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Companies Act, 1956-Clarification on directorship, perquisites and gratuity and contribution to provident fund, etc - Income Tax - 005/1989Extract Companies Act, 1956-Clarification on directorship, perquisites and gratuity and contribution to provident fund, etc Circular No. 005 Dated 15/9/1989 To All India Chambers of Commerce and Industry. Sir, Subject: Companies Act, 1956-Clarification on directorship, perquisites and gratuity and contribution to provident fund, etc. The following clarification are hereby issued for information of your constituent members:- SECTION 257: In terms of section 257, as amended by the Companies (Amendment) Act, 1988, a person other than a retiring director proposing himself as a director, or any member proposing him for directorship, has to deposit with the company concerned a sum of Rs. 500 which shall be refunded to such person or member in the event the person concerned succeeds in getting elected as a director of the company. Conversely, in case such a person is not elected as a director, he or the member, as the case may be, it may be clarified, will not be entitled to the refund of Rs. 500 and the amount deposited shall stand forfeited by the company. SECTION 269 AND SCHEDULE XIII: As per Schedule XIII, the overall limit of perquisites and gratuity have been prescribed as under:- "Perquisites.-Perquisites may be allowed in addition to salary and/or commission or both. In the case of persons posted at Bombay, Calcutta, Delhi and Madras, perquisites shall be restricted to an amount equal to the annual salary or Rs. 1,35,000 per annum, whichever is less. In the case of persons posted at other places, perquisites shall be restricted to an amount equal to the annual salary or Rs. 1,15,000 per annum, whichever is less. Category "B" Contribution to provident fund, superannuation fund or annuity fund will not be included in the computation of the ceiling on perquisites to the extent these, either singly or put together, are not taxable under the Income-tax Act. Gratuity payable should not exceed half a month's salary for each completed year of service, subject to a ceiling of Rs. 1,00,000." It is clarified that the gratuity payable is over and above the value of perquisites payable in terms of Schedule XIII to the Act. Yours faithfully, (Sd.) U.P. Mathur, Director.
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