India Inc has demanded a tax set-off for the mandatory amount they will have to spend on corporate social responsibility (CSR) programmes. The Companies Bill to be introduced in Parliament in this session has specified that 2 per cent of net profit of every company must be spent on CSR.
Many corporates raised the issue of tax benefits for the amount they spend on CSR. I will take up the issue with the finance ministry, said Sachin Pilot, minister of state holding independent charge of corporate affairs, to reporters after a meeting with senior executives of industry on Tuesday.
While such a tax break will not require any amendment to the Companies Bill the provisions will have to be provided through the Finance Bill in the annual Budget.
The demand for tax break on CSR spend was raised earlier too but it is for the first time that it has been supported explicitly by the government. If approved, it will be a major incentive for the companies.
A Central government analysis shows in the year 2010-11 ,66,347 companies reported Rs 9,46,731 crore as profits before taxes as per their books, which makes 2 per cent of thatfigure, Rs 18,935 crore.
The Bill says the companies will have to ensure that they spend 2 per cent of their net profits on such activities and in case they fail to do so, they will have to provide an explanation to shareholders. The Bill approved by the Cabinet is likely to be tabled in the ongoing Parliament session.