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Question

Refer to the following information to answer the next 4 questions (Q9 to Q12) The Companies Act 2013 had introduced several new provisions which changed the face of Indian corporate business. One of such new provisions was the Corporate Social Responsibility (CSR). The concept of CSR rests on the ideology of give and take. Companies take resources in the form of raw materials, human resources etc. from the society. By performing the task of CSR activities, the companies are giving something back to the society.  CSR is the integration of socially beneficial programs and practices into a corporation's business model and culture. India is one of the first countries in the world to make CSR mandatory for companies following an amendment to the Companies Act, 2013 in 2014. Under the Companies Act, businesses can invest their profits in areas such as promoting rural development in terms of healthcare, sanitation, education including skill development, environmental sustainability, etc.

As per the provisions for CSR given under Companies Act 2013, how much has to be spent on CSR by eligible entities?

A 1.5% of the average net profits of three immediately preceding years Correct Answer Incorrect Answer
B 2.0% of the average net profits of three immediately preceding years Correct Answer Incorrect Answer
C 1.5% of the average net profits of two immediately preceding years Correct Answer Incorrect Answer
D 2.0% of the average net profits of two immediately preceding years Correct Answer Incorrect Answer
E 2.5% of the average net profits of two immediately preceding years Correct Answer Incorrect Answer

Solution

As per the provisions of this section, a Company having Net worth of ·         Rs.500 crore or more, or ·         Turnover of Rs.1000 crore or more or ·         net profit of Rs.5 crore or more in previous financial year, should: ·         Constitute a CSR Committee (consisting of 3 or more directors of which at least 1 is independent director) and ·         spend at least 2% of the average net profits of three immediately preceding years on CSR activities (companies which spend any amount in excess  of their CSR obligation in a financial year can set off the excess amount towards their CSR  obligations in subsequent financial years)  

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