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

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 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

 

Explanation:

Only the first statement, "CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities," is correct. The second statement, "CSR rules do not specify minimum spending on CSR activities," is incorrect.

Statement 1:

The Companies Act, 2013 states that CSR activities should benefit society or specific communities, not the company or its employees directly. Expenditures like employee benefits, sponsorship for marketing benefits, and activities fulfilling statutory obligations are not considered CSR activities.

Statement 2:

The Companies Act mandates that companies meeting certain criteria spend at least 2% of their average net profit from the preceding three financial years on CSR activities. This makes the statement incorrect.

The first statement accurately reflects the CSR rules in India.

Therefore, option (a) only 1  is correct.