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For Chartered AccountantsRates reviewed September 2026

Managerial Remuneration Calculator under Section 197

Section 197 of the Companies Act, 2013 caps what a public company may pay its directors and its manager. The total for a financial year cannot exceed 11 per cent of the net profits of that year computed in the manner laid down in section 198, and the company in general meeting may authorise more only subject to Schedule V. This calculator applies that ceiling, the individual limbs inside it, and the Schedule V table that takes over when profits are thin.

Inside the 11 per cent sit two sub-limits. Any one managing director, whole-time director or manager is limited to 5 per cent of net profits, and where there is more than one such person they are limited to 10 per cent between them. Directors who are neither managing nor whole-time are limited to 1 per cent if the company has a managing or whole-time director or manager, and to 3 per cent if it does not. Crossing a sub-limit needs a special resolution, not merely an ordinary one.

Where a company has no profits or inadequate profits, section 197(3) allows remuneration only in accordance with Schedule V, Part II, Section II, whose table fixes a yearly ceiling for each managerial person by reference to effective capital. The Companies (Amendment) Act, 2020 extended that route to non-executive and independent directors, and a second column of limits for them was inserted in 2021. The Central Government approval route was removed in 2017 and 2018, so the decision now rests with the shareholders.

Managerial Remuneration Calculator

Not the profit before tax in the accounts: section 198 has its own list of what is credited and what is deducted.

₹

Paid-up capital, securities premium, reserves other than revaluation reserve and long-term loans, less investments, accumulated losses and preliminary expenses not written off.

₹
persons

Non-executive and independent directors, who share the 1% or 3% limb.

directors
The company has adequate profits

Turn this off for a loss-making year or one where the profits cannot carry the remuneration; Schedule V then sets the ceiling.

Special resolution passed to double the Schedule V limit

Schedule V allows the slab limit to be doubled if the shareholders pass a special resolution.

Maximum managerial remuneration

₹88,00,000

within the section 197 ceilings on net profits of ₹8 crore

Net profit under section 198₹8 crore
₹8,00,00,000
Overall ceiling at 11% of net profitsall directors and the manager taken together
₹88,00,000
Managing and whole-time directors at 10%2 managerial persons, so the limb is 10%
₹80,00,000
Other directors at 1%4 directors who are neither managing nor whole-time
₹8,00,000
Total within the section 197 limitsthe two limbs added together
₹88,00,000
Effective capital bandeffective capital of ₹60 crore
₹5 crore and above but less than ₹100 crore
Schedule V yearly limit per managerial person₹17,00,000 for each other director; may be doubled by special resolution
₹84,00,000
Schedule V limit for the whole board2 × ₹84,00,000 plus 4 × ₹17,00,000
₹2,36,00,000
Basis appliedprofits are adequate
Net profits under section 198
Sitting fees, outside the ceilingthe prescribed maximum per Board or committee meeting
₹1,00,000
  • Section 197 caps remuneration for a public company. A private company is outside the 11% ceiling, though its articles and the section 188 related-party rules still bind it.
  • Sitting fees paid for attending Board or committee meetings sit outside the 11% ceiling, subject to the prescribed limit per meeting.
  • Going above 11% of net profits needs the company in general meeting to authorise it, subject to Schedule V. Going above the 5%, 10%, 1% or 3% limbs needs a special resolution.

The formula

Maximum remuneration = 11% of net profits under section 198, made up of 5% or 10% for managing and whole-time directors and 1% or 3% for the other directors; or, where profits are inadequate, the Schedule V slab for the effective capital

Net profits
Profit for the financial year computed under section 198, which has its own list of what is credited and what is deducted and is not the profit before tax in the accounts.
Overall ceiling
11 per cent of net profits for all directors and the manager taken together, applicable to a public company for the financial year.
Managerial person
A managing director, a whole-time director or a manager. One such person is limited to 5 per cent of net profits, and more than one to 10 per cent between them.
Other directors
Directors who are neither managing nor whole-time, limited to 1 per cent of net profits where there is a managerial person and 3 per cent where there is none.
Effective capital
Paid-up capital, securities premium, reserves other than revaluation reserve and long-term loans, less investments, accumulated losses and preliminary expenses not written off.

Sitting fees for attending Board or committee meetings are outside these ceilings, subject to the prescribed limit of ₹1,00,000 per meeting.

How to calculate it

  1. 1

    Compute net profits under section 198

    Start from the profit for the year and apply the section 198 adjustments: credit the sums listed in sub-section (2), leave out the sums in sub-section (3) such as premium on shares and profits of a capital nature including the sale of an undertaking, deduct the sums in sub-section (4) and do not deduct the sums in sub-section (5). Directors' remuneration itself is not deducted in arriving at the base.

  2. 2

    Apply the 11 per cent overall ceiling

    Total managerial remuneration for the financial year cannot exceed 11 per cent of that net profit figure. This is the cap for the whole board and the manager taken together, and it applies to a public company. To pay more, the company has to authorise it in general meeting and stay within Schedule V.

  3. 3

    Test each limb inside the ceiling

    Check 5 per cent for a single managing or whole-time director or manager, or 10 per cent where there is more than one of them. Then check 1 per cent for the directors who are neither, or 3 per cent where the company has no managing or whole-time director and no manager. The limbs add up to the 11 per cent, so satisfying both tests keeps you inside the overall ceiling.

  4. 4

    Ask whether profits are adequate

    If the company has no profits, or its profits are too small to carry the intended remuneration under the percentage limits, the percentage route closes and section 197(3) sends you to Schedule V. A loss year is always inadequate, because 11 per cent of a loss is nil, and so is a year where the percentage ceiling falls below what the appointment terms provide for.

  5. 5

    Read the Schedule V table against effective capital

    Work out effective capital under Explanation I to Section II: paid-up capital, securities premium, reserves other than revaluation reserve and long-term loans and deposits repayable after a year, less investments, accumulated losses and preliminary expenses not written off. Then read the yearly ceiling for each managerial person, and the separate column for each other director, off the table.

  6. 6

    Get the approvals in place

    Remuneration inside the Schedule V slab needs the Nomination and Remuneration Committee's recommendation, a Board resolution and shareholder approval. Twice the slab is allowed only where the shareholders pass a special resolution. Paying above a section 197 sub-limit also needs a special resolution, and an excess actually paid has to be refunded unless the shareholders waive it.

Schedule V, Part II, Section II: yearly remuneration where profits are nil or inadequate

Schedule V, Part II, Section II: yearly remuneration where profits are nil or inadequate
Effective capitalLimit for each managerial personLimit for each other director
Negative or less than ₹5 crore₹60 lakh₹12 lakh
₹5 crore and above but less than ₹100 crore₹84 lakh₹17 lakh
₹100 crore and above but less than ₹250 crore₹120 lakh₹24 lakh
₹250 crore and above₹120 lakh plus 0.01% of the effective capital above ₹250 crore₹24 lakh plus 0.01% of the effective capital above ₹250 crore

Worked example: public company with adequate profits

Net profit computed under section 198
₹8,00,00,000
Effective capital
₹60,00,00,000
Managing and whole-time directors
2
Directors who are neither managing nor whole-time
4
Profits
Adequate
  • Overall ceiling = 11% of ₹8,00,00,000 = ₹88,00,000
  • More than one managing or whole-time director, so their limb is 10% of ₹8,00,00,000 = ₹80,00,000
  • The company has a managing director, so the other four directors share 1% of ₹8,00,00,000 = ₹8,00,000
  • ₹80,00,000 + ₹8,00,000 = ₹88,00,000, exactly the 11% overall ceiling
  • Effective capital of ₹60 crore falls in the ₹5 crore to ₹100 crore band, so Schedule V would have allowed ₹84,00,000 for each managerial person and ₹17,00,000 for each other director had profits been inadequate
  • Sitting fees of up to ₹1,00,000 per meeting may be paid on top of the ₹88,00,000

Maximum managerial remuneration for the year = ₹88,00,000

Frequently asked questions

The total managerial remuneration payable by a public company to its directors, including the managing director and whole-time directors, and to its manager, cannot exceed 11 per cent of the net profits of the company for that financial year computed in the manner laid down in section 198. The company in general meeting may authorise payment above 11 per cent, but only subject to the provisions of Schedule V. Sitting fees are outside this ceiling.
Remuneration to any one managing director, whole-time director or manager cannot exceed 5 per cent of the net profits of the company. Where there is more than one such person, the limit is 10 per cent of net profits for all of them taken together. These sub-limits sit inside the overall 11 per cent ceiling, and exceeding one of them requires the shareholders to pass a special resolution rather than an ordinary one.
Directors who are neither managing directors nor whole-time directors are limited to 1 per cent of net profits if the company has a managing or whole-time director or a manager, and to 3 per cent of net profits in any other case. That is again inside the overall 11 per cent. Sitting fees for attending Board and committee meetings are not counted in these percentages and are governed separately by section 197(5).
Section 197(3) allows the company to pay remuneration only in accordance with Schedule V. Part II, Section II of Schedule V gives a table of yearly ceilings by effective capital: ₹60 lakh where effective capital is negative or below ₹5 crore, ₹84 lakh up to ₹100 crore, ₹120 lakh up to ₹250 crore, and ₹120 lakh plus 0.01 per cent of the excess above that. Each limit may be doubled if the shareholders pass a special resolution.
Explanation I to Part II, Section II defines it as the aggregate of paid-up share capital excluding share application money and advances against shares, the amount standing to the credit of the share premium account, reserves and surplus excluding revaluation reserve, and long-term loans and deposits repayable after one year, reduced by investments, accumulated losses and preliminary expenses not written off. Working capital loans, overdrafts and short-term arrangements are left out of the long-term loans figure.
No. The Companies (Amendment) Act, 2017 removed the requirement for Central Government approval from the first proviso to section 197(1), and the Schedule V amendment notified on 12 September 2018 took the corresponding language out of Schedule V. The decision now rests with the shareholders: an authorisation in general meeting for the 11 per cent excess, and a special resolution for the individual sub-limits and for doubling the Schedule V slab.
Section 198 sets out its own computation rather than adopting the profit before tax shown in the accounts. Credit is given for the sums specified in sub-section (2), including bounties and subsidies from a Government or public authority unless directed otherwise. Credit is not given for the sums in sub-section (3), which include premium on shares or debentures and profits of a capital nature such as those from the sale of an undertaking. Sub-sections (4) and (5) then set out what is deducted and what is not.

Sources

Rates and rules on this page come from the following. This is a working aid, not professional advice: confirm anything material with your Chartered Accountant before you act on it.

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