MaushamMishra In what sequence should these expenses be computed?
Returning to the initial question of the sequence in which Bonus and CSR expenses should be deducted, it's noteworthy that Clause 18.13(1) of the Income Tax Directive 2066 provides relevant guidance. According to this clause, bonus is permitted to be deducted to a maximum limit of 10% of net profit, as outlined in the Bonus Act 2030. However, if the bonus is calculated prior to accounting for CSR expenses, there's a likelihood that the calculated bonus expense would exceed the 10% limit. Let's elucidate this through a case study:
Case Study: Assuming a hypothetical company's financial figures for a fiscal year:
Net Profit (Before Tax): Rs. 1,00,00,000
Bonus Calculation (10% of Net Profit): 10% of Rs. 1,00,00,000 = Rs. 10,00,000
Now, incorporating CSR expenses:
CSR Allocation (1% of Net Profit Before Tax): 1% of Rs. 1,00,00,000 = Rs. 1,00,000
If CSR is considered prior to calculating Bonus:
Available Net Profit for Bonus Calculation: Rs. 1,00,00,000 - Rs. 1,00,000 (CSR) = Rs. 99,00,000
Bonus Calculation (10% of Adjusted Net Profit): 10% of Rs. 99,00,000 = Rs. 9,90,000
However, If Bonus is calculated before CSR:
Bonus Expense: Rs. 10,00,000 (exceeding the permissible limit of 10%)
By following this sequence, the bonus expense remains within the 10% limit of the net profit as specified in the Bonus Act 2030. Therefore, considering CSR allocation before calculating Bonus helps in ensuring compliance with the prescribed legal limits and maintaining consistency with the provisions of the acts and regulations involved.