Page 292 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 12: Divisible Profits and Managerial Remuneration

Notes
Where the effective capital of the company is Monthly salary payable shall not exceed
(i) less than 1 crore. 75,000
(ii) rupees 1 crore or more but less than 5 crore. 1,00,000
(iii) 5 crore or more but less than 25 crore. 1,25,000
(iv) 25 crore or more but less than 100 crore. 1,50,000
(v) 100 crore or more. 2,00,000
Explanation I: For the purpose of section II of this part, “effective capital” means the aggregate

of:
(i) Paid up share capital (excluding share application money or advances against shares).
(ii) Credit balance of share premium account.

(iii) Reserve and surplus (excluding revaluation reserve).
(iv) Long-term loans and deposits repayable after one year (excluding working capital, loans,
overdrafts, interest due on loans unless funded, bank guarantee etc., and other short-term
arrangements) as reduced by:
(a) Aggregate of any investments (except in the case of investment by an investment
company whose principal business is acquisition of shares, stock, debentures, or
other securities).
(b) Accumulated losses not written off.

(c) Preliminary expenses not written off.
Explanation II:
(a) Where the appointment of the managerial person is made in the year in which the company
has been incorporated, the effective capital shall be calculated as on the date of such
appointment.
(b) In any other cases, the effective capital shall be calculated as on the last date of the financial
year preceding the financial year in which the appointment of managerial person is made.

Perquisites

2. A managerial person shall be eligible to the following perquisites which shall not be
included in the computation of the ceiling on the remuneration specified in the paragraph
1 of this section:
(i) Contribution to provident fund, superannuation fund or annuity fund to the extent
these either single or put together are not taxable under the Income Tax Act 1961.
(ii) Gratuity payable at a rate not exceeding half a month’s salary for each completed
year of service.

(iii) Encashment of leave at the end of the tenure.
Perquisites for Expatriates

3. In addition to the perquisites specified in paragraph 2 of this section, an expatriate
managerial person (including Non-resident Indians) shall be eligible to the following
perquisites which shall not be included in the computation of the ceiling on remuneration
specified in paragraph 1 of this section:

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