Regulation 12 , 43 of LODR
(1) No shall be declared or paid by a company for any financial year except—
(a) out of the profits of the for that year arrived at after providing for depreciation in accordance with the provisions of sub-section (2), or out of the profits of the company for any previous or years arrived at after providing for depreciation in accordance with the provisions of that sub-section and remaining undistributed, or out of both or;
in computing profits any amount representing unrealised gains, notional gains or revaluation of assets and any change in carrying amount of an asset or of a liability on measurement of the asset or the liability at fair value shall be excluded; or
(b) out of money provided by the Central Government or a State Government for the payment of dividend by the company in pursuance of a guarantee given by that Government:
Provided that a company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the company:
Provided further that where, owing to inadequacy or absence of profits in any financial year, proposes to declare dividend out of the accumulated profits earned by it in previous years and transferred by the company to the reserves , such declaration of dividend shall not be made except in accordance with in this behalf:
Provided also that no dividend shall be declared or paid by a company from its reserves other than .
(2) For the purposes of clause (a) of sub-section (1), depreciation shall be provided in accordance with the provisions of
(3) The of a company may declare interim dividend during any financial year out of the surplus in the profit and loss account and out of profits of the financial year in which such interim dividend is sought to be declared:
Provided that in case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during the immediately preceding three financial years.
The of a company may declare interim dividend during any financial year or at any time during the period from closure of financial year till holding of the annual general meeting out of the surplus in the profit and loss account or out of profits of the financial year for which such interim dividend is sought to be declared or out of profits generated in the financial year till the quarter preceding the date of declaration of the interim dividend:
Provided that in case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during immediately preceding three financial years.
(4) The amount of the dividend, including interim dividend, in a in a separate account within five days from the date of declaration of such dividend.
(5) No dividend shall be paid by a in respect of any therein except to the registered shareholder of such share or to his order or to his banker and shall not be payable except in cash:
Provided that nothing in this sub-section shall be deemed to prohibit the capitalisation of profits or reserves of a company for the purpose of issuing fully paid-up bonus shares or paying up any amount for the time being unpaid on any shares held by the members of the company:
Provided further that any dividend payable in cash may be paid by cheque or warrant or in any electronic mode to the shareholder entitled to the payment of the dividend.
(6) A company which fails to comply with the provisions of sections 73 and 74 shall not, so long as such failure continues, declare any dividend on its equity shares.
Provided that on an application made by a company or body corporate, which is a holding company or a subsidiary or associate company of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:
Provided further that a company or body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause
Provided also that in case of a Specified IFSC public company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.
Provided also that in case of a Specified IFSC private company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.
(The exceptions, modifications and adaptations provided above shall be applicable only to those Government Companies which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)
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Provided that—
(i) any amount representing unrealised gains, notional gains or revaluation of assets, whether shown as a reserve or otherwise, or
(ii) any change in carrying amount of an asset or of a liability recognized in equity, including surplus in profit and loss account on measurement of the asset or the liability at fair value, shall not be treated as free reserves
(The exceptions, modifications and adaptations provided above shall be applicable only to those Government Companies which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)
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8.1.3-Companies (Declaration and Payment of Dividend) Rules,2014
3. Declaration of dividend out of reserves.-
In the event of inadequacy or absence of profits in any year, a company may declare dividend out of free reserves subject to the fulfillment of the following conditions, namely:—
(1) The rate of dividend declared shall not exceed the average of the rates at which dividend was declared by it in the three years immediately preceding that year:
Provided that this sub-rule shall not apply to a company, which has not declared any dividend in each of the three preceding financial year.
(2) The total amount to be drawn from such accumulated profits shall not exceed one-tenth of the sum of its paid-up share capital and free reserves as appearing in the latest audited financial statement.
(3) The amount so drawn shall first be utilised to set off the losses incurred in the financial year in which dividend is declared before any dividend in respect of equity shares is declared.
(4) The balance of reserves after such withdrawal shall not fall below fifteen per cent of its paid up share capital as appearing in the latest audited financial statement.
Amendment to Schedule II dated 17/11/2016
Amendment to Schedule II dated 31.03.2014
Commencement Notification dated 09.02.2018
Companies (Declaration and Payment of Dividend) Second Amendment Rules, 2015 [GSR 441(E)] dated 29/05/2015
Corrigendum Notification dated 09/12/2016-Schedule II
Enforcement Notification S.O. 1440(E) dated 29/05/2016
Enforcement Notification S.O. 902(E) dated 26/03/2014
Exemption to Govt Companies G.S.R. 463(E) dated 05/06/2015
Exemption to Nidhi Companies [G.S.R 465(E)] dated 05/06/2015
Exemptions to Government Companies [Amendment to GSR 463(E)] dated 13/06/2017
Further Amendment to Schedule II dated 29.08.2014 (GSR 627 E)
The Companies (Amendment) Act, 2017 (Effective from 03.01.2018)
The Companies (Amendment) Act,2015
Schedule II
Schedule II
(See section 123)
USEFUL LIVES TO COMPUTE DEPRECIATION
PART ‘A’
- Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by the entity.
- For the purpose of this Schedule, the term depreciation includes amortisation.
- Without prejudice to the foregoing provisions of paragraph 1,-
The useful life of an asset shall not ordinarily be different from the useful life specified in Part C and the residual value of an asset shall not be more than five per cent of the original cost of the asset:
Provided that where a company adopts a useful life different from what is specified in Part C or uses a residual value different from the limit specified above, the financial statements shall disclose such difference and provide justification in this behalf duly supported by technical advice
(ii) For intangible assets, the relevant Indian Accounting Standards (Ind AS) shall apply. Where a company is not required to comply with Indian Accounting Standards (Ind As), it shall comply with relevant Accounting Standards under Companies (Accounting Standards) Rules, 2006. except in case of intangible assets (Toll Roads) created under ‘Build, Operate & Transfer’, ‘Build, Own, Operate & except or any other form of public private partnership route in case of roads projects. Amortization in such cases may be done as follows:-
(a) Mode of amortization
Amortization Rate= Amortization Amount/ Cost of Intangible Assets X 100
Amortization Amount
Amount of Intangible Assets X Actual revenue for the Year/ Projected Revenue from Intangible Assets ( till the end of concession period) (C)
(b) Meaning of particulars are as follows:-
Cost of Intangible Assets (A) = Cost incurred by the company in accordance with the accounting standards
Actual Revenue for the year (B) = Actual revenue (Toll Charges) received during the Accounting year
Projected Revenue from Intangible Asset (C) = Total projected revenue from the Intangible Assets as provided to the project lender at the time of financial closure/agreement.
The amortisation amount or rate should ensure that the whole of the cost of the intangible asset is amortised over the concession period.
Revenue shall be reviewed at the end of each financial year and projected revenue shall be adjusted to reflect such changes, if any, in the estimates as will lead to the actual collection at the end of the concession period.
(c) Example:-
Cost of creation of Intangible Assets : 500 Crores
Total period of Agreement : 20Years
Time used for creation of Intangible Assets : 2 Years
Intangible Assets to be amortised in : 18 Years
Assuming that the Total revenue to be generated out of Intangible Assets over the period would be ` 600 Crores, in the following manner:-
| Year No | Revenue (In Rs. Crores) | Remarks |
| Year 1 | 5 | Actual |
| Year 2 | 7.5 | Estimate* |
| Year 3 | 10 | Estimate* |
| Year 4 | 12.5 | Estimate* |
| Year 5 | 17.5 | Estimate* |
| Year 6 | 20 | Estimate* |
| Year 7 | 23 | Estimate* |
| Year 8 | 27 | Estimate* |
| Year 9 | 31 | Estimate* |
| Year 10 | 34 | Estimate* |
| Year 11 | 38 | Estimate* |
| Year 12 | 41 | Estimate* |
| Year 13 | 46 | Estimate* |
| Year 14 | 50 | Estimate* |
| Year 15 | 53 | Estimate* |
| Year 16 | 57 | Estimate* |
| Year 17 | 60 | Estimate* |
| Year 18 | 67.5 | Estimate* |
| Total | 600 |
‘*’ will be actual at the end of financial year
Based on this the charge for first year would be Rs.4.16 Crore (approximately) (i.e. Rs. 5/ Rs.600 x Rs.500 Crores) which would be charged to profit and loss and 0.83% (i.e. Rs. 4.16 Crore/ Rs. 500 x 100 Crores) is the amortization rate for the first year.
Where a company arrives at the amortization amount in respect of the said Intangible Assets in accordance with any method as per the applicable Accounting Standards, it shall disclose the same.
PART ‘B’
- The useful life or residual value of any specific asset, as notified for accounting purposes by a Regulatory Authority constituted under an Act of Parliament or by the Central Government shall be applied in calculating the depreciation to be provided for such asset irrespective of the requirements of this Schedule.
PART ‘C’
- Subject to Parts A and B above, the following are the useful lives of various tangible assets
| Nature of assets | Useful Life |
| I Buildings [NESD] | |
| (a) Buildings (other than factory buildings) RCC Frame Structure | 60 Years |
| (b) Buildings (other than factory buildings) other than RCC Frame Structure | 30 Years |
| (c) Factory building | -do- |
| (d) Fences, wells, tube wells | 5 Years |
| (e) Others (including temporary structure, etc.) | 3 Years |
| II Bridges, culverts, bunders, etc. [NESD] | |
| III Roads [NESD] | |
| (a) Carpet roads | |
| (i) Carpeted Roads-RCC | 10 Years |
| (ii) Carpeted Roads- other than RCC | 5 Years |
| (b) Non-Carpeted roads | 3 Years |
| IV Plant and Machinery | |
| (i) General rate applicable to plant and machinery not covered under special plant and machinery | |
| (a) Plant and Machinery other than continuous process plant not covered under specific industries | 15 Years |
| (b) continuous process plant for which no special rate has been prescribed under (ii) below [NESD] | (8 Years) 25 Years [ 8 years substituted to 25 years vide notification G.S.R 237 (E) dated 31.03.2014 |
| (ii) Special Plant and Machinery | |
| (a) Plant and Machinery related to production and exhibition of Motion Picture Films | |
| 1. Cinematograph films—Machinery used in the production and exhibition of cinematograph films, recording and reproducing equipment’s, developing machines, printing machines, editing machines, synchronizers and studio lights except bulbs | 13 Years |
| 2. Projecting equipment for exhibition of films | -do- |
| (b) Plant and Machinery used in glass manufacturing | |
| 1. Plant and Machinery except direct fire glass melting furnaces-Recuperative and regenerative glass melting furnaces | 13 Years |
| 2. Plant and Machinery except direct fire glass melting furnaces- moulds [NESD] | 8 Years |
| 3. Float Glass Melting Furnaces [NESD] | 10. Years |
| (c) Plant and Machinery used in mines and quarries—Portable underground machinery and earth moving machinery used in open cast mining [NESD] | 8 Years |
| (d) Plant and Machinery used in Telecommunications [NESD] | |
| 1. Towers | 18 Years |
| 2. Telecom transceivers, switching centres, transmission and other network equipment | 13 Years |
| 3. Telecom—Ducts, Cables and optical fibre | 18 Years |
| 4. Satellites | -do- |
| (e) Plant and Machinery used in exploration, production and refining oil and gas [NESD] | |
| 1. Refineries | 25 Years |
| 2. Oil and gas assets (including wells), processing plant and facilities | -do- |
| 3. Petrochemical Plant | -do- |
| 4. Storage tanks and related equipment | -do- |
| 5. Pipelines | 30 Years |
| 6. Drilling Rig | -do- |
| 7. Field operations (above ground) Portable boilers, drilling tools, well-head tanks, etc | 8 Years |
| 8. Loggers | -do- |
| (f ) Plant and Machinery used in generation, transmission and distribution of power [NESD] | |
| 1. Thermal/ Gas/ Combined Cycle Power Generation Plant | 40 Years |
| 2. Hydro Power Generation Plant | -do- |
| 3. Nuclear Power Generation Plant | -do- |
| 4. Transmission lines, cables and other network assets | -do- |
| 5. Wind Power Generation Plant | 22 Years |
| 6. Electric Distribution Plant | 35 Years |
| 7. Gas Storage and Distribution Plant | 30 Years |
| 8. Water Distribution Plant including pipelines | -do- |
| (g) Plant and Machinery used in manufacture of steel | |
| 1. Sinter Plant | 20 years |
| 2. Blast Furnace | -do- |
| 3. Coke ovens | -do- |
| 4. Rolling mill in steel plant | -do- |
| 5. Basic oxygen Furnace Converter | 25 Years |
| (h) Plant and Machinery used in manufacture of non-ferrous metals | |
| 1. Metal pot line [NESD] | 40 Years |
| 2. Bauxite crushing and grinding section [NESD] | -do- |
| 3. Digester Section [NESD] | -do- |
| 4. Turbine [NESD] | -do- |
| 5. Equipment’s for Calcination [NESD] | -do- |
| 6. Copper Smelter [NESD] | -do- |
| 7. Roll Grinder | 40 Years |
| 8. Soaking Pit | 30 Years |
| 9. Annealing Furnace | -do- |
| 10. Rolling Mills | -do- |
| 11. Equipments for Scalping, Slitting , etc. [NESD] | -do- |
| 12. Surface Miner, Ripper Dozer, etc., used in mines | 25 Years |
| 13. Copper refining plant [NESD] | -do- |
| (i) Plant and Machinery used in medical and surgical operations [NESD] | |
| 1. Electrical Machinery, X-ray and electrotherapeutic apparatus and accessories thereto, medical, diagnostic equipments, namely, Cat-scan, Ultrasound Machines, ECG Monitors, etc. | 13 Years |
| 2. Other Equipments | 15 Years |
| (j)Plant and Machinery used in manufacture of pharmaceuticals and chemicals [NESD] | |
| 1. Reactors | 20 Years |
| 2. Distillation Columns | -do- |
| 3. Drying equipments/Centrifuges and Decanters | -do- |
| 4. Vessel/storage tanks | -do- |
| (k) Plant and Machinery used in civil construction | |
| 1. Concreting, Crushing, Piling Equipments and Road Making Equipments | 12 Years |
| 2. Heavy Lift Equipments- | |
| Cranes with capacity of more than 100 tons | 20 Years |
| Cranes with capacity of less than 100 tons | 15 Years |
| 3. Transmission line, Tunneling Equipments [NESD] | 10 Years |
| 4. Earth-moving equipments | 9 Years |
| 5. Others including Material Handling /Pipeline/Welding Equipments [NESD] | 12 Years |
| (l) Plant and Machinery used in salt works [NESD] | 15 Years |
| V Furniture and fittings [NESD] | |
| (i) General furniture and fittings | 10 Years |
| (ii) Furniture and fittings used in hotels, restaurants and boarding houses, schools, colleges and other educational institutions, libraries; welfare centres; meeting halls, cinema houses; theatres and circuses; and furniture and fittings let out on hire for use on the occasion of marriages and similar functions. | 8 Years |
| VI Motor Vehicles [NESD] | |
| 1. Motor cycles, scooters and other mopeds | 10 years |
| 2. Motor buses, motor lorries, motor cars and motor taxies used in a business of running them on hire | 6 Years |
| 3. Motor buses, motor lorries and motor cars other than those used in a business of running them on hire | 8 Years |
| 4. Motor tractors, harvesting combines and heavy vehicles | -do- |
| 5. Electrically operated vehicles including battery powered or fuel cell powered vehicles | 8 Years |
| VII. Ships [NESD] | |
| 1. Ocean-going ships | |
| (i) Bulk Carriers and liner vessel | 25 Years |
| (ii) Crude tankers, product carriers and easy chemical carriers with or without conventional tank coatings. | 20 Years |
| (iii) Chemicals and Acid Carriers: | |
| (a) With Stainless steel tanks | 25 Years |
| (b) With other tanks | 20 Years |
| (iv) Liquefied gas carriers | 30 Years |
| (v) Conventional large passenger vessels which are used for cruise purpose also | -do- |
| (vi) Coastal service ships of all categories | -do- |
| (vii) Offshore supply and support vessels | 20 Years |
| (viii) Catamarans and other high speed passenger for ships or boats | -do- |
| (ix) Drill ships | 25 Years |
| (x) Hovercrafts | 15 years |
| (xi) Fishing vessels with wooden hull | 10 Years |
| (xii) Dredgers, tugs, barges, survey launches and other similar ships used mainly for dredging purposes | 14 Years |
| 2. Vessels ordinarily operating on inland waters- | |
| (i) Speed boats | 13 Years |
| (ii) Other vessels | 28 Years |
| VIII. Aircrafts or Helicopters [NESD] | |
| IX Railways siding, locomotives, rolling stocks, tramways and railways used by concerns, excluding railway concerns [NESD] | 15 Years |
| X Ropeway structures [NESD] | 15 Years |
| XI Office equipmnets [NESD] | 5 Years |
| XII Computers and data processing units [NESD] | |
| (i) Servers and networks | 6 Years |
| (ii) End user devices, such as, desktops, laptops, etc | 3 Years |
| XIII Laboratory equipment [NESD] | |
| (i) General laboratory equipment | 10 Years |
| (ii) Laboratory equipmnets used in educational institutions | 5 Years |
| XIV Electrical Installations and Equipments [NESD] | 10 years |
| XV Hydraulic works, pipelines and sluices [NESD] | 15 Years |
Notes.—
- “Factory buildings” does not include offices, godowns, staff quarters.
- Where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, the depreciation on such assets shall be calculated on a pro rata basis from the date of such addition or, as the case may be, up to the date on which such asset has been sold, discarded, demolished or destroyed.
- The following information shall also be disclosed in the accounts, namely:—
(i) depreciation methods used; and
(ii) the useful lives of the assets for computing depreciation, if they are different from the life specified in the Schedule.
Useful life specified in Part C of the Schedule is for whole of the asset. Where cost of a part of the asset is significant to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part shall be determined separately.
(a) Useful life specified in Part C of the Schedule is for whole of the asset and where cost of a part of the asset is significant to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part shall be determined separately.
(b) The requirement under sub-paragraph (a) shall be voluntary in respect of the financial year commencing on or after the 1st April, 2014 and mandatory for financial statements in respect of financial years commencing on or after the 1st April, 2015.”
(c) in paragraph 7, in sub-paragraph (b) for the words “shall be recognized”, the words “may be recognized” shall be substituted
- The useful lives of assets working on shift basis have been specified in the Schedule based on their single shift working. Except for assets in respect of which no extra shift depreciation is permitted (indicated by NESD in Part C above), if an asset is used for any time during the year for double shift, the depreciation will increase by 50% for that period and in case of the triple shift the depreciation shall be calculated on the basis of 100% for that period.
- From the date this Schedule comes into effect, the carrying amount of the asset as on that date—
(a) shall be depreciated over the remaining useful life of the asset as per this Schedule;
(b) after retaining the residual value, shall be recognised in the opening balance of retained earnings where the remaining useful life of an asset is nil.
- ‘‘Continuous process plant’’ means a plant which is required and designed to operate for twenty-four hours a day.