Reg professional fees paid to director
This query is : Open
21 September 2013
Hi
There is a company which runs a hospital, a director of which is a doctor. Can a company give salary as well as professional fees to him provided professional fees are towards operations performed by him. If company can give professional fees, is there any limit to the same?
please reply
There is a company which runs a hospital, a director of which is a doctor. Can a company give salary as well as professional fees to him provided professional fees are towards operations performed by him. If company can give professional fees, is there any limit to the same?
please reply
21 September 2013
First of all you confirm that such company is public limited or private limited company.
The remuneration of directors of the private company is totally governed by their company articles. If the Company’s article permits to pay remuneration you can give remuneration without any restriction. For this you will pass a Board Resolution for payment of remuneration.
The remuneration of directors of the private company is totally governed by their company articles. If the Company’s article permits to pay remuneration you can give remuneration without any restriction. For this you will pass a Board Resolution for payment of remuneration.
21 September 2013
For public limited company:
Section 198(1) relates to overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits. The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and its manager in respect of any financial year shall not exceed 11% of the net profits of the company for that financial year. Such net profits shall be computed in a manner laid down under sections 349 and 350, except that the remuneration of the directors shall not be deducted from the gross profits.
Remuneration is payable to all the directors including managing and whole-time directors and in any capacity. Therefore, it includes the remuneration for services rendered by him in any other capacity other than that of a director.
Section 198(1) relates to overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits. The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and its manager in respect of any financial year shall not exceed 11% of the net profits of the company for that financial year. Such net profits shall be computed in a manner laid down under sections 349 and 350, except that the remuneration of the directors shall not be deducted from the gross profits.
Remuneration is payable to all the directors including managing and whole-time directors and in any capacity. Therefore, it includes the remuneration for services rendered by him in any other capacity other than that of a director.
21 September 2013
Remuneration for professional services rendered by a director:
Proviso of section 309(1) excludes any remuneration for professional services rendered by a director, provided that the director possesses requisite professional qualification for practicing the profession in respect of which they render special services. It is immaterial, whether the professional fees, which are paid to him is on a monthly basis or on a case to case basis. [Stup Consultants Ltd. v Union of India].
Though the directors are designated as "technical advisors' or as 'technical directors' the functions entrusted to them are not of a purely advisory or technical nature and in fact considerable administrative and executive powers, involving the exercise of managerial decision have been entrusted to them, and consequently the remuneration paid to them is held to fall within the scope of section 198(1) of the Act.
It is hardly necessary to stress the point that the formal designation given to a director is in no way significant, so far as the question of applicability of the provisions of the Act is concerned. The important point is whether the nature of the duties and powers delegated to a director would, in fact, place him in the position of a managing director or a director in the whole-time employment of a company.
If a director of the company is working as a technical adviser to the company and is paid remuneration by way of monthly salary, his salary will be included in the 11% managerial remuneration.
Proviso of section 309(1) excludes any remuneration for professional services rendered by a director, provided that the director possesses requisite professional qualification for practicing the profession in respect of which they render special services. It is immaterial, whether the professional fees, which are paid to him is on a monthly basis or on a case to case basis. [Stup Consultants Ltd. v Union of India].
Though the directors are designated as "technical advisors' or as 'technical directors' the functions entrusted to them are not of a purely advisory or technical nature and in fact considerable administrative and executive powers, involving the exercise of managerial decision have been entrusted to them, and consequently the remuneration paid to them is held to fall within the scope of section 198(1) of the Act.
It is hardly necessary to stress the point that the formal designation given to a director is in no way significant, so far as the question of applicability of the provisions of the Act is concerned. The important point is whether the nature of the duties and powers delegated to a director would, in fact, place him in the position of a managing director or a director in the whole-time employment of a company.
If a director of the company is working as a technical adviser to the company and is paid remuneration by way of monthly salary, his salary will be included in the 11% managerial remuneration.
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21 September 2013
In order to help you with proper reply, kindly share the nature of company i.e. Public or Private.
Also share the designation of Director.
Request you to go through the provisions of your AOA w.r.t. remuneration part.
Thanks
Also share the designation of Director.
Request you to go through the provisions of your AOA w.r.t. remuneration part.
Thanks
23 October 2020
Hello Ankur Sir,
If there is private limited company and AOA allows any remuneration to Directors. Now if Company pays professional Fees to 3 Executive Director in addition to Salary/Remuneration, is that fine?
Company will deduct TDS u/s 194J for professional fees and u/s 192 for Salary.
If there is private limited company and AOA allows any remuneration to Directors. Now if Company pays professional Fees to 3 Executive Director in addition to Salary/Remuneration, is that fine?
Company will deduct TDS u/s 194J for professional fees and u/s 192 for Salary.
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