Tax exemption only for PM CARES fund, donation to CM relief fund not eligible
Chennai: For corporates, big industrial houses and service firms seeking to get tax concessions under the Corporate Social Responsibility (CSR) scheme, It might not be an easy process just by donating to the activities to fight the Covid-19 pandemic at the State level.
Going by the latest circular of the Union Ministry of Corporate Affairs, on "eligibility of CSR expenditure to Covid-19 activities", only contributions made to PM-CARES fund, shall qualify as 'CSR expenditure' under item number eight under schedule seven of Companies Act, 2013, an April 10 dated clarification by the Corporate Affairs Ministry, has said. And this has been also made clear by an office memorandum dated March 28, 2020.
Meanwhile, many State Governments including Tamil Nadu have also begun raising resources under the respective 'Chief Minister's Public Relief Fund' for Covid-19 activities in particular.
In fact a clarification from the Tamil Nadu chief minister's Office a couple of days back urged corporates and industrial and big business establishments to contribute more liberally as such contributions will also qualify as "CSR expenditure" for tax benefits.
But now the Corporate Affairs Ministry's latest clarification explicitly says: ‘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, the Ministry's clarification goes on to add that contributions made to the State Disaster Management Authority (SDMA) shall qualify as "CSR Expenditure" under the relevant provision of the Companies Act, 2013.
Also, the 'general circular' dated March 23, 2020, says spending CSR Funds for Covid-19 related activities "shall qualify as CSR expenditure".
These could include expenditure on items under Schedule seven of the Companies Act, relating to promotion of health care, including preventive health care and sanitation and for disaster management.
The items in schedule seven are "broad based and may be interpreted liberally for this purpose," says the Ministry.
The Ministry has also clarified that payment of salaries and wages during lockdown period by companies to employees and workers "shall not qualify as admissible CSR expenditure."
If any ex-gratia payment is made to employees and workers for the specific purpose of fighting and containing Covid19, then that shall qualify as "CSR expenditure as one-time exception," adds the Ministry of Corporate Affairs.
Going by this latest clarification by the Government of India, State governments including Tamil Nadu may have to slightly tweak the nomenclature of their respective CM's Public Relief Fund, perhaps through a G.O., by specifically including within brackets "Activities to Fight Covid-19", if they are to raise funds more liberally from corporates and industrial houses under the category of "shall qualify as CSR expenditure".
On Friday evening, the Tamil Nadu chief secretary, Dr K Shanmugam had said that the additional funds they got from Centre yesterday to the tune of Rs. 314 crore was the State's share from the National Health Mission (NHM) coronavirus fund announced for all States by the Centre. The first tranche of Rs. 510 crore was from SDRF funds, he pointed out.
