Q. 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?

1 only
2 only
Both 1 and 2
Neither 1 nor 2

Answer: (a) 1 only

Corporate Social Responsibility (CSR) is a business model where companies voluntarily integrate social, environmental, and ethical considerations into their operations and interactions with stakeholders.
- CSR aims to make businesses accountable for their impact on society beyond just profit, focusing on sustainable development, community welfare, and ethical practices.
CSR under the Companies Act, 2013:
- CSR provisions under Section 135 of the Companies Act, 2013, became effective from April 1, 2014.
- These provisions reflect India’s commitment to inclusive growth by mandating corporate contributions towards social, environmental, and human development.
- CSR provisions apply to companies meeting any of the following criteria in the preceding financial year:
  - Net worth: More than INR ₹500 crore.
  - Turnover: More than INR ₹1,000 crore.
  - Net profit: More than INR ₹5 crore.
  - Such companies must spend a minimum of 2% of their net profit over the last 3 years on CSR activities.
Penal Provisions: If a company fails to meet CSR obligations, it faces fines ranging from ₹50,000 to ₹25 lakh. Responsible officers may face imprisonment (up to three years), fines between ₹50,000-₹5 lakh, or both.
- 2019 Amendment:
  - Prior to 2019, unspent CSR funds could be carried forward to the next fiscal.
  - Post-amendment, unspent funds must be transferred to a specified Schedule VII fund by the end of the fiscal year and utilized within three years, failing which, they must be deposited in a government-specified fund.