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Section 197 Managerial Remuneration Calculator.

Compute managerial remuneration caps under Section 197 of the Companies Act 2013. 11% / 5% / 1% / 3% caps for adequate profits; Schedule V Part II effective-capital slabs for inadequate-profit or no-profit years.

Inputs (₹ in crore)
Profit position
Net profit (Section 198 computed)
Net profit computed per Section 198 of Companies Act — add-backs include managerial remuneration itself, depreciation deviation, capital profits etc.
Number of Managing/Whole-Time Directors
Any MD/WTD/Manager appointed?
If yes, non-exec directors cap is 1% of NP; if no MD/WTD, cap rises to 3%.
Actual total remuneration paid
Result
Overall cap (11% of NP)₹5.50 cr
Per MD/WTD (5% each)₹2.50 cr
Non-executive directors cap₹0.50 cr
Actual remuneration₹4.00 cr
Compliance✓ Within limits

How Section 197 + Schedule V work.

Section 197 caps total managerial remuneration at 11% of net profits computed per Section 198. Within this overall cap: 5% per MD/WTD/Manager, with 10% in aggregate if multiple; non-executive directors capped at 1% with MD/WTD present, 3% otherwise. In years of inadequate or no profits, Schedule V Part II Table A prescribes effective-capital slab limits — exceedances require special resolution.

On CORAA
Net profit per Sec 198 + remuneration compliance checks land in the Working Papers hub, with CARO clause (xi) impact carried to the Reporting hub.
Related Party verification templateMore calculators

How Section 197 managerial remuneration works

Section 197 of the Companies Act 2013 governs the total managerial remuneration payable by a public company to its directors, including managing director (MD), whole-time director (WTD), and manager. The basic ceiling: total managerial remuneration in any financial year shall not exceed 11% of the "net profit" of that company computed under Section 198, except as permitted by the shareholders by special resolution.

Within the 11% overall ceiling, the per-individual caps are: 5% of net profit for a single MD / WTD / manager; 10% for more than one such director; and 1% of net profit for directors who are neither MD nor WTD (if there is an MD/WTD), or 3% if there is no MD/WTD/manager. Independent directors' sitting fees (up to ₹1 lakh per meeting) and reimbursements are outside the 11% cap.

In years of inadequate or no profit, Schedule V Part II of the Companies Act prescribes effective-capital-based slabs for managerial remuneration. The slabs (currently): effective capital less than ₹5 cr — annual remuneration cap ₹60 lakh; ₹5 cr to less than ₹100 cr — ₹84 lakh; ₹100 cr to less than ₹250 cr — ₹120 lakh; ₹250 cr or more — ₹120 lakh + 0.01% of effective capital exceeding ₹250 cr (these limits were doubled for special resolution route via the 2017 amendment).

Worked example — adequate-profit year with two MDs

A profitable listed company has two MDs. Net profit under Section 198 is ₹50 crore. Proposed annual remuneration: MD1 ₹3 crore, MD2 ₹2 crore. Other non-executive directors: ₹40 lakh aggregate.

Inputs
Net profit (Section 198)₹50 Cr
Two MDs combined cap (10%)₹5 Cr
Non-executive directors cap (1%)₹50 L
Overall cap (11%)₹5.5 Cr
Output
Two MDs proposed₹5 Cr (at cap)
Non-executive directors proposed₹40 L (within ₹50 L)
Total managerial remuneration₹5.4 Cr — within 11%
Special resolutionNot required (within caps)
Both individual caps (10% for two MDs and 1% for non-executive) and the overall 11% ceiling are met. No special resolution needed. Disclosure in Board's Report under Section 197(12) and Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.

Common mistakes

Using net profit per Section 2(40) instead of Section 198
Section 197 ceiling is tested against net profit computed under Section 198 — which adjusts the P&L profit for items like capital gains, premium on share issue, revaluation, etc. Companies that use the unadjusted P&L profit typically over-allocate.
Forgetting independent director sitting fees are outside the cap
Section 197(5) provides that sitting fees up to ₹1 lakh per meeting (Rule 4 limit) and reimbursement of actual expenses are NOT counted within the 11% / 1% caps. Stock options to independent directors ARE prohibited (Section 197(7)).
Treating Schedule V Part II Section II/III limits without special resolution
Schedule V Part II Section II provides remuneration limits in inadequate-profit years — but those limits apply without shareholder approval only when conditions in Section III are met. Otherwise, Central Government approval was required (now abolished by 2017 amendment for limits within Schedule V); special resolution suffices.
Missing the recovery provision under Section 197(9)
If remuneration is paid in excess of Section 197 / Schedule V limits, the company shall recover the excess from the director within two years from the date of payment — and shall not waive recovery unless permitted by Central Government. Many companies miss this when they over-pay.

Frequently asked questions

What is the Section 197 ceiling?+
For a public company in a year of adequate profit, total managerial remuneration cannot exceed 11% of net profit computed under Section 198. Within this: 5% for a single MD/WTD/manager (10% for multiple); 1% for non-executive directors with an MD/WTD (3% if no MD/WTD/manager).
What is "net profit" for Section 197?+
Net profit computed under Section 198 — accounting P&L profit adjusted for: + profit on capital nature transactions; − premium on share / debenture issue; − profit on revaluation of assets; − compensation under restricted Acts; etc. This is also the basis for Section 135 CSR.
Does Section 197 apply to private companies?+
No — Section 197 applies only to PUBLIC companies. Private companies are not subject to the 11% ceiling or the Schedule V Part II limits. However, private companies still need to disclose managerial remuneration in the Board's Report.
What are the Schedule V Part II limits for inadequate profit years?+
Currently: effective capital < ₹5 cr → ₹60 L; ₹5 cr-100 cr → ₹84 L; ₹100 cr-250 cr → ₹120 L; ≥ ₹250 cr → ₹120 L + 0.01% of excess over ₹250 cr. Via 2017 amendment, these limits can be doubled by special resolution. Higher limits require Central Government approval.
Is sitting fee to independent directors counted in the 11%?+
No. Sitting fees (up to ₹1 lakh per meeting under Rule 4) and reimbursement of actual expenses are OUTSIDE the Section 197 ceiling. However, profit-related commission to non-executive directors IS within the 1%/3% cap.
What is effective capital?+
Effective capital under Schedule V Part II Section IV(III): paid-up share capital + securities premium + reserves and surplus (excluding revaluation reserve) − accumulated losses − preliminary expenses not written off. For a new company, computed at end of FY in which appointment is made.
Does CARO 2020 require remuneration disclosure?+
CARO 2020 clause (xi)(c) requires the auditor to report whether the managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Companies Act. Non-compliance must be specifically reported with the steps taken or proposed.
Can a managing director be given stock options?+
Yes — under Section 62(1)(b) read with Rule 12 of Companies (Share Capital and Debentures) Rules 2014, a company may grant ESOPs to employees including MDs/WTDs (but NOT to independent directors or promoters). The fair value of ESOPs vests over the vesting period and is part of remuneration under Section 197.

Authoritative sources

Section 197 + Schedule V — Companies Act 2013 — Read alongside Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 and CARO 2020 clause (xi)(c).
Always confirm against the latest version of the source. Regulations evolve and amendments are common.
Related calculators
CSR Section 135 →Section 188 RPT →CARO clause (xi) →Section 186 Loan Cap →
Last reviewed: 2026-05-28 · For informational purposes only — not professional advice.