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?
Answer & explanation
Answer: (a) 1 only
Statement 1 is right: the CSR Rules leave out activities that benefit the company's own employees, that are part of its normal business, or that are sponsorship for marketing benefit. Statement 2 is wrong: under section 135 the Board must ensure the company spends at least two per cent of its average net profit of the three preceding years on CSR.
- ✓ 1. Rule 2(1)(d) of the Companies (CSR Policy) Rules, 2014 excludes activities in the normal course of business, activities benefitting employees, and sponsorship done to gain marketing benefit. CSR money has to serve society, not the company or its staff.
- ✗ 2. The law does set a floor. The Board must ensure the company spends at least two per cent of the average net profits made in the three immediately preceding financial years.
Remember · CSR floor: at least 2% of average net profit of the preceding three years. Activities benefitting employees, done as normal business, or sponsored for marketing do not count.
Sources
- Ministry of Corporate Affairs, General Circular No. 14/2021, FAQs on CSR (exclusions under Rule 2(1)(d)) ↗ “Activities benefitting employees of the company as defined in section 2(k) of the Code on Wages, 2019; (v) Sponsorship activities for deriving marketing benefits for products/services … ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years”
Question and answer: UPSC's official GS Paper I (2024, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·