With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements:

Question

1. CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities.

2. CSR rules do not specify minimum spending on CSR activities.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer 1

(a) 1 only

Explanation:

• Statement 1: This statement is correct. According to the CSR rules under the Companies Act, 2013, expenditures that benefit only the company or its employees do not qualify as CSR activities. CSR activities should benefit society at large or specific communities, rather than providing direct advantages to the company or its staff.

• Statement 2: This statement is incorrect. The CSR rules under the Companies Act, 2013, mandate that companies meeting certain criteria (net worth, turnover, or net profit) must spend at least 2% of their average net profits from the preceding three financial years on CSR activities.

Therefore, only statement 1 is correct, making option (a) the right answer.