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The Act applies to every factory where 10 or more workers are working and every
other establishment in which 20 or more persons are employed, on any day during
an accounting year,excluding employees covered under Life Insurance Corporation
of India (LIC) ,port and dock workers,universities,etc.
The Act further provides for payment of minimum and maximum bonus and linking
the payment of bonus with the production and productivity. Every employer shall
pay minimum bonus at the rate of 8.33% of the salary or wages earned by an
employee in a year or one hundred rupees,whichever is higher. Here it is not
required that the employer has any allocable surplus in the accounting year.
Whereas,when the allocable surplus exceeds the amount of minimum bonus
payable to the employees,the employer shall in lieu of such minimum bonus,be
bound to pay bonus equivalent to the amount in certain proportion of salary or
wages earned by employees.
Such a benefit in the form of bonus serves as an incentive to the employee to work
harder and contribute his best for the growth of the organisation.
CALCULATION OF BONUS
The method for calculation of annual bonus is as follow:
1. Calculate the gross profit in the manner specified in-
a. First Schedule, in case of a banking company, or
b. Second Schedule, in any other case.
2. Calculate the Available Surplus.
Available Surplus = A+B, where A = Gross Profit – Depreciation admissible u/s
32 of the Income tax Act - Development allowance - Direct taxes payable for the
accounting year (calculated as per Sec.7) – Sums specified in the Third
Schedule.
B = Direct Taxes (calculated as per Sec. 7) in respect of gross profits for the
immediately preceding accounting year – Direct Taxes in respect of such gross
profits as reduced by the amount of bonus, for the immediately preceding
accounting year.
3. Calculate Allocable Surplus
Allocable Surplus = 60% of Available Surplus, 67% in case of foreign companies.
4. Make adjustment for ‘Set-on’ and ‘Set-off’. For calculating the amount of bonus in
respect of an accounting year, allocable surplus is computed after considering
the amount of set on and set offf from the previous years, as illustrated in Fourth
Schedule.
5. The allocable surplus so computed is distributed amongst the employees in
proportion to salary or wages received by them during the relevant accounting
year.
In case of an employee receiving salary or wages above Rs. 2,500 the bonus payable
is to be calculated as if the salary or wages were Rs. 2,500 p.m. only.
THE PAYMENT OF BONUS RULES, 19751
In exercise of the powers conferred by section 38 of the Payment of Bonus Act, 1965
(31 of 1965), and in super session of the Payment of Bonus Rules, 1965, the Central
Government hereby makes the following rules, namely:-
1. Short title and commencement. – (1) These rules may be called the Payment
of Bonus Rules, 1965.
(2) They shall come into force on the date of their publication in Official Gazette.
(b) a register howing the set-on and set-off of the allocable surplus, under
section 15, in form B.
(c) 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.
2
{5. Annual returns. – Every employer shall send a return in Form D to the Inspector
so as to reach him within 30 days after the expiry of the time limit specified in section 19
for payment of bonus.}
1
Vide G.S.R 2367dated 21st August, 1975, published in the Gazette of India, Part-II Sec. 3(i), dated 6th
September, 1975.
2
Ins. By S.O. 251, dated 7th January, 1984 (w.e.f 21-1-1984)
FORM A
{See rule 4(1)}
Total of sums deducted Available surplus for the accounting Amount of allocable surplus
α ∗
under Column 2,3,4, and 5 Year (Column 1 minus Column 6) 67% ( 60% of column 7)
6 7 8
Section 2(4)(a)
Section 2(4)(b)
FORM B
{See rule 4(b)}
Accounting Year Amount allocable Amount payable Amount of set on Total set-on or set-off
as bonus as bonus or set-off carried forward
(in Rs.) (in Rs.) (in Rs.)
_________________________________________________________________________________
1 2 3 4 5
FORM C
{See rule 4(c)}
Bonus paid to employees for the accounting year ending on the ……………
2
Ins by G.S.R 1147 dated 23rd August, 1979 ( w.e.f 8-9-1979)
1
FORM D
{See rule 5}
Annual Return – Bonus paid to employees for the accounting year ending on the ……….
4 5 6 7
1
Ins. by S.O. 251 dated 7th January,1984,(w.e.f. 21.1.1984)