CHAPTER 4. PAYMENT OF BONUS
26. Eligibility for a bonus, etc.
(1) Payable to an employee who has worked at least 30 days in an accounting year, minimum bonus of Rs 100 or 8.33% of the monthly wages earned, whichever is higher
(2) Wages will be higher of monthly wage or wage determined by govt
(3) If the allocable surplus exceeds the amount of minimum bonus, the excess will be distributed as a bonus subject to a maximum of 20% of monthly wages ( per mensem).
(4) In calculating the allocable surplus, amount of set-off under sec 36 shall be taken into account
(5) Any demand for bonus based on production shall be determined by agreement or settlement between employer and employee. But in any case, shall not exceed 20% mentioned in 3 above.
(6) In 1st 5 accounting year, a bonus shall be payable only if there is profit from the business without applying sec 36 (set-off provisions)
(7) In 6th and 7th year, sec 36 shall be modified
(i) Sufficiency of allocable surplus shall be considered for applying set off or set on of 5th and 6th year
(ii) Sufficiency of allocable surplus shall be considered for applying set off or set on of 5th, 6th and 7th year
(8) From 8th year, sec 36 shall be applied normally
Explanation 1.–– Profits shall be after
(a) Making provision for depreciation of that year to which he is entitled under the Income-tax Act
(b) the arrears of such depreciation and losses incurred by him in respect of the establishment for the previous accounting years have been fully set off against his profits.
Explanation 2.––For the purposes of sub-sections (6), (7) and (8), sale of the goods produced or manufactured during the course of the trial running of any factory or of the prospecting stage shall not be taken into account. If a question arises, govt will decide after giving the opportunity of being heard
(9) The provisions of sub-sections (6), (7) and (8) shall, so far as may be, apply to new departments or undertakings or branches set up by existing establishments.
27. Proportionate reduction in bonus in certain cases.
Where an employee has not worked for all the working days in an accounting year, and if such bonus is higher than 8.33% of the salary or wage of the days such employee has worked in that accounting year, shall be proportionately reduced.
28.Computation of the number of working days.
For the purposes of section 27, an employee shall be deemed to have worked in an establishment in any accounting year also on the days on which,––
(a) he has been laid off under an agreement or as permitted by standing orders of any law
(b) he has been on leave with salary or wages;
(c) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
(d) the employee has been on maternity leave with salary or wages, during the accounting year.
29. Disqualification for the bonus.
Notwithstanding anything contained in this Code, an employee shall be disqualified from receiving bonus under this Code, if he is dismissed from service for––
(a) fraud; or
(b) riotous or violent behaviour while on the premises of the establishment, or
(c) theft, misappropriation or sabotage of any property of the establishment; or
(d) a conviction for sexual harassment.
30. Establishments to include departments, undertakings and branches.
Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of computation of bonus under this Code:
Provided that where for any accounting year a separate balance sheet and profit and loss account are prepared and maintained in respect of any such department or undertaking or branch, then, such department or undertaking or branch shall be treated as a separate establishment for the purpose of computation of bonus, under this Code for that year, unless such department or undertaking or branch was, immediately before the commencement of that accounting year treated as part of the establishment for the purpose of computation of bonus.
31. Payment of bonus out of allocable surplus.
(1) The bonus shall be paid out of the allocable surplus
Allocable surplus = 60% of Available Surplus for Banking company and 67% for others.
The available surplus shall be the amount calculated in accordance with section 33.
(2) Audited accounts of companies shall not normally be questioned.
(3) Where there is any dispute regarding the quantum of bonus, the authority notified by the appropriate Government having jurisdiction may call upon the employer to produce the balance sheet before it, but the authority shall not disclose any information contained in the balance sheet unless agreed to by the employer.
32. Computation of gross profits.
The gross profits shall be calculated as per rules prescribed for banking and other company
33. Computation of available surplus.
The available surplus = Gross profit as per 32 - deductions as per 34
Provided that the available surplus in respect of the accounting year commencing on any day in a year after the commencement of this Code and in respect of every subsequent the accounting year shall be the aggregate of—
(a) Gross profit as per 32 minus deductions as per 34 and
(b) an amount equal to the difference between––
(i) the direct tax, calculated in accordance with the provisions of section 35, in respect of an amount equal to the gross profits of the employer for the immediately preceding accounting year; and
(ii) the direct tax, calculated in accordance with provisions of section 35, in respect of an amount equal to the gross profits of the employer for such preceding accounting year after deducting therefrom the amount of bonus which the employer has paid or is liable to pay to his employees in accordance with the provisions of this Code for that year.
34. Sums deductible from gross profits.
The following sums shall be deducted from the gross profits as prior charges, namely:—
(a) any amount by way of depreciation admissible in accordance with the provisions of sub-section (1) of section 32 of the Income-tax Act or in accordance with the provisions of the agricultural income-tax law, for the time being in force, as the case may be;
(b) subject to the provisions of section 35, any direct tax which the employer is liable to pay for the accounting year in respect of his income, profits and gains during that year;
(c) such further sums in respect of the employer as may be prescribed by the Central Government.
35. Calculation of direct tax payable by employer.
For the purposes of this Code, any direct tax payable by the employer for any accounting year shall, subject to the following provisions, be calculated at the rates applicable to the income of the employer for that year, namely:—
(a) in calculating such tax no account shall be taken of,––
(i) any loss incurred by the employer in respect of any previous accounting year and carried forward under any law for the time being in force relating to direct taxes;
(ii) any arrears of depreciation which the employer is entitled to add to the amount of the allowance for depreciation for any succeeding accounting year or years under sub-section (2) of section 32 of the Income-tax Act;
(b) where the employer is a religious or a charitable institution to which the provisions of section 41 do not apply and the whole or any part of its income is exempt from the tax under the Income-tax Act, then, with respect to the income so exempted, such institution shall be treated as if it were a company in which the public are substantially interested within the meaning of that Act;
(c) where the employer is an individual or a Hindu undivided family, the tax payable by such employer under the Income-tax Act shall be calculated on the basis that the income derived by him from the establishment is his only income;
(d) where the income of any employer includes any profits and gains derived from the export of any goods or merchandise out of India and any rebate on such income is allowed under any law for the time being in force relating to direct taxes, then, no account shall be taken of such rebate;
(e) no account shall be taken of any rebate other than development rebate or investment allowance or development allowance or credit or relief or deduction (not hereinbefore mentioned in this section) in the payment of any direct tax allowed under any law for the time being in force relating to direct taxes or under the relevant annual Finance Act, for the development of any industry.
36. Set on and set off of allocable surplus.
(1) Where for any accounting year, the allocable surplus exceeds the amount of maximum bonus payable to the employees in the establishment under section 26, then, the excess shall, subject to a limit of twenty per cent. of the total salary or wage of the employees employed in the establishment in that accounting year, be carried forward for being set on in the succeeding accounting year and so on up to and inclusive of the fourth accounting year to be utilised for the purpose of payment of bonus in such manner as may be prescribed by the Central Government.
(2) Where for any accounting year, there is no available surplus or the allocable the surplus in respect of that year falls short of the amount of minimum bonus payable to the employees in the establishment under section 26, and there is no amount or sufficient the amount carried forward and set on under sub-section (1) which could be utilised for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding accounting a year and so on up to and inclusive of the fourth accounting year in such manner as may be prescribed by the Central Government.
(3) The principle of setting on and set off as may be provided in rules by the Central
The government under this Code shall apply to all other cases not covered by sub-section (1) or sub-section (2) for the purpose of payment of bonus under this Code.
(4) Where in any accounting year any amount has been carried forward and set on or
set off under this section, then, in calculating bonus for the succeeding accounting year,
the amount of setting on or set off carried forward from the earliest accounting year shall first be taken into account.
37. Adjustment of customary or interim bonus against bonus payable under this Code.
Where in any accounting year,—
(a) an employer has paid any puja bonus or other customary bonus to
employee; or
(b) an employer has paid a part of the bonus payable under this Code to an
employee before the date on which such bonus becomes payable,
then, the employer shall be entitled to deduct the amount of bonus so paid from the amount of bonus payable by him to the employee under this Code in respect of that accounting year and the employee shall be entitled to receive only the balance.
38. Deduction of certain amounts from bonus payable.
Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the employee under this Code in respect of that accounting year only and the employee shall be entitled to receive the balance, if any.
39. Time limit for payment of bonus.
(1) All amounts payable to an employee by way of bonus under this Code shall be paid by crediting it in the bank account of the employee by his employer within a period of eight months from the close of the accounting year:
Provided that the appropriate Government or such authority as the appropriate Government may specify in this behalf may, upon an application made to it by the employer and for sufficient reasons, by order, extend the said period of eight months to such further period or periods as it thinks fit; so, however, that the total period so extended shall not in any case exceed two years.
(2) Notwithstanding anything contained in sub-section (1), where there is a dispute regarding payment of bonus pending before any authority, such bonus shall be paid, within a period of one month from the date on which the award becomes enforceable or the settlement comes into operation, in respect of such dispute:
Provided that if, there is a dispute for payment at the higher rate, the employer shall pay eight and one-third per cent. of the wages earned by the employee as per the provisions of this Code within a period of eight months from the close of the accounting year.
40. Application of this Chapter to establishments in public sector in certain cases.
(1) If in any accounting year an establishment in public sector sells any goods produced or manufactured by it or renders any services, in competition with an establishment in private sector, and the income from such sale or services or both, is not less than twenty per cent. of the gross income of the establishment in public sector for that year, then, the provisions of this Chapter shall apply in relation to such establishment in public sector as they apply in relation to a like establishment in private sector.
(2) Save as otherwise provided in sub-section (1), nothing in this Chapter shall apply to the employees employed by any establishment in public sector.
41. Non applicability of this Chapter.
(1) Nothing in this Chapter shall apply to––
(a) employees employed by the Life Insurance Corporation of India;
(b) seamen as defined in clause (42) of section 3 of the Merchant Shipping
(c) employees registered or listed under any scheme made under the Dock Workers (Regulation of Employment) Act, 1948, and employed by registered or listed employers;
(d) employees employed by an establishment under the authority of any department of the Central Government or a State Government or a local authority;
(e) employees employed by––
(i) the Indian Red Cross Society or any other institution of a like nature including its branches;
(ii) universities and other educational institutions;
(iii) institutions including hospitals, chamber of commerce and social welfare institutions established not for purposes of profit;
(f) employees employed by the Reserve Bank of India;
(g) employees employed by public sector financial institution other than a banking company, which the Central Government may, by notification, specify, having regard to—
(i) its capital structure;
(ii) its objectives and the nature of its activities;
(iii) the nature and extent of financial assistance or any concession given to it by the Government; and
(iv) any other relevant factor;
(h) employees employed by inland water transport establishments operating on routes passing through any other country; and (i) employees of any other establishment which the appropriate Government may, by notification, exempt having regard to the overall benefits under any other scheme of profit-sharing available in such establishments to the employees.
(2) Subject to the provisions of sub-section (1) and notwithstanding anything contained in any other provisions of this Chapter, the provisions of this Chapter shall apply to such establishment in which twenty or more persons are employed or were employed on any day during an accounting year.
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