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Information on Payment of Bonus, 1965 | Pionhr Services India

Bonus Act, 1965

Introduction

This Act is to provide for the payment of bonus to persons employed in certain establishments on the basis of profits or on the basis of production or productivity.

Applicability

It extends to the whole of India. It applies to:

  • every factory
  • every other establishment in which twenty or more persons are employed on any day during an accounting year
  • If less than 20, then this act can be applied by ‘Appropriate Government’ by way of notification in the official gazette

Computation of Gross Profits

  • in the case of a banking company, be calculated in the manner specified in the First Schedule
  • in any other case, be calculated in the manner specified in the Second Schedule

Computation of Available Surplus

The available surplus in respect of any accounting year shall be:

  • The gross profits for that year after deducting the sums mentioned below:
    1. Any amount by way of depreciation admissible in accordance with the provisions of sub-section (1) of section 32 of the Income Tax Act,
    2. Any amount in accordance with the provisions of the agricultural income-tax law, as the case may be
    3. Any amount by way of development rebate or investment allowance or development allowance, which the employer is entitled to deduct from his income under the Income Tax Act
    4. Subject to the provisions of section 7, 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;
    5. Such further sums as are specified in respect of the employer in the Third Schedule
  • An amount equal to the difference between
    1. The direct tax, calculated in accordance with the provisions of section 7, in respect of an amount equal to the gross profits of the employer for the immediately preceding accounting year
    2. The direct tax, calculated in accordance with the provisions of section 7, 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 Act for that year.

Eligibility for bonus

Every employee shall be entitled to be paid by his employer in an accounting year, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year.

Payment of Minimum and Maximum Bonus

Minimum Bonus

  • A minimum bonus which shall be 8.33% of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year
  • Where an employee has not completed fifteen years of age at the beginning of the accounting year, a minimum bonus which shall be 8.33% of the salary or wage earned by the employee during the accounting year or sixty rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year 

Maximum Bonus

The employer is bound to pay to every employee in respect of that accounting year, bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of 20% of such salary or wage.

Disqualification for bonus

An employee shall be disqualified from receiving bonus under this Act, if he is dismissed from service for

  • Fraud
  • Riotous or violent behaviour while on the premises of the establishment
  • Theft, misappropriation or sabotage of any property of the establishment