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 ?

Q 3 / 28

UPSC CSE Prelims 2024

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 ?

EXPLANATION

Correct Option

Statement 1 is correct. As per Rule 2(1)(d) of the Companies (CSR Policy) Rules, 2014, activities that primarily benefit the employees of the company are explicitly excluded from being considered as CSR activities. This provision ensures that CSR expenditure is directed towards broader societal welfare and not for internal company or employee-centric benefits. Consequently, any expenditure that directly benefits the company or its employees does not qualify as valid CSR under the Companies Act, 2013.

Incorrect Options

Statement 2 is incorrect. The CSR framework in India, specifically Section 135(5) of the Companies Act, 2013, mandates a clear minimum spending requirement. Every eligible company is required to spend, in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years on CSR activities. Therefore, the CSR rules do specify a minimum spending threshold for eligible companies.

SOURCEIndian Economy by Ramesh Singh, Chapter 10: Industrial Policy and Public Sector