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

Question

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?

Accepted Answer

A company satisfying any of the following criteria during the immediately preceding financial year is required to comply with CSR provisions specified under section 135(1) of the Companies Act, 2013 read with the Companies (CSR Policy) Rules, 2014 made thereunder:net worth of rupees five hundred crore or more,turnover of rupees one thousand crore or more,net profit of rupees five crore or more.Section 135 of the Companies Act 2013 (Act), mandates that certain companies must allocate at least 2% of their average net profits from the preceding three financial years towards CSR activities. Hence, statement 2 is not correct.Under the Companies (CSR Policy) Rules, 2014, any activity benefitting employees of the company shall not be considered as eligible CSR activity. As per the rule, any activity designed exclusively for the benefit of employees shall be considered as an activity benefitting employees and will not qualify as permissible CSR expenditure. Hence, statement 1 is correct.