Discuss, debate and exchange ideas on latest trends and opportunities in the Business Process Outsourcing (BPO) landscape. Deliberate on adding “business value” to clients, vendors, employees and various other stakeholders to enhance customer satisfaction and sustain long term partnerships.

« Low Cost Country Sourcing (LCCS) - Are International Purchasing Offices the next paradigm? | Main | HR future state operating model »

How critical is it for organizations in India to have a mandatory CSR program?

345_1_small.jpg
Infosys is way ahead in the right direction. It has formed a committee of directors for CSR initiative and is driving it in association with the Infosys Foundation.


Globally, India is the first country to introduce Corporate Social Responsibility (CSR) through a statute.  All these years, CSR was a voluntary initiative from few institutions for their own branding. However, from April 2014, The Indian Companies Act 2013, made it mandatory for certain category of corporates to spend a portion of their profits to integrate social, economic and environmental objectives as CSR.

Who is required take up mandatory CSR activity?

As most of us are aware, any entity under the Act whose net worth is more than INR 5000m or turn over more than INR 10000m or net profit more than INR 50m in any year. The act says, at least 2% of average net profit for the past three years need to be spent on specified CSR initiatives.

It is worthwhile to note that the CSR initiatives are to be taken near the location of corporates where it operates. Thus, the effect of environment, social and economic imbalance contributed due to corporatization in the local area is addressed.

Infosys is way ahead in the right direction. It has formed a committee of directors for CSR initiative and is driving it in association with the Infosys Foundation which has been very active in these areas. Other companies have also started the same in their individual capacity in the area of health, education and the planet. In my opinion, Infosys can look at education sector as a part of CSR where in required talent can be identified, groomed for ready deployment within the organization as a strategy for Infosys to get skilled employees and also to fulfill the CSR obligation.

What are the Accounting or Taxation Requirements of CSR Initiatives?

Accounting:
Going by the spirit of the statute, it is preferable to operate a separate account under COA for CSR activities to retain and prove the CSR obligation.

Taxation:
The Indian Income tax authorities are yet to come out with specific provision for tax treatment of CSR expenses. One school of thought is of the opinion that it is an appropriation of profit and hence CSR expenses are not allowed as expenditure for computing Income tax profit. However, individually almost all the expenses listed above is allowed as expenditure provided it is related to business as per sec 35 of Indian Income Tax Act.

Conclusion

Over all it's an appreciable move by the Indian Government to introduce CSR for a good cause and we need to wait and see the benefits in the coming months as millions of rupees will be at the disposal of profitable corporates for a great cause.

Comments

Short and crisp update on a very significant move made by India towards CSR and engaging corporates to the social development. Thanks Jairam!

Very nice article, Sir. Just wanted to comment that as per today's Economic Times (16 July 2014) - While 2% of average Net Profit is mandatory, Tata's group has spent over 8000 crore as CSR in the past decade, with an average amount of 1000 crore pa just on CSR activities.

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Please key in the two words you see in the box to validate your identity as an authentic user and reduce spam.

Subscribe to this blog's feed

Follow us on

Blogger Profiles

Process Progression Model

Tweets by @Infosys_BPO