Section 198 deals with the Maximum Remuneration payable to a managerial person Managerial Person includes directors , managing

directors , managers Section 309 prescribes the remuneration payable to whole time directors and part time directors Section 349 deals with how to calculate the NET PROFIT for calcualting managerial remuneration

For Companies having profits : Overall 1 managerial person >1 managerial person Remuneration of Part time Directors If there is no managing or whole time director If there is managing or whole time director

For Companies having no profits or inadequate profits Managerial Remuneration depends upon the Effective Capital of the Company If Effective Capital is =< 1,00,000,00 Effective Capital is 1,00,000,00 =< 5,00,000,00 Effective Capital is 5,00,000,00 =< 25,00,000,00 Effective Capital is 25,00,000,00 =< 100,00,000,00

Calculation Of Effective Capital Paid up share Capital Credit to Share Premium A/c ALL Reserves /Surplus ALL Long Term Loans ALL Long Term Deposits Share Application Money Advances against Shares Revaluation Reserves Long term W.C loans Long term O/D Bank Guarantee Investments Accumulated Losses Preliminary Expenses EFFECTIVE CAPITAL

Repayable after 1 year Repayable after 1 year

ADD : ADD : ADD : ADD : LESS : LESS : LESS : LESS : LESS : LESS : LESS : LESS : LESS :

NOTE : The concept of Effective Capital is applicable for companies having no profits or inadequate profits

11 % of Net Profits 5 % of Net Profits 10% of Net Profits

3% of Net Profits 1% of Net Profits

Then Managerial remuneration shall be =< 75,000 p.m Managerial remuneration shall be =< 1,00,000 p.m Managerial remuneration shall be =< 1,25,000 p.m Managerial remuneration shall be =< 2,00,000 p.m

Amt in Lakhs 100 20 10 5 2 4 7 2 1.5 2.5 8 2 3.6 2.4

137

33 104

nadequate profits

SECTION 349
ADD : ADD : ADD : ADD : ADD : ADD : GROSS PROFITS Bounties received from any Govt Subsidies received from any Govt Bounties received from any Public authority Bounties received from any Public authority Sale Price of FA > WDV (-) [sale price - Cost of FA] OTHER INCOMES 150 10 12 5 8 12 3 200 LESS : LESS : LESS : LESS : Premium on shares or Debentures issues or sold Profit on sale of forfieted shares Capital Profits Profits from any sale of immovable property or Fixed assets 15 4.5 2 6.5

28 172

LESS : LESS : LESS : LESS : LESS : LESS : LESS : LESS : LESS : LESS : LESS : LESS : LESS : LESS : LESS :

USUAL WORKING CHARGES BONUS OR COMMISSION PAID TO ANY MEMBER ANY TAX PAID NOTIFIED BY CENTRAL GOVERNMENT INTEREST ON DEBENTURES ANY TAX ON BUSINESS PROFITS INTEREST ON MORTGAGES INTEREST ON UNSECURED LOANS AND ADVANCES EXPENSES ON REPAIRS TO MOVABLE OR IMMOVABLE PROPERTY DONATIONS TO CHARITABLE FUNDS DEPRECIATION CALCUALTED u/s 350 DEBTS WRITTEN OFF COMPENSATION OR DAMAGE PAID AGAINST ANY LEGAL LIABILITY INSURANCE CHARGES DIRECTORS FEES EXCESS OF EXPENSE OVER INCOME ( if any ) NET PROFITS AS PER Section 349

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 120 52

COST WDV SALE PRICE PROFIT not eligible for calculation PROFIT FOR Sec 349

30 18 35 17 5 12

LESS :

Note : The above calculation is applicable only if the SALE PRICE IS > WDV as well as COST

Limits within which directors / managerial personnel may be paid remuneration under the Companies Act, 1956 Sl. No. Description

1 Overall managerial remuneration (exclusive of fee for attending meetings) 2 If the company has one managing director or whole-time director 3 If the company has more than 1 managing director or whole time director (For all of them) 4 Remuneration of part-time directors where the compayn has no managing director (for all of them) 5 Remuneration of part-time director where the company has one or more managing director (for all of them) 6 Remuneration to the manager

uneration under the Companies Act, 1956 Maximum Limit

11% of the net profits.

5% of the net profits 10% of the net profits

3% of the net profits

1% of the Net profits

5% of the net profits