CSR on Dividend Received from Foreign companies

Hi Neeraj,

Great question on CSR applicability!

Key points from your query:

• Section 135(5) & Rule 2(h) of CSR Rules define Net Profit for CSR calculation.

• Exclusions from Net Profit include:

  • Profits from overseas branches.

  • Dividend received from Indian companies covered under Section 135.

• Your question: What about dividends received from foreign subsidiaries?

Interpretation & Practice:

• Dividend from foreign subsidiaries is not explicitly excluded under CSR rules.

• The rules specifically exclude dividend from Indian companies complying with CSR, and profits from overseas branches, but say nothing about dividends from foreign subsidiaries.

• Therefore, dividend income from foreign subsidiaries is included in the Net Profit for CSR calculations.

• So, yes, the company is required to consider such dividend income when calculating net profit and pay CSR accordingly (if the other CSR applicability thresholds are met).

Supporting points:

• Ministry of Corporate Affairs (MCA) FAQs and clarifications generally affirm this interpretation.

• The exclusion for overseas branches is about operational profits, but dividends from foreign subsidiaries are treated as income of the company, hence included.

• If a company receives dividend from its foreign subsidiary, that dividend forms part of its net profit for CSR.

Summary: