Corporate Affairs Ministry announces donations to CM Relief Fund cannot be counted as CSR
By MYBRANDBOOK
India’s Corporate Affairs Ministry has clarified that companies cannot make financial contributions to any ‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19′ and claim that as ‘corporate social responsibility’ (CSR) spending as per existing law.
This clarification comes less than two weeks after the Ministry of Corporate Affairs (MCA) said all corporate donations to Modi’s ‘PM CARES Fund’, which was set up to fight the COVID-19 pandemic, could be counted as CSR expenditure that most companies are mandated to make by law. Instead, corporations will have to donate to a state government’s disaster management authority in order to claim it as CSR spending.
Most companies are mandated by law to spend 2% of their average net profits (as calculated by the average of the preceding three financial years) on CSR duties. These CSR funds can be used for a wide range of activities, including helping alleviate poverty and hunger, promoting skill development and education and disaster relief. At present, companies with a net profit of Rs 5 crore or a net worth of Rs 500 crore or a turnover of Rs 1,000 crore have to spend 2% of their average net profits of the last three years as CSR.
In the last few weeks, the MCA and finance ministry both received a number of requests over whether donations to ‘Chief Minister’s Relief Fund’ also would count as CSR spending. However, as per existing law, this is not allowed.
An FAQ issued by the ministry noted, “Chief Minister’s Relief Fund or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Companies Act, 2013 and therefore any contribution to such funds shall not qualify as admissible CSR expenditure. However, corporate contributions made to each individual ‘State Disaster Management Authority ‘to combat COVID-19 “shall qualify as CSR expenditure under item no (xii) of Schedule VII of the 2013 and clarified vide general circular No. 10/2020 dated 23rd March, 2020”.
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