{"id":13721,"date":"2018-08-24T05:59:21","date_gmt":"2018-08-24T05:59:21","guid":{"rendered":"https:\/\/www.legalraasta.com\/blog\/?p=13721"},"modified":"2026-04-07T17:17:45","modified_gmt":"2026-04-07T11:47:45","slug":"remuneration-of-director-under-company-act","status":"publish","type":"post","link":"https:\/\/www.legalraasta.com\/blog\/remuneration-of-director-under-company-act\/","title":{"rendered":"Remuneration of Director as per companies Act 2013"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_73 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.legalraasta.com\/blog\/remuneration-of-director-under-company-act\/#Introduction\" title=\"Introduction\">Introduction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.legalraasta.com\/blog\/remuneration-of-director-under-company-act\/#Applicability_of_Remuneration_of_Director\" title=\"Applicability of Remuneration of Director\">Applicability of Remuneration of Director<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.legalraasta.com\/blog\/remuneration-of-director-under-company-act\/#Three_ways_of_Managerial_Remuneration_are_described_by_the_following_figure\" title=\"Three ways of Managerial Remuneration are described by the following figure:\">Three ways of Managerial Remuneration are described by the following figure:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.legalraasta.com\/blog\/remuneration-of-director-under-company-act\/#Remuneration_of_Director_under_section_197_of_the_companies_act_2013\" title=\"Remuneration of Director under section 197 of the companies act 2013\">Remuneration of Director under section 197 of the companies act 2013<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.legalraasta.com\/blog\/remuneration-of-director-under-company-act\/#Maximum_remuneration_for_a_Director\" title=\"Maximum remuneration for a Director:\">Maximum remuneration for a Director:<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.legalraasta.com\/blog\/remuneration-of-director-under-company-act\/#Facilities_provided_by_the_company_as_a_Remuneration_of_director\" title=\"Facilities\u00a0provided by the company as a Remuneration of director\">Facilities\u00a0provided by the company as a Remuneration of director<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"Introduction\"><\/span>Introduction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In a company, there can be many <a href=\"https:\/\/www.legalraasta.com\/types-of-directors\/\" target=\"_blank\" rel=\"noopener noreferrer\">types of directors<\/a> such as\u00a0Managing\u00a0Director, Whole-time \u00a0Director, Part-time Directors\u00a0and managers. The remuneration shall be paid all of the directors in accordance with provisions of section 197 of the companies\u00a0act, 2013. In the old companies act, 1956 there were provisions under chapter 198,309 etc which dealt with Managerial remunerations separately whereas the new companies act, 2013 consolidated all these provisions under one chapter i.e 197. With the <a href=\"https:\/\/www.legalraasta.com\/appointment-of-director\/\" target=\"_blank\" rel=\"noopener noreferrer\">appointment of Directors<\/a>,\u00a0there is some remuneration set by the act which should not be forgotten. This article will let you know\u00a0the Remuneration of Director as per <a href=\"https:\/\/www.legalraasta.com\/companies-act-2013\/\" target=\"_blank\" rel=\"noopener noreferrer\">companies Act 2013<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-a-little-b-of-body-text-1-e1535026281448.png\"><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-13752\" src=\"https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-a-little-b-of-body-text-1-e1535026281448.png\" alt=\"Remuneration of Director\" width=\"409\" height=\"407\" srcset=\"https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-a-little-b-of-body-text-1-e1535026281448-45x45.png 45w, https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-a-little-b-of-body-text-1-e1535026281448-66x66.png 66w, https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-a-little-b-of-body-text-1-e1535026281448-150x150.png 150w, https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-a-little-b-of-body-text-1-e1535026281448-200x199.png 200w, https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-a-little-b-of-body-text-1-e1535026281448-300x298.png 300w, https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-a-little-b-of-body-text-1-e1535026281448-400x398.png 400w, https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-a-little-b-of-body-text-1-e1535026281448.png 553w\" sizes=\"(max-width: 409px) 100vw, 409px\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Applicability_of_Remuneration_of_Director\"><\/span><strong>Applicability of Remuneration of Director<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Being a Director of a company, it is important to be aware of the managerial remuneration prescribed as per Companies Act, 2013. Whether it is a <a href=\"https:\/\/www.legalraasta.com\/private-limited-company-registration\/\">private limited company<\/a> or a <a href=\"https:\/\/www.legalraasta.com\/documents-required-for-incorporation-of-public-limited-company\/\">Public limited company<\/a>, in both the cases regulations for payment\u00a0of directors will be followed.<\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Three_ways_of_Managerial_Remuneration_are_described_by_the_following_figure\"><\/span><strong>Three ways of Managerial Remuneration are described by the following figure:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><a href=\"https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-subheading-e1535027779706.png\"><img decoding=\"async\" class=\"aligncenter wp-image-13756\" src=\"https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-subheading-e1535027779706.png\" alt=\"remuneration of directors\" width=\"390\" height=\"326\" srcset=\"https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-subheading-e1535027779706-200x167.png 200w, https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-subheading-e1535027779706-300x251.png 300w, https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-subheading-e1535027779706-400x335.png 400w, https:\/\/www.legalraasta.com\/blog\/wp-content\/uploads\/2018\/08\/Add-subheading-e1535027779706.png 546w\" sizes=\"(max-width: 390px) 100vw, 390px\" \/><\/a><\/p>\n<ol>\n<li>Automatically by Profits<\/li>\n<li>By Shareholders\u2019 Approval<\/li>\n<li>By Shareholders\u2019 and Central Government<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Remuneration_of_Director_under_section_197_of_the_companies_act_2013\"><\/span><strong>Remuneration of Director under section 197 of the companies act 2013<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The various methods at which company can pay remuneration to its director is below:<\/p>\n<ul>\n<li>In case of <a href=\"https:\/\/www.legalraasta.com\/public-company-registration\/\" target=\"_blank\" rel=\"noopener noreferrer\">Public company<\/a>, a company can pay not more than 11% of the net profit as calculated in a manner laid down in section 198 of the companies act. Whether it is Managing director or whole time directors.<\/li>\n<li>A company having only one managing director, whole-time director or manager shall not pay more than 5% of its net profits.<\/li>\n<li>A company has more than one such directors, remuneration shall be payable not more than 11% of the net profit.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Maximum_remuneration_for_a_Director\"><\/span><strong>Maximum remuneration for a Director:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The table given below will further portray the limits:<\/p>\n<table style=\"height: 150px;\" width=\"752\">\n<thead>\n<tr>\n<th align=\"left\">Capital (Rupees)<\/th>\n<th align=\"left\">Highest limit for Remuneration to a Director<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td align=\"left\">Less than 5 crores<\/td>\n<td align=\"left\">30 lakhs<\/td>\n<\/tr>\n<tr>\n<td align=\"left\">5 crore or more but less than 100 crore<\/td>\n<td align=\"left\">42 lakhs<\/td>\n<\/tr>\n<tr>\n<td align=\"left\">100 crore or more but\u00a0less than 250 crore<\/td>\n<td align=\"left\">60 lakhs<\/td>\n<\/tr>\n<tr>\n<td align=\"left\">250 crore and above<\/td>\n<td align=\"left\">60 lakhs along with 9.99% of the capital in excess of Rs. 250 crore<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<ol>\n<li>If a company is having an adequate profit then it can pay to its managing director or whole time manager remuneration up to 200% of the above mentioned managerial remuneration if shareholders have given their approval through a special resolution<strong>.<\/strong><\/li>\n<li>A managerial director who is not holding share up to Rs. 5 lakhs or more and director of the company is not related to any promoter during the period of two years prior to his appointment as a managerial person, so in this case, the company may pay to him 2.5% of the <strong>current relevant profits<\/strong> and up to 5% with the approval of shareholders by a special resolution.<\/li>\n<li><strong>Current relevant profit<\/strong> is the profit calculated under section 198 and under this there is no deduction of an excess of expenditure over income as prescribed in section 4(1). It is relating to all usual working charges in respect of those years during\u00a0which the managerial person was not an employee, director or shareholder of the company or its holding and subsidiary companies.<\/li>\n<li>While computing of the ceiling on remuneration specified in section II and section III, following are the perquisites which shall not be included:<\/li>\n<\/ol>\n<ul>\n<li>PF or superannuation fund or annuity fund are not taxable under the Income-tax Act, 1961 (43 of 1961).<\/li>\n<li>Gratuity shall not be exceeding half a month&#8217;s salary for each year of service<\/li>\n<li>Encashment of leave at the end of the tenure.<\/li>\n<\/ul>\n<p>5. According to clause (a), any contribution made to PF (Provident fund), superannuation fund or annuity fund more than the limits of tax under IT Act 1961, shall not be included\u00a0for the purpose of calculation of managerial remuneration. Whether it is an event of adequate profit or nil profit.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Facilities_provided_by_the_company_as_a_Remuneration_of_director\"><\/span><strong>Facilities\u00a0provided by the company as a Remuneration of director<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>It is not necessary that everything which is in the form of salary will be considered as remuneration. But apart from this, rewards and compensation provided to a managerial person are also countable in the remuneration. Following are the expenditure incurred by the company are also termed as managerial remuneration:<\/p>\n<ul>\n<li>Expenditure on rent-free accommodation, or any other amenity free of charge<\/li>\n<li>Expenditure on amenities at a concessional rate<\/li>\n<li>Expenditure on the life insurance, any pension, annuity or gratuity for the director or for his\/her spouse\/child.<\/li>\n<li>Expenditure on Indemnify on behalf of Director against any liability in respect of any negligence, default, misfeasance, breach of duty\/trust then, in this case, the premium paid on such insurance would be taken as a part of its remuneration.<\/li>\n<li>Expenditure on\u00a0maintenance of vehicles pertaining to personal use by director or manager.<\/li>\n<\/ul>\n<p>For further more information regarding <a href=\"https:\/\/www.legalraasta.com\/private-limited-company-registration\/\" target=\"_blank\" rel=\"noopener noreferrer\">Company registration<\/a>, Types of Business Forms, <a href=\"https:\/\/www.legalraasta.com\/blog\/regulations-for-nbfcs\/\" target=\"_blank\" rel=\"noopener noreferrer\">regulations governing companies<\/a> you can visit our website: <a href=\"https:\/\/www.legalraasta.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Legal Raasta<\/a><\/p>\n<p>You can send your query on Email: contact@legalraasta.com and ring us on <span style=\"color: #0000ff;\"><a href=\"tel:+918750048585\">+918750048585<\/a><\/span>.<\/p>\n<blockquote>\n<p>Related Articles:<\/p>\n<p><a href=\"https:\/\/www.legalraasta.com\/loans-to-directors\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Loans to Directors&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:8403901,&quot;3&quot;:[null,0],&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;10&quot;:2,&quot;11&quot;:0,&quot;12&quot;:0,&quot;14&quot;:[null,2,0],&quot;15&quot;:&quot;Calibri, sans-serif&quot;,&quot;16&quot;:11,&quot;26&quot;:400}\">Loans to Directors<\/span><\/a><\/p>\n<p><a href=\"https:\/\/www.legalraasta.com\/directors-duty\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Director's Duty of a Company&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:8403901,&quot;3&quot;:[null,0],&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;10&quot;:2,&quot;11&quot;:0,&quot;12&quot;:0,&quot;14&quot;:[null,2,0],&quot;15&quot;:&quot;Calibri, sans-serif&quot;,&quot;16&quot;:11,&quot;26&quot;:400}\">Director&#8217;s Duty of a Company<\/span><\/a><\/p>\n<p>&nbsp;<\/p>\n<\/blockquote>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduction In a company, there can be many types of directors such as\u00a0Managing\u00a0Director, Whole-time \u00a0Director, Part-time Directors\u00a0and managers. The remuneration shall be paid all of the directors in accordance with provisions of section 197 of the companies\u00a0act, 2013. In the old companies act, 1956 there were provisions under chapter 198,309 etc which dealt with Managerial remunerations [&hellip;]<\/p>\n","protected":false},"author":15,"featured_media":13766,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[556],"tags":[252,250,251,249,253],"class_list":["post-13721","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-company-articles","tag-applicability-of-remuneration","tag-company-act-2013","tag-directors-of-the-company","tag-remuneration-of-director","tag-types-of-directors"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Remuneration of Director as per companies act 2013 | Legal Raasta |<\/title>\n<meta name=\"description\" content=\"Being a Director of a company, it is important to be aware of the 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