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 the 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?
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Explanation
Statement 1 is correct
- Corporate Social Responsibility (CSR) integrates social and environmental considerations into business operations. In India, the CSR framework is established by Section 135 of the Companies Act, 2013, which mandates eligible companies to contribute towards societal development
- NON-permissible CSR Activities:
- Activities undertaken in pursuance of the normal course of business of the company.
- Any activity undertaken by the company outside India except for the training of Indian sports personnel representing any State or Union territory at the national level or India at the international level.
- Contribution of any amount directly or indirectly to any political party under section 182 of the Act.
- Activities benefitting employees of the company.
- Activities supported by the companies on a sponsorship basis for deriving marketing benefits for its products or services.
- Activities carried out for the fulfilment of any other statutory obligations under any law in force in India.
Statement 2 is incorrect
- Eligibility Criteria for CSR: The CSR law applies to companies that meet any of the following criteria: a net worth of ₹500 crore or more, an annual turnover of ₹1,000 crore or more, or a net profit of ₹5 crore or more in the previous financial year.
- CSR Spend Requirement: Eligible companies must allocate at least 2% of their average net profit from the previous 3 years towards CSR activities.
- Penalty for Non-Compliance: Penalties are imposed if companies fail to meet the 2% CSR spend requirement and do not transfer the unspent amount to a specified fund.
- CSR Registration: Companies intending to undertake CSR activities must register with the Registrar of Companies. This ensures their CSR initiatives comply with the legal framework and are monitored.
