Correct Option
Statement 1 is correct. As per Rule 2(1)(d) of the Companies (CSR Policy) Rules, 2014, activities that primarily benefit the employees of the company are explicitly excluded from being considered as CSR activities. This provision ensures that CSR expenditure is directed towards broader societal welfare and not for internal company or employee-centric benefits. Consequently, any expenditure that directly benefits the company or its employees does not qualify as valid CSR under the Companies Act, 2013.
Incorrect Options
Statement 2 is incorrect. The CSR framework in India, specifically Section 135(5) of the Companies Act, 2013, mandates a clear minimum spending requirement. Every eligible company is required to spend, in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years on CSR activities. Therefore, the CSR rules do specify a minimum spending threshold for eligible companies.