Question
With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements:
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 rights over virtual items spending on CSR activities.
Which of the statements given above is/are correct?
Explanation
Corporate Social Responsibility (CSR) in India is governed under Section 135 of the Companies Act, 2013 along with the Companies (CSR Policy) Rules, 2014:
• Statement 1 is correct: Under the Companies (CSR Policy) Rules, activities undertaken in the normal course of business or expenditures that benefit only the company, its employees, and their families do not qualify as permissible CSR activities. CSR spending must be directed toward public welfare activities listed under Schedule VII of the Act.
• Statement 2 is incorrect: The law explicitly mandates a minimum spending threshold. Any qualifying company (based on net worth, turnover, or net profit thresholds) must spend at least 2% of its average net profits made during the three immediately preceding financial years on approved CSR initiatives.
Hence, Option A is the correct answer.