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Payment of Bonus
PAYMENT OF BONUS ACT, 1965 & THE RULES
CHECKLIST
Applicability of Act
Every factory where in 10 or more persons are employed with
the aid of power or
An establishment in which 20 or more persons are employed without the aid of
power on any day during an accounting year
Establishment
Establishment includes
Departments, undertakings and branches, etc.
Computation of available surplus
Income tax and direct taxes as payable.
Depreciation as per section 32 of Income Tax Act.
Development rebate, investment or development allowance. Sec.5
Components of Bonus
Salary or wages includes dearness allowance but no other allowances e.g.
over-time, house rent, incentive or commission. Sec.2(21)
Separate establishment
If profit and loss accounts are prepared and maintained in respect of any such
department or undertaking or branch, then such department or undertaking or
branch is treated as a separate establishment. Sec.3
Disqualification & Deduction of Bonus
On dismissal of an employee for
•Fraud; or
•riotous or violent behaviour while on the premises of the establishment; or
•theft, misappropriation or sabotage of any property of the establishment or
•Misconduct of causing financial loss to the Employer to the extent that bonus
can be deducted for that year. Secs. 9 & 18.
Computation of gross profit
For banking company, as per First Schedule.
Others, as per Second Schedule Sec.4
Eligibility of Bonus
An employee will be entitled only when he has worked for 30
working days in that year. Sec. 8
Payment of Minimum Bonus
8.33% of the salary
or Rs.100 (on completion of 5 years after 1st Accounting year even if there is
no profit) Sec.10
Eligible Employees
Employees drawing wages upto Rs.3500 per
month or less.
For calculation purposes Rs.2500 per month maximum will be taken
even if an employee is drawing upto Rs.3500 per month.
Sec.12
Note: The proposal to enhance the existing ceiling of Rs.3500 is under active consideration by the
Govt.
Time Limit for Payment of Bonus
Within 8 months from the close of
accounting y ear. Sec. 19
Set-off and Set-on
As per Schedule IV.
Sec. 15
Maintenance of Registers and Records etc.
•A register showing the computation of
the allocable surplus referred to in clause (4) of section 2, in form A.
•A register showing the set-on and set-off of the allocable surplus, under section
15, in form B
•A register showing the details of the amount of bonus due to each
of the employees, the deductions under section 17 and 18 and the amount actually
disbursed, in form C. Sec.26, Rule 4
Act not applicable to certain employees of
LIC, General Insurance, Dock Yards, Red Cross, Universities & Educational
Institutions, Chambers of Commerce, Social Welfare Institutions, Building
Contractors, etc. etc. Sec.32.
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