Companies (Corporate Social Responsibility Policy) Rules 2014 as amended

Companies (Corporate Social Responsibility Policy) Rules, 2014

as amended by Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021

Companies (CSR Policy) Rules 2014 had come in force w.e.f. April 1, 2014 which is amended by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 w.e.f. January 22, 2021

Who is responsible for Compliances under Companies (CSR Policy) Rules 2014 ?

Every Company having

-        Net Worth=> 500 Crore

-        Turnover =>1000 crores

-        Net Profit => 5 crore

in immediately preceding financial year

 

Corporate Social Responsibility (CSR) Committee

It shall consists of three or more Directors (including at least one independent director). Where the company is not required to keep independent director in its board, two or more directors shall consists of CSR Committee.

What constitute CSR Activities?

The activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in these rules, but shall not include the following, namely:-

 

(i) activities undertaken in pursuance of normal course of business of the company:

Provided that any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions that -

(a)   such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act;

 

(b)   details of such activity shall be disclosed separately in the Annual report on CSR included in the Board’s Report;

 

(ii) any activity undertaken by the company outside India except for training of Indian sports personnel representing any State or Union territory at national level or India at international level;

(iii) contribution of any amount directly or indirectly to any political party under section 182 of the Act;

(iv) activities benefitting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019);

(v) activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services;

(vi) activities carried out for fulfilment of any other statutory obligations under any law in force in India;

 

Calculation of Amount towards CSR liability

Where the company is running for more than 3 financial years	Where the company has not completed 3 financial years
2% of average net profit of the company in preceding three financial years	2% of average net profit of the company in preceding financial years since incorporation

 

Net Profit for this purpose shall not include

-        Any profit arising from any overseas branches of the company

-        Any dividend received from other companies in India

 

How CSR activities shall be implemented

CSR activities shall be implemented in the following manner:

-             The company can undertake such activities itself or through

o      Section 8 Company or Registered Public Trust or Registered Society registered under section 12A and 80G of the Income Tax Act, 1961 established by the company either singly or along with any other company;

 

o      Section 8 Company or Registered Public Trust or Registered Society established by Central or State Government

 

o      Any entity established by an Act of the Parliament or State Legislature

 

o      Section 8 Company or Registered Public Trust or Registered Society registered under section 12A and 80G of the Income Tax Act, 1961 and having an established track record of at least three years in undertaking similar activities

 

Every entity mentioned above who intends to undertake any CSR activity, shall register itself with the Central Government by filling form CSR-1 electronically with the Registrar w.e.f.  April 01, 2021. However, any CSR projects or programme shall not be affected if the such projects has been approved prior to April 01, 2021.

Upon submission of CSR-1 duly certified by CA/CS/CWA in practice, unique CSR registration number shall be generated.

CSR Expenditure

-   Administrative Overhead shall not exceed 5% of total expenditure:

 

-   Any surplus arising out of CSR activities shall not form part of business profit of a company and shall be ploughed back into the same project or shall be transferred to the unspent CSR account and spent in pursuance of  CSR Policy and annual action plan of the company or transfer such amount to fund specified in schedule VII, within a period of 6 months of the expiry of financial year

 

    -   CSR amount may be spent by a company for creation or acquisition of a Capital Asset         which shall be held by

o   Section 8 Company or Registered Public Trust or Registered Society having charitable objects and CSR registration Number or
o   Beneficiaries of the said CSR projects (self help groups, collectives, entities) or

o   A public authority

Where such assets are created before commencement of Companies (CSR Policy) Amendment Rules, 2021, shall within 180 days (can further be extended for 90 days) from the commencement comply with the requirement.

 CSR Reporting

    (1)   The Board's Report of a company covered under these rules pertaining to any financial year shall include an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable.

    (2)   In case of a foreign company, the balance sheet filed under clause (b) of sub-section (1) of section 381 of the Act, shall contain an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable.

    (3)   (a) Every company having average CSR obligation of ten crore rupees or more in pursuance of subsection of section 135 of the Act, in the three immediately preceding financial years, shall undertake impact assessment, through an independent agency, of their CSR projects having outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.

(b) The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR.

(c) A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed five percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less.

 

Display of CSR activities on its website

The Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website, if any, for public access.

Transfer of unspent CSR amount

Until a fund is specified in Schedule VII for the purposes of subsection (5) and(6) of section 135 of the Act, the unspent CSR amount, if any, shall be transferred by the company to any fund included in schedule VII of the Act

[Sources:  http://www.mca.gov.in/Ministry/pdf/CSRAmendmentRules_22012021.pdf ]

DISCLAIMER

The material and information contained in this blog are for general information purpose only.  Though we have made every efforts to make our interpretation correctly, we do not make representation either express or implied about the completeness or correctness of the subject matter.  Under no circumstances the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions.

 

EXEMPTION ON CAPITAL GAIN ON AGRICULTURE LAND U/S 54B

EXEMPTIONS FOR CAPITAL GAINS ARISING ON TRANSFER OF LAND USED FOR AGRICULTURAL PURPOSE

[Section 54B of Income-tax Act, 1961]

Under Income-tax Act, 1961, there are certain exemptions given to different class of assesses from Capital Gain provided certain investment is done. One of such exemptions are given on capital gain arising on sale of agricultural land under section 54B of Income-tax Act

Condition to avail Benefits under Section 54B

Who Can avail Benefits under Section 54B	Individual or Hindu Undivided Family (HUF)*
Assets Transferred	Land which was used for Agricultural Purpose by Individual or his parent or a HUF, two years immediately before date of transfer of land
Type of Capital Assets transferred (Depending upon period of holding of capital assets)	Long Term Capital Assets **(If period of holding)
When New Land should be purchased	For Purchase of Land for Being used for Agricultural Purpose *** Within a period of two years after the date of transfer of old land,
How many years the New Land should be held	For 3 years from the date of purchase/ from the date of completion of construction of New House

*   Whether resident or non-resident

**Period of holding for becoming Long term Capital assets is reduced from 36 months to 24 months w.e.f. assessment year 2020-2021

 *** The assessee shall have option to invest the unutilized investment to claim exemption U/s 54 of the Act in Capital Gain Saving Scheme on or before due date for filing of Income Tax Return and to utilize the deposited amount for the purpose of purchase of new land for agricultural purpose.

How much amount exempted from Capital Gain Tax

Sr. No.	Situations	Amount Exempted
1	(amount of capital gain on Old Land) < (amount of investment in New Land)	Amount of Capital Gain
2	(amount of capital gain on Old Land) > (amount of investment in New Land)	Amount of long term capital gain as reduced by amount of investment in new land

 

CONSEQUENCES IF THE NEW LAND TRANSFERRED BEFORE STIPULATED TIME PERIOD

If the new Land is sold before 3 years from the date of purchase, then cost of acquisition of new land at the time of sale of new Land shall be as follows:

Situations	Cost of acquisition
Where amount spent on purchase of New Land equal to or greater than amount of Capital Gain (LTCG) on Old Land	Amount spent on purchase of new land as reduced by amount of Capital gain exemption on sale of old land
Where amount spent on purchase of New Land less than amount of Capital Gain on Old Land	NIL

 

DISCLAIMER

The material and information contained in this blog are for general information purpose only.  Though we have made every efforts to make our interpretation correctly, we do not make representation either express or implied about the completeness or correctness of the subject matter.  Under no circumstances the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions.

 

EXEMPTIONS FOR CAPITAL GAINS ARISING ON TRANSFER OF RESIDENTIAL HOUSE PROPERTY U/s 54 of Income-tax Act, 1961

EXEMPTIONS FOR CAPITAL GAINS ARISING ON TRANSFER OF RESIDENTIAL HOUSE PROPERTY

[Section 54 of Income-tax Act, 1961]

Under Income-tax Act, 1961, there are certain exemptions given to different class of assesses from Capital Gain provided certain investment is done. One of such exemptions are given under section 54 of Income-tax Act which is discussed in below lines:

Condition to avail Benefits under Section 54

Who Can avail Benefits under Section 54	Individual or Hindu Undivided Family (HUF)*
Assets Transferred	Residential House Property (“Old House”)
Type of Capital Assets transferred (Depending upon period of holding of capital assets)	Long Term Capital Assets **(If period of holding is more than 36 months)
When the New Residential House Property should be acquired or be Constructed	i)          For Acquisition of New house Property*** Within a period of one year before or two years after the date of transfer of old house,     OR ii)         For Construction of New House Property*** within a period of three years from the date of transfer of the old house
How many years the New House should be held	For 3 years from the date of purchase/ from the date of completion of construction of New House

Amendment with effect from assessment year 2020-2021,

1)    There is amendment in section 54 of the Act and benefits of section 54 shall be available in respect of investment made in two residential house properties if the long term capital gain in not more than two crores. However, this option of investment in two residential house properties shall be available for only one time during his lifetime.

* Whether resident or non-resident

2)   **Period of holding for becoming Long term Capital assets is reduced from 36 months to 24 months

    *** The assessee shall have option to invest the unutilized investment to claim exemption U/s 54 of the Act in Capital Gain Saving Scheme on or before due date for filing of Income Tax Return which shall be utilised on or before expiry of 2 or 3 years depending upon type of investment he has opted for.

HOW MUCH AMOUNT EXEMPTED FROM CAPITAL GAIN TAX

Sr. No.	Situations	Amount Exempted
1	(amount of capital gain on Old House) < (amount of investment in New Land)	Amount of Capital Gain
2	(amount of capital gain on Old House) > (amount of investment in New Land)	Amount of long term capital gain as reduced by amount of investment in new House

CONSEQUENCES IF THE NEW HOUSE TRANSFERRED BEFORE STIPULATED TIME PERIOD

If the new House is sold before 3 years from the date of purchase, then cost of acquisition of new house at the time of sale of new Land shall be as follows:

Situations	Cost of acquisition
Where amount spent on purchase of New House equal to or greater than amount of Capital Gain (LTCG) on Old House	Amount spent on purchase of New House as reduced by amount of Capital gain exemption on sale of Old House
Where amount spent on purchase of New Land less than amount of Capital Gain on Old Land	NIL

EXAMPLE

To understand this, we calculated capital gain taxability in the assessment year 2020-2021 and 2021-2022 in below facts

Year		Amount
01.08.2012	Cost of Purchase of residential House (House 1)	500000
10.04.2019	Sale consideration of House 1	1200000
	Long Term Capital Gain	350000
01.08.2019	Purchase of new residential House (House 2)	450000
31.07.2020	Sale consideration for House 2	500000

CAPITAL GAIN TAXABILITY 

In the assessment year 2020-21

Period of Holding	More than 24 months
Type of Capital gain	Long Term Capital Gain
Sale Consideration of House 1	1200000
Less: Indexed Cost of Acquisition of House 1 (say)	850000
Long Term Capital Gain	350000
Less: Exemption Under section 54 (lower of Investment in house 2 or capital gain)	350000
Taxable LTCG in Assessment year 2020-2021	Nil

 In the assessment year 2021-2022

Period of Holding	Less than 24 months
Type of Capital gain	Short Term Capital Gain
Sale Consideration of House 2	500000
Less: Cost of Acquisition of House 2 as reduced by Capital gain exemption as claimed under section 54 for house 1 (Cost of acquisition of House 2: 450000 Less: Exemption claimed U/s 54 claimed earlier 350000)	100000
Short Term Capital Gain	400000

 DISCLAIMER

The material and information contained in this blog are for general information purpose only.  Though we have made every efforts to make our interpretation correctly, we do not make representation either express or implied about the completeness or correctness of the subject matter.  Under no circumstances the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions.