As per Company Act 1956, Managerial Remuneration should be include all the payment and benefit whichever incurred by a company on behalf of its management. Managerial remuneration may include:-
- Salaries
- Commission
- RFA
- Life Insurance Policies
- Membership fee of club
- Cost of car facilities
- Any other allowances or benefits
Note: A person having power of planning, directing and controlling are covered in management. For Examples:- Directors ,MD, Managers or person having same designations etc.
Managerial remuneration is given on the basic of net profit. In case of shortage of profit or absence of profit it can be given on the basic of effective capital.
Maximum limit of managerial remuneration on the basic of net profit:
| Situation-I
If company having only one whole time director or m.d. or mangers |
5% of Net Profit |
| Situation-II
If company having more then one whole time director or m.d. or mangers |
10% of Net Profit |
| Situation-III
If company having only one part time director or m.d. or mangers |
3% of Net Profit |
| Situation-IV
Situation I+ Situation III |
6% of Net Profit |
| Situation-V
Situation II+ Situation III |
11% of Net Profit |
Maximum limit of managerial remuneration on the basic of Effective Capital in the absence or shortage of profit:
| Effective Capital(EC) | Remuneration per month |
| If EC is less then One Crore | Rs.75000 per month |
| If EC is One crore or more but less then Five crore | Rs.100000 per month |
| If EC is Five crore or more but less then Twenty Five crore | Rs.125000 per month |
| If EC is Twenty Five crore or more but less then Fifty crore | Rs.150000 per month |
| If EC is Fifty crore or more but less then Hundred crore | Rs.175000 per month |
| If EC is Hundred Crore or more | RS.200000 per month |
For the managerial remuneration we use net profit and effective capital. Now we are going to explain that:-
Net Profit: As per the provisions, profit for the purpose of managerial remuneration should be calculated separately.
STATEMENT SHOWING CALCULATION OF NET PROFIT (Section-349)
Net profit as per financial books xxxx
Provisions (All) xxxx
Appropriation (All) xxxx
Actual Depreciation xxxx
Depreciation as per company act (xxxx)
Voluntary compensation xxxx
Voluntary Donation xxxx
Profit on sale of investment (xxxx)
Loss on sale of investment xxxx
Intt./Dividend/Rental/Investment income (xxxx)
Profit on sale of Fixed assets (xxxx)
(if profit is higher then provision for depreciation)
Capital Expenditure (Research& Development) xxxx
……… TOTAL xxxx
Management Salary xxxx
Management Commission xxxx
……….
Profit as per section 349 xxxx
……….
Director Fees should not to be included as a part of managerial remuneration and it should be allowed under the calculation net profit as per section 349.
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