PAYMENT OF BONUS ACT 1965

by : DR. T.K. JAIN AFTERSCHO☺OL centre for social entrepreneurship sivakamu veterinary hospital road bikaner 334001 rajasthan, india www.afterschoool.tk mobile : 91+9414430763
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What is available surplus?
It is the profit that can be distributed to the workers. It has to be calculated as per the provisions of payment of Bonus Act. It is profit which can be distributed. Out of Available surplus, we will find allocable surplus. While calculating available surplus, we have to allow expenditure, depreciation etc. As per Income tax rules.
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WHAT IS ALLOCABLE SURPLUS
1. in relation to an employer, being a company (other than a banking company) which has not made the arrangements prescribed under the Income-tax Act for the declaration and payment within India of the dividends payable out of its profits in accordance with the provisions of Section 194 of that Act, sixty-seven per cent of the available surplus in an accounting year; 2. in any other case sixty per cent of such available surplus. [Section 2(4)]
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WHO CAN GET BONUS?

As per section 2(13) and sec. 8, every worker / employee drawing upto 3500 per month is entitled to get bonus. As per court judgements, even part time worker, temporary worker and retrenched worker will also get bonus.
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Exempted organisations

As per section 32, LIC, red cross, merchant company, local authorities, government departments, etc are exemmpted. Labour laws dont apply to army / security personnel. Some financial institutions like UTI, IFCI etc. Are also exempted from the provisions of this act.
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How to calculate allocable surplus?
1. calculate gross profit as per section 4. 2. allow deductions as per sec. 6. 3. carry out set on or set off as per section 10, and 15.

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What is set off?

Suppose you dont have sufficient profit, you still have to pay bonus, this amount is set off to be adjusted against future profits (carried forward)

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What is set on?

After making all the adjustments, we can make payment of bonus (minimum bonus is 8.33% and maximum bonus 20% p.a. Of salary / wages), if we have surplus profit left, we can keep it for future, this is called set on – it can be used in next 4 years.
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example...
Gross profit 200, permissible exp. 40, depreciation 20, income tax : 20%, payments to workers 10. solution : (200 – 40 – 20) = 140 less tax : = 140-28= 112 60% is allocable surplus : 67 bonus to be given : 20% of 10 = 2. amount left : 67-2 = 65, the firm can set on for 4 years: Rs. 8. answer
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Other provisions...
Sec. 17 : employer can deduct custom bonus (like Diwali bonus) from the bonus payable under the act Sec. 18 : deductions for penalty on workers are permitted from bonus Sec. 19: time limit to pay bonus : 8 months. Sec 21 : employee can claim bonus – in 1 year from due date.
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THANKS....
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