Q. 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? (UPSC Prelims 2024)
Answer:
1 only
Notes: The correct answer is
[A] 1 only. Corporate Social Responsibility (CSR) in India is governed by Section 135 of the Companies Act, 2013, which makes India one of the few countries to mandate CSR by law.
- Statement 1 (Correct): According to the Companies (CSR Policy) Rules, activities that benefit only the employees of the company and their families are not considered CSR activities. Similarly, any activity undertaken by the company in the normal course of its business or that provides a direct financial benefit to the company is excluded from the definition of CSR.
- Statement 2 (Incorrect): The law specifies a clear minimum spending requirement. Companies meeting certain financial thresholds (Net worth of 500 crore or more, Turnover of 1,000 crore or more, or Net Profit of 5 crore or more) must spend at least 2% of their average net profits made during the three immediately preceding financial years on CSR activities.
Failure to spend the required amount necessitates a detailed explanation in the Board's report, and unspent funds must generally be transferred to a specified government fund or an unspent CSR account, depending on the nature of the project.