How Will Govt-Backed Incubators Benefit From Latest CSR Regulations

Finance and Corporate Affairs Minister Nirmala Sitharaman on Friday said that the government-sponsored incubators are now eligible for donations under corporates’ corporate social responsibility (CSR) spending. 

Sitharaman said that research funding in science, technology, engineering and medicine will be counted as part of mandatory CSR expenditure. The government said that the research funding by companies can go towards efforts by publicly funded universities, Indian Institutes of Technology and national laboratories towards the achievement of United Nations sustainable development goals. 

It is to be noted that every year, companies with a minimum net worth of INR 500 Cr, turnover of INR 1,000 Cr or net profit of INR 5 Cr are required to spend at least 2% of their average profit for the previous three years on CSR activities.

Along with the additions announced by Sitharaman, efforts to reduce poverty, hunger and childhood mortality, promote education and gender equality, ensure environmental sustainability and contributions to government-designated relief funds are also counted as CSR spending.

Earlier, the minister had said that the government would not operationalise an amendment to the Companies Act that had made violations of CSR provisions punishable by up to three years in prison. 

Narayan Mahadevan, cofounder at BridgeLabz said, “As incubators ourselves, we recognise the important role played in nurturing the startup ecosystem. With corporates being given further permissions to utilize the CSR funds for funding incubators, it will create a close synergy between the industry and the startup ecosystem. One of the areas to support in this would be to look at the startups and organizations which are helping disadvantaged youth to upskill. It will help uplift and upskill several capable engineers across the country.”

Saurabh Srivastava, chairman and cofounder of Indian Angel Network (IAN) said, “The decision of encouraging businesses to reroute their CSR 2% spending into state-sponsored incubators will further contribute towards driving innovation and entrepreneurship with renewed vigor. This falls in line with the Government’s aspirational ‘Startup India’ vision.”  

The announcement came with slashing of corporate tax rates to 22% for domestic companies and 15% for new domestic manufacturing companies. In all the reliefs, the government said it is foregoing revenue of $20 Bn (INR 1,45,000 Cr).