PQR Ltd had a net worth of ₹40 crore, a turnover of ₹160 crore and a net profit of ₹6.5 crore in the immediately preceding financial year. As regards corporate social responsibility under the Companies Act 2013, which statement is correct?

Section 135 of the Companies Act 2013 applies to a company which, in the immediately preceding financial year, has a net worth of ₹500 crore or more, a turnover of ₹1000 crore or more, or a net profit of ₹5 crore or more. PQR Ltd has a net profit of ₹6.5 crore, which crosses the net profit threshold, so the section applies even though its net worth and turnover fall below their respective limits. The CSR committee must formulate a CSR policy, and the company must spend at least 2% of the average net profits of the immediately preceding three financial years under Section 135(5). The spend is computed on average net profits, not on net worth, so the options stating that the company is not covered or that a 1% rate applies are incorrect.