🧷 Authentic Classroom Explanation by IAS Monk

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📌 The Question:

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

✅ Correct Answer: (a) 1 only

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🧠 Curiosity Raiser

Why does the law disqualify employee-centric spending from CSR even though employees are part of society?

👉 Because CSR is meant to look beyond the corporate gate, not polish the inside of it.

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📘 Enrichment Notes (CSR Rules Decoded)

🟩 Statement 1: Benefit to Company / Employees

✅ Correct

• As per Companies (CSR Policy) Rules, 2014:
  • Any activity designed exclusively for the benefit of employees of the company does NOT qualify as CSR
  • Expenditure that directly benefits the company’s business interests is also excluded

📌 CSR is intended for external social good, not internal welfare or profit-linked spending.

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🟥 Statement 2: Minimum CSR Spending

❌ Incorrect

• Section 135 of the Companies Act, 2013 clearly mandates:
  • Eligible companies must spend at least 2% of the average net profits of the preceding three financial years on CSR activities

📌 Hence, minimum CSR spending is explicitly specified in law.

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🧩 Statement-wise Verdict

Statement	Status
1. Employee / company-benefiting expenditure excluded	✅ Correct
2. No minimum CSR spending specified	❌ Incorrect

➡️ Only Statement 1 is correct

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🧘‍♂️ IAS Monk Whisper

Charity that circles back to the giver is not social responsibility — it is accounting.