While presenting the budget for 2015-16 fiscal, Arun Jaitley said that from now on all the money provided by corporate entities towards the Clean Ganga project will be exempted from taxation. It is expected that the corporate houses will be making these contributions as part of their corporate social responsibility programmes. In fact, the companies in India are supposed to spend 2% of their net profits in this domain and with the tax breaks being offered to them one feels that the contributions will only increase. The business community in India had been clamouring for corporate social responsibility to be treated as deduction or weighed deduction at least with regards to taxes.
Before this benefit was announced the only area where the companies could expect 100% tax deduction was when they made contributions to the Prime Minister’s National Relief Fund. The obligation to spend on CSR is outlined in the Companies Act. However, the Income Tax Act does not allow any incentives to be provided for such activities.
The same vein has been maintained in the recently presented budget with the logic being that since this money is not being spent for business purposes it cannot be regarded as tax exempt. It has however stated that in certain cases such contributions will be exempted from taxation. Nabin Ballodia, the Partner Tax of KPMG India, says that in order to encourage companies to take part in the social sector it is necessary to provide tax breaks.
Clean Ganga Project to be aided by Levy on Coal Production
Documents related to the union budget have shown that in 2016 it might be possible to get all the finances needed to operate the Clean Ganga project from the clean energy cess being imposed on coal production. The Indian Government has allotted INR 2100 crore for Clean Ganga project in the new budget as opposed to INR 1500 crore in the previous one. In the same way the cess on per tonne of coal has been doubled from INR 100 to INR 200. In 2014 too there had been a 100% increase in clean energy cess on coal from INR 50 to INR 100.
When 2014 ended the Indian Government had earned at least INR 3000 crore in its clean energy fund. This time around Clean Ganga is the sole programme of the water sector to have received a funding impetus. The Water Resources Ministry, meanwhile, will need to work with a lower budget. Previously it was being used as a medium of transfer of funds for certain projects being done in various states. Now the state governments will receive the money directly from the central government. This is one reason why the Water Resources Ministry will have to work with a smaller allocation. The change has been brought about as per the suggestions in the domain of revenue provision systems by the Fourteenth Finance Commission.
There has also been a marginal increase in the budget for the National River Conservation Plan, which will work on rivers other than Ganga. The amount has gone up to INR 550 crore from INR 537 crore. The Finance Minister has also allocated INR 100 crore for developing riverfronts and beautifying ghats.