2. Managerial Remuneration under Section 197 of Companies Act, 2013.
However, it can occasionally be difficult to determine the precise amount of profits earned. For this reason, the following table can be very helpful in helping the board and other professionals comprehend Section 198.
CALCULATION OF CSR EXPENDITURE
Understanding the table;
1. Items in ‘Credit not to be provided for’ shall be deducted from PAT.
2. Items in ‘Non-permissible deductions’ shall be added back to PAT.
3. Managerial remuneration shall be included only when profit is calculated for Section 197 purposes, not when computing for Section 135 purposes.
NOTE: This table is just intended to provide a simple and quick computation of profit and since PAT serves as the beginning point, things in heads such as “Credit to be provided for” and “Permissible Deductions” are not included in this table.
Conclusion: The computation of profits under Section 198 of the Companies Act, 2013 is pivotal for companies, especially in the context of CSR obligations and managerial remuneration. This comprehensive guide and accompanying table offer clarity on the deductions and additions required for accurate profit determination, ensuring adherence to regulatory requirements and facilitating informed decision-making by corporate entities.
If you would like a working Excel model of this please leave a comment along with your email.