How is average net profit calculated for the purpose of section 135 of the Act? Whether ‘profit before tax’ or ‘profit after tax’ is used for such computation?

How is average net profit calculated for the purpose of section 135 of the Act? Whether ‘profit before tax’ or ‘profit after tax’ is used for such computation?

The average net profit for the purpose of determining the spending on CSR activities is to be computed in accordance with the provisions of section 198 of the Act and will also be exclusive of the items given under rule 2(1)(h) of the Companies (CSR Policy) Rules, 2014. Section 198 of the Act specifies certain additions/deletions (adjustments) to be made while calculating the net profit of a company (mainly it excludes capital payments/receipts, income tax, set-off of past losses). Profit Before Tax (PBT) is used for computation of net profit under section 135 of the Act.

Posted on: 2 years ago