State the provisions relating to transfer of profits to Reserve

According to the companies (Transfer of profits to Reserve) Rules 1975, a company declaring or paying a dividend exceeding 10% out of current profits, must transfer the prescribed % of current profits to reserve as follows :

Where the dividend proposed exceeds 10% but not 12.5% of the paid-up capital, the amount to be transferred to the reserves shall no be less than 2.5% of the current profits.

Where the dividend proposed exceeds 12.5% but does not exceed 15% of the paid-up capital, the amount to be transferred to the reserves shall not be less than 5% of the current profits.

Where the dividend proposed exceeds 15%, but does not exceed 20% of the paid-up capital, the amount to be transferred to the reserves shall not be less than 7.5% of the current profits and

Where the dividend exceeds 20% of the paid-up capital, the amount to be transferred to reserves shall not be less than 10% of the current profits.

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