would be reviewed.
The panel, however, recommended that the CSR spending obligation be extended to limited liability partnerships and banks too.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.