Corporate Balance Sheet Managerial Remuneration: Certain restrictions are laid down by the Companies Act 1956, as to the

remuneration to be paid to directors, managers and managing directors. Limits for payment of remuneration based on the net profits of the company: 1. Limit, if profits are Adequate Managerial Personnel Overall limit (excluding fee for attending meetings) If there is one managing director/whole time director/manager If there are more than one managing director/whole time director/manager Remuneration for part time directors: (i) If there is no manager or whole time director (ii) If there is managing director or whole time director % of net profits (maximum) 11% 5% 10% 3% 1%

2. Limit, if there is no profit or profits are inadequate If a company has no profits or its profits are inadequate, it may pay remuneration to managerial personnel by way of salary, dearness allowance, perquisites and any other

allowances limited to a ceiling on the effective capital of the company. a) Not exceeding the ceiling b) Not exceeding the ceiling limit of Rs.24,00,000 per limit of Rs.48,00,000 per annum or Rs.2,00,000 per annum or Rs.4,00,000 per month calculated on the month calculated on the following scale where the following scale where the effective capital of the effective capital of the company. company. Scale Limit Scale Limit (Rs.) (Rs.) (i) Less than 75,000 (i) Less than 1,50,000 Rs.1cr Rs.1cr (ii) Rs.1 crore or 1,00,00 (ii) Rs.1 crore or 2,00,000 more, but less than 0 more, but less Rs.5 cr. than Rs.5 cr. (iii) Rs.5 cr. or 1,25,00 (iii) Rs.5 cr. or 2,50,000 more, but less than 0 more, but less Rs.25cr. than Rs.25cr. (iv) Rs.25 cr. or 1,50,00 (iv) Rs.25 cr. or 3,00,000 more, but less than 0 more, but less Rs.50 cr. than Rs.50 cr. (v) Rs.50 cr. or 1,75,00 (v) Rs.50 cr. or 3,50,000 more, but less than 0 more, but less Rs.100 cr. than Rs.100 cr. (vi) Rs.100 cr. or 2,00,00 (vi) Rs.100 cr. or 4,00,000 more 0 more

Calculation of Net Profit for the purpose of managerial remuneration: (Section 349) Particulars Amount (Rs) Net Profit as per profit and loss A/c xxx Add: Provisions made in books xxx Managerial remuneration (if debited to P&L A/c) xxx Depreciation charged in books xxx Less: Depreciation as per schedule XIV xxx Actual expenditure (if not debited to P&L A/c) xxx Book Profit as per Schedule XIII xxx Corporate Balance Sheet: Rules for Transfer to reserve: When proposed dividend is between 10% to 12.5% of paid up capital ,transfer to general reserve should be 2.5% When proposed dividend is greater than 12.5 % to 15 % of paid up capital ( >12.5% to 15%) ,transfer to general reserve should be 5% When proposed dividend is greater than 15 % to 20 % of paid up capital ( >15% to 20 %) ,transfer to general reserve should be 7.5% When proposed dividend is greater than o 20 % of paid up capital ( >20 %) ,transfer to general reserve should be 10% .

DIVIDEND DISTRIBUTION TAX Dividend distributed by an Indian Company is exempt from income-tax in the hands of many shareholders. The Indian Company is liable to pay Dividend Distribution Tax (DDT) @ 16.995 percent (i.e. inclusive of surcharge and education cess) on such dividends