Replying to supplementaries during Question Hour in Rajya Sabha, he said the law passed by the Parliament mandates companies to spend 2 percent of the average post-tax profit or net profit of three years on CSR.

"Now, in the schedule of activities, which have been permitted in Schedule VII, there are several activities that are included in the Income Tax Act as exempted activities. So, if it is spent on those activities, a company under the Income Tax will get an exemption. The exemption provision is under the Income Tax Act and not under the Companies Act," he said.

Jaitley said if there are suggestions from MPs, at a later stage, the Parliament "may decide to expand that list of the income tax exemptions."

"While as on date no specific tax exemption has been extended to expenditure incurred on specified CSR activities, spending on several activities like contributions to Prime Minister's Relief Fund, scientific research, rural development projects, skill development projects, agricultural extension projects etc, which find place in Schedule VII, already enjoy such exemptions under the Income Tax Act, 1961," he said.

He said based on nature of queries received in future, "the question of introducing FAQs (frequently asked questions) or guidelines may also be considered."

Companies not spending 2 percent of their profit on CSR will have to give reasons for that. The spending on CSR will be part of auditing.

The mandatory spending is based on a principle that those who earn from the society should pay back or, at least, give reason for not doing so.

"The reasons that they mentioned for not having paid back are plausible reasons or not, the Department will certainly look into a mechanism to check this," he added.


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