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director remuneration

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Querist : Anonymous

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Querist : Anonymous (Querist)
13 September 2010 can director's salary be increased or decreased according to profit of the company?
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KARAN SHARMA

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KARAN SHARMA (Expert)
13 September 2010 In the case of a profit making company the provisions of Section 1 of Part II of the Schedule is applicable.
Accordingly the company can pay managerial remuneration upto 5% of net profits to one such managerial person and if there is more than one person, 10% of the net
profits for all of them put together.
However, if the company incurred losses or earned inadequate net profits in any subsequent financial year,then Section II of Part II will apply automatically.
Accordingly, the company has to either
a) re-fix the remuneration within the applicable ceiling limits specified in Section II of Part II.
or
b) obtain the approval of the Central Government for payment in excess of the Schedule XIII limits
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