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12/4/2018 Payment of Bonus Act, 1965 in brief | TaxGuru

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Payment of Bonus Act, 1965 in brief


Applicability of Act (Sec 1) - Every factory wherein 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.

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Applicability of Act (Sec 1)


Every factory wherein 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 (Sec.5) : 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, as the case may be:

Provided that where an employer has been paying bonus to his employees under a
settlement or an award or agreement made before the 29th May, 1965, and subsisting
on that date after deducting from the gross profits notional normal depreciation, then,
the amount of depreciation to be deducted under this clause shall, at the option of such
employer (such option to be exercised once and within one year from that date)
continue to be such notional normal depreciation;

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(b)  any amount by way of 2[development rebate or investment allowance or


development allowance] which the employer is entitled to deduct from his income
under the income-tax Act;

(c)  subject to the provision of section 7, any direct tax which the employer is liable to
pay for the accounting year in respect of his income, profit and gain during that year;

Components of Bonus :- Sec. 2(21) : Salary or wages includes dearness allowance but no
other allowances e.g. over-time, house rent, incentive or commission.

Separate establishment (Sec. 3) : I profit loss accounts are prepared and mainland in
respect of any such department or undertaking or branch, then such department or
undertaking or branch is treated as a separate establishment.

Disqualification and Deduction of Bonus : Sec 1 :

• 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.

Computation of gross profits : For banking company, as per First Schedule. Others, as
per Second Schedule.

Eligibility of Bonus : An employee will be entitled only when he has worked for 30
working days in that year. Sec. 8
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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.10000/-   per month or less.
For calculation purposes Rs.3500 per month maximum will be taken even if an
employee is drawing upto Rs.3500 per month. (Sec. 12)

Time Limit for Payment of Bonus : Within 8 months from the close of accounting year.
(Sec. 19)

Set-o and Set-on : As per Schedule IV. Sec. 15

Submission of Return : In Form D to the inspector within 30 days of the expiry of time
limit under Section 19. Rule 5

Maintenance of Registers and Records etc. Sec. 2(21) :

• 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-o 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 sections 17 and 18 and the amount actually disbursed, In Form C.

Non applicability of the Act: – Act not applicable to certain employees of LIC. General
Insurance, Dock Yards, Red Cross, Universities* Educational Institutions, Chambers of
Commerce, Social Welfare Institutions. etc. Sec.32

Penalty : For contravention of any provision of the Act or the Rules: Upto 6 months or
with fine upto Rs.1000. Sec.28

Colourable device cannot be a part of tax planning, where transaction is sham and not
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Categories: Corporate Law

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View Comments (67)

B.M.V.SUBRAMANYA RAO says: July 31, 2015 at 4:16 pm

Dear Sir,

we are the employees workind worth 10 Nos in private Coop. Bank sector most of the employees

were reach their salaries worth Rs.10,000/- let know they were eligible for Bonus? and what is
the steps taken the bonus. please send reply to my e-mail

thanking you, awaiting your reply.

kannan says: August 18, 2015 at 12:29 pm

Dear Sir,

I am getting Rs 15125 per month in basic, I want to know whether eligible to get the bonus while

reliving

Sumant Vyas says: April 26, 2016 at 3:13 pm

Dear Sir,

If a Limited Company not pay bonus then what is accounting procedure

RG says: April 21, 2018 at 11:37 am

As per sec 8, please explain as to what is minimum working days of 30. If a person has worked

for 26 days and availed leave for 4 days in April, please clarify whether the employee is eligible
for bonus or not.

Anurag jha says: June 6, 2018 at 1:45 pm

i need same bonus every employee yes ya no please tell me.

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