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CMA Foundation · Fundamentals of Business Economics and Management · Economic and Business Environment

Under Section 135 of the Companies Act, 2013, a qualifying company must spend at least a stated percentage of its average net profit of the preceding three financial years on CSR. A company has net profits of ₹6 crore, ₹9 crore and ₹12 crore in the last three years. What is the minimum CSR spend for the current year?

The minimum CSR spend is ₹18 lakh. The average net profit of the last three years is ₹9 crore, and the law requires at least 2% of this average. Using only the latest year's profit or the three-year total would give a wrong figure.

  1. A₹12 lakh
  2. B₹18 lakhCorrect
  3. C₹54 lakh
  4. D₹1.8 crore

Explanation

Average net profit = (6+9+12)/3 = ₹9 crore. The prescribed minimum is 2% of that, so 2% × 9 crore = ₹18 lakh. ₹54 lakh wrongly uses 2% of total profit of 27 crore; ₹12 lakh uses 2% of the latest year's profit alone; ₹1.8 crore applies 20%.

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