Payment of Bonus

• Objective

• Applicability of Bonus

• Authority to government: A boon and also a curse - wage ceiling for

bonus, set on/set off during 6th and 7th accounting year, gross profit
determination, additional amounts to be reduced from gross profit,
utilization of set on until 4 years

• Minimum and maximum bonus

• 8.33% of wages or Rs.100
• 20% of wages
Payment of Bonus
 How Bonus percentage is calculated?

• The bonus shall be paid out of allocable surplus.

• How the allocable surplus is calculated? 60% of available surplus in
case of a banking company, 67% in the case of other establishments.
• Evolution in accounting for profits
• How do you calculate Available Surplus (Section 33 of the Code) =
Gross profit + Bonus
• The available surplus is the gross profit for that year after deducting
certain sums (audited statements)
• How to arrive at gross profits:
• Banking companies and other establishments – to be computed
in the manner prescribed by the Central Government
• Deduction: Depreciation, Direct taxes and such further sums as
prescribed by the Central Government.
Payment of Bonus
 How Bonus percentage is calculated?

• Work out Set on & Set-off (Sec 36) in such manner as prescribed by
the Central Government with a limit upto 4 years.
• First 5 years, 6th, 7th and 8th year
• Mandatory adjustment for depreciation and business loss
• Calculate the eligible wages for bonus and bonus at 8.33% or 20%
and check what percentage of Bonus can be paid from the available
surplus allocable as a bonus
• Divisions/ Departments – separate books of account maintained (Sec
30)
• Time limit for bonus payment
• Accounting year