11 August 2009 Sitting Fees :-

A PUBLIC company wants to include the following clause in its articles of association: "Each director shall be entitled to be paid out of the funds of the company for attending meetings of the board or a committee thereof, including adjourned meetings, such sum as sitting fees as shall be determined from time to time by the directors, but not exceeding a sum of Rs 30,000 for each meeting to be attended by the director."

Advise the company as to the validity of such a clause and the correct legal position.

With effect from July 24, 2003, the Government has, vide its powers under Section 310 of the Companies Act, allowed payment of sitting fees to directors for attending meetings of the board in the following manner:

a) Companies with a paid-up share capital and free reserves of Rs 10 crore and above or turnover of Rs 50 crore and above — sitting fees not to exceed Rs 20,000.

b) Other companies — sitting fees not to exceed Rs 10,000.

Accordingly, the suggested clause in the AoA will not be valid. Any provision in the articles which is contrary to those in the Companies Act is void (Section 9).

The aforesaid is one of the questions that appeared in the May 2004 CA (Final) paper on corporate laws and secretarial practice. Of the total marks of 150, the Companies Act accounted for 107 (71.3 per cent), with `directors' alone given a weightage of 40 marks. The SEBI Act and guidelines took up 12 marks. The SC(R)A, FEMA, the Competition Act and interpretation of statutes were accorded 10, 14, 4 and 3 marks respectively.

and other then above remuneration is count as salary.

ASHISH NIRMAL

ASHISH NIRMAL (Querist)
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11 August 2009 here the any director includes whole time and part time
also clear me director salary is taxable under head salary okay its true and his sitting fees is taxable under head other sources but tds is deducted only on salary but not on sitting fees ???

Guest

Guest (Expert)

11 August 2009 Sitting fees received by Directors ( Nominee directors and Whole time directors ) is taxable under the head "Income from other sources " for nominee directors and under "Salary" for Executive / Whole time directors

Mark these word....Taxable - under the head of Income from other sources.