Quick Summary
The Income Tax Department has unearthed a suspected money laundering racket linked to CSR funds, where several companies are alleged to have routed their mandatory CSR spending through bogus trusts, only to receive the money back in cash or via layered transactions. According to sources, the raids began in Delhi earlier this month and covered 11-12 suspicious trusts, with plans to expand the crackdown to other metros. Officials believe the scheme exploits loopholes in CSR compliance norms under
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FAQ :
The Income Tax Department has uncovered a suspected money laundering network linked to CSR funds, where companies allegedly routed their mandatory CSR spending through bogus trusts to get money back.
Companies transferred CSR funds to fake trusts, which then returned most of the money in cash or via layered transactions. Companies claimed CSR obligations were met and sometimes wrongful tax deductions.
The exchequer faces a double loss: revenue from wrongful deductions claimed by companies and tax on the undeclared funds that were returned to the companies.
In FY 2023-24, 27,188 companies spent ₹34,908.75 crore on CSR. Since the 2013 amendment, companies must spend 2% of their average net profits on CSR projects.
No, under the Income Tax Act, CSR expenditure is not deductible as a business expense, which has led some companies to seek questionable tax benefits.
The government is tightening scrutiny on CSR spending and associated tax claims, with raids expanding to other metros and potential legislative changes to close loopholes.
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