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New Delhi: The Ministry of Corporate Affairs (MCA) clarified Friday that contributions to ‘Chief Minister’s Relief Fund’ and ‘State Relief Fund’ for Covid-19 cannot be claimed as corporate social responsibility (CSR) spending by companies.

This comes after the MCA allowed contributions to the PM CARES fund on 28 March, which was created to collect public donations for Covid-19, as CSR expenditure.

A set of FAQs released by the ministry also said that ex-gratia payment to temporary or casual or daily wage workers over and above the disbursement of wages, specifically for fighting Covid-19, can be classified as CSR.

The ministry said that this was a “one-time exception” provided to companies only after the board of the company makes an explicit declaration to this effect and it is duly certified by the statutory auditor.

It, however, clarified that payment of daily wages to casual and daily workers and salaries to employees and contract labour won’t qualify as CSR expenditure, stating that it was part of the moral or contractual obligations of the company.

Also read: PM CARES gets Rs 6,500 crore donation in a week, 3 times more than what PMNRF got in 2 yrs

Corporate social responsibility expenditure

Corporates are mandated by law to spend 2 per cent of their net profits towards expenditure or activities that qualify as corporate social responsibility. These may include funds directed towards promoting education and skill development, helping eradicate poverty and hunger, improving child and maternal mortality rate or for 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 per cent of their average net profits of the last three years as CSR.

With the outbreak of the Covid-19 pandemic, the government had relaxed norms around what constitutes CSR spending.

Along with allowing contributions to the prime minister’s fund as CSR expenditure, MCA stated that all Covid-19 related spending on health care can be classified as CSR expenditure including preventive health care and sanitation, and disaster management.

Also read: Modi tells Indian envoys to ‘mobilise’ funds for PM-CARES fund to tackle Covid-19

PM CARES fund

The government had constituted the PM CARES fund last month and relaxed norms to enable companies to claim 100 per cent tax deductions on contributions made to the fund on par with the tax treatment to the PM’s National Relief fund. PM CARES had received nearly Rs 6,500 crore within a week of its launch, ThePrint had reported.

The fund can accept donations even from state-owned firms unlike the national relief fund that does not allow any contributions from such entities.

The FAQs also clarified that contributions made to state disaster management authorities to combat Covid-19 will qualify as CSR expenditure.

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