Coronavirus Outbreak: Ex-gratia payments to temporary workers, donations to PM-CARES FUND to be CSR spending, says govt

New Delhi: Ex-gratia payments made to temporary, casual and daily wage workers by companies will be considered as CSR expenditure under the companies law, provided that such payments are over and above disbursement of wages.

Weeks after announcing that contributions by companies to PM-CARES Fund to tackle the pandemic would be considered as CSR, the corporate affairs ministry has come out with a set of FAQs (Frequently Asked Questions) to clarify various aspects.

Migrant workers being screened at Gorakhpur, Uttar Pradesh. ANI

According to the ministry, contributions made to State Disaster Management Authority to combat COVID-19 would qualify as CSR expenditure.

However, contribution towards 'Chief Minister's Relief Fund' or 'State Relief Fund for COVID-19' would not be considered as spending towards CSR work.

Under the Companies Act, 2013, certain classes of profitable entities are required to spend at least 2 percent of their three-year average annual net profit towards Corporate Social Responsibility (CSR) activities.

"If any ex-gratia payment is made to temporary/ casual workers/ daily wage workers over and above the disbursement of wages, specifically for the purpose of fighting COVID 19, the same shall be admissible towards CSR expenditure as a one-time exception," the ministry said.

This exception is subject to the condition that there is an explicit declaration to that effect by a company's board that is duly certified by the statutory auditor.

The ministry also clarified that payment of wages to temporary or casual or daily wage workers during the lockdown period would not count towards CSR expenditure.

"Payment of salary/ wages to employees and workers even during the lockdown period is a moral obligation of the employers, as they have no alternative source of employment or livelihood during this period," it noted.

Similarly, payment of salary/ wages to employees and workers during the lockdown period, including imposition of other social distancing requirements, would also not qualify under the CSR framework.

Contributions to the Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund (PM-CARES Fund) would qualify as CSR spending. The fund has been set up the which would be utilised to deal with any emergency or distress situation such as the coronavirus outbreak.

CSR funds could be utilised for various activities related to COVID-19, including those relating to preventive healthcare and sanitation.

More than 240 people have died due to coronavirus while the number of infected people crossed 7,500 in the country.

Under Section 135 of the Companies Act, 2013, every company having net worth of at least Rs 500 crore, turnover of Rs 1,000 crore or more, or a minimum net profit of Rs 5 crore during the immediately preceding financial year, has to make CSR expenditure.

Last month, Corporate Affairs Secretary Injeti Srinivas said that making contributions to the fund would further help companies to meet their CSR obligations. Corporates have spent Rs 52,000 crore towards social welfare activities in the last five financial years.

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Press Trust of India