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RAS question

Corporate Social Responsibility (CSR) spending is mandatory for companies with:

Correct answer: (B) Net worth of ₹500 crore or turnover of ₹1,000 crore or net profit of ₹5 crore.

Corporate Social Responsibility spending under Section 135 of the Companies Act, 2013 is mandatory for companies with a net worth of Rs 500 crore or more, turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more in a financial year.

  1. (A)

    All companies

  2. (B)

    Net worth of ₹500 crore or turnover of ₹1,000 crore or net profit of ₹5 crore

  3. (C)

    Only government companies

  4. (D)

    Companies listed on stock exchange only

Explanation

Section 135 of the Companies Act, 2013 applies once a company crosses any one of the three financial thresholds: net worth of Rs 500 crore or more, turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more in a financial year. For such companies, CSR is not a voluntary add-on; they must spend at least 2% of the average net profits of the last three years on their CSR policy. The PIB release also links this obligation to Schedule VII of the Act, which specifies the activities that may be included in CSR policy. That is why option B captures the legal trigger correctly: eligibility depends on financial size, not ownership type or stock-market listing.

Why the other options are wrong

  • (A) CSR spending is not imposed on all companies; Section 135 applies only when one of the specified net worth, turnover, or net profit thresholds is met.
  • (C) The rule is not limited to government companies because the Section 135 trigger is financial size, not whether the company is publicly or privately owned.
  • (D) Listing on a stock exchange is not the criterion; the PIB-notified thresholds apply by net worth, turnover, or net profit, covering companies beyond listed entities.

Concept

This tests the Companies Act, 2013 provisions on corporate governance and social responsibility. It recurs in RAS because CSR links legal compliance, business regulation, and welfare-oriented economic policy in a single factual rule.

Source

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