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Payment of Bonus



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 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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