With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements :
- CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities.
- CSR rules do not specify minimum spending on CSR activities.
Which of the statements given above is/are correct ?
1 only
2 only
Both 1 and 2
Neither 1 nor 2
Answer is Wrong!
Answer is Right!
This question was previously asked in
UPSC IAS – 2024
Statement 1: “CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities.” This statement is correct. The CSR rules (specifically Schedule VII of the Companies Act, 2013 and associated rules/clarifications) explicitly exclude activities undertaken in the normal course of business, activities that benefit only employees of the company, or activities conducted solely for the benefit of the company itself from being considered as CSR expenditure.
Statement 2: “CSR rules do not specify minimum spending on CSR activities.” This statement is incorrect. Section 135 of the Companies Act, 2013 mandates that companies meeting certain turnover, net worth, or net profit criteria in any financial year must constitute a CSR Committee and “shall ensure that the company spends, in every financial year, at least two per cent. of the average net profit of the company made during the three immediately preceding financial years”. This clearly specifies a minimum spending requirement for eligible companies.
Therefore, only statement 1 is correct.