Managerial remuneration

Managerial Remuneration

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:-

1) Salaries 2) Commission 3) RFA 4) Life Insurance Policies

5) Membership fee of club 6) Cost of car facilities 7) 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. The following statement can be prepared for the calculation of net profit.

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.

STATEMENT SHOWING CALCULATION OF EFFECTIVE CAPITAL

Share Capital xxxx

Reserve and surplus xxxx

Long term loan xxxx

Investment (xxxx)

Misc. Expenditures (xxxx)

................

Effective Capital xxxx