Download - Payment of Bonus Act 197 in India
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Bonus Act- 1975
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Applicability
The Act applies to-
(a) every factory; and
(b) every other establishment in which
twenty or more persons are employed onany day during an accounting year.
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. Establishments to includedepartments, undertakingsand branches
Where an establishment consists ofdifferent departments or
undertakings or has branches,whether situated in the same placeor in different places, all suchdepartments or undertakings orbranches shall be treated as parts ofthe same establishment for the
purpose of computation of bonus :
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PROVIDED that where forany accounting yeara
separate balance-sheetand profit and loss accountare prepared andmaintained in respect of
any such department orundertaking or branch,then, such department orundertaking or branchshall be treated as aseparate establishment forthe purpose ofcomputation of bonus, forthat year.
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Where an establishment is newly set up, theemployees shall be entitled to be paid bonus underthis Act
In the first five accounting years following theaccounting year in which the employer sells thegoods produced or manufactured by him or rendersservices, bonus shall be payable only in respect ofthe accounting year in which the employer derivesprofit and such bonus shall be calculated inaccordance with the provisions of this Act in relationto that year but without applying the provisions ofset on & set off.
For the sixth and seventh accounting years
following the accounting year in which the employersells the goods produced or manufactured by himor renders services, as the case may be, from suchestablishment, the provisions of set on & set offshall apply.
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However employees of L.I.C.,
Universities and Educational
institutions, Hospitals, Chamber of
Commerce, R.B.I., IFCI, U.T.I. SocialWelfare institutions are not entitled to
bonus under this Act.
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The payment of Bonus Act provides
for payment of bonus to persons
employed in certain establishments
of the basis of profits or on the basis
of production or productivity and for
matters connected therewith.
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Salary Limit
Where the salary or wages of an employee
exceeds two thousand and five hundred
rupees per month, the bonus payable to
such employee shall be calculated as if his
salary or wages were two thousand and
five hundred rupees per month.
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Salary or Wages " means allremuneration (other thanremuneration in respect of over-time
work, which would, be payable to anemployee in respect of hisemployment or of work done in suchemployment and includes dearnessallowance, but does not include,-
(i) any other allowance which theemployee is for the time being entitledto;
(ii) the value of any house
accommodation or of supply of light,water, medical attendance or otheramenity or of any service or of anyconcessional supply of foodgrains orother articles;
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(iii) any travelling concession;
(iv) any bonus (including incentive,production and attendance bonus);
(v) any contribution paid or payableby the employer to any pension fundor provident fund or for the benefit ofthe employee
(vi) any retrenchment compensationor any gratuity or other retirementbenefit payable to the employee orany ex gratia payment made to him;
(vii) any commission payable to theemployee.
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Computation of number of
working days
An employee shall be deemed tohave worked in an establishmentin any accounting yearalso on the
days on which,- (a) he has been laid off under
an agreement or as permitted bystanding orders under the
Industrial Employment (StandingOrders) Act, 1946, or under theIndustrial Disputes Act, 1947, orunder any other law applicable to
the establishment;
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Computation of number
of working days
(b) he has been on leave with salary orwages;
(c) he has been absent due to temporarydisablement caused by accident arising
out of and in the course of hisemployment, and
(d) the employee has been on maternityleave with salary or wages, during theaccounting year.
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DISQUALIFICATION FOR
BONUS
An employee shall be disqualifiedfrom receiving bonus under this Act,if he is dismissed from service for,-
fraud; or riotous or violent behaviour while on
the premises of the establishment;or
theft, misappropriation or sabotageof any property of the establishment.
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Deduction of certain amounts from
bonus payable under the Act Where in any accounting year, an
employee is found guilty of misconduct
causing financial loss to the employer,
then, it shall be lawful for the employer
to deduct the amount of loss from the
amount of bonus payable by him to the
employee under this Act in respect of
that accounting year only and the
employee shall be entitled to receive thebalance, if any.
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MINIMUM ANDMAXIMUM
BONUS PAYABLE MINIMUM BONUS- The minimum bonus which an employer is
required to pay even if he suffers lossesduring the accounting year or there is no
allocable surplus is 8.33 % of the salaryduring the accounting year, or
Rs. 100 in case of employees above 15years and Rs 60 in case of employeesbelow 15 years,
whichever is higher
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MAXIMUM BONUS If in an accounting year, the allocable surplus,
calculated after taking into account the amountset on or the amount set of exceeds the
minimum bonus, the employer should pay
bonus in proportion to the salary or wages
earned by the employee in that accounting yearsubject to a maximum of20% of such salary or
wages.
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TIME LIMIT FOR PAYMENT The bonus should be paid in cash within 8
months from the close of the accounting yearor within one month from the date ofenforcement of the award or coming intooperation of a settlement following an industrial
dispute regarding payment of bonus. However if there is sufficient cause extension
may be applied for.
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CALCULATION OF BONUS
CALCULATION OF BONUS
The method for calculation of annual
bonus is as follows:
Calculate the Available Surplus.
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Available Surplus
Available Surplus =
Gross Profit ( deduct) the following
:
Depreciation admissible u/s 32 of
the Income tax Act
Development allowance
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Available Surplus
(Deductions)
Direct taxes payable for the accounting
year (calculated as per Sec.7) Sums
specified in the Third Schedule.
Direct Taxes (calculated as per Sec. 7) inrespect of gross profits for the immediately
preceding accounting year
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Calculate Allocable Surplus
Allocable Surplus = 60% of
Available Surplus, 67% in case
of foreign companies.
Make adjustment for Set-onand Set-off. For calculating the
amount of bonus in respect of an
accounting year, allocable
surplus is computed afterconsidering the amount of set on
and set off from the previous
years, as illustrated in Fourth
Schedule.
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Set On
Where for any accounting year, theallocable surplus exceeds the amount ofmaximum bonus payable to the employees,then, the excess shall, subject to a limit oftwenty per cent of the total salary or wages of
the employees employed in theestablishment in that accounting year, becarried forward for being set on in thesucceeding accounting year and so on up toand inclusive of the fourth accounting yearto
be utilised for the purpose of payment ofbonus.
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Set Off Where for any accounting year, there is no
available surplus or the allocable surplus inrespect of that year falls short of the amountof minimum bonus payable to the employees,and there is no amount or sufficient amountcarried forward and set on which could be
utilised for the purpose of payment of theminimum bonus, then such minimum amountor the deficiency, as the case may be, shall becarried forward for being set off in thesucceeding accounting year and so on up to
and inclusive of the fourth accounting year.
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Set & Set Off
Where in any accounting year any amounthas been carried forward and set on or setoff under this section, then, in calculatingbonus for the succeeding accounting year,
the amount of set on or set off carriedforward from the earliest accounting yearshall first be taken into account.
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The allocable surplus so
computed is distributed
amongst the employees inproportion to salary or wages
received by them during the
relevant accounting year.
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DUTIES / RIGHTS OF EMPLOYER
D
UTIES To calculate and pay the annual bonusas required under the Act
To submit an annul return of bonus paidto employees during the year, in Form
D, to the Inspector, within 30 days of theexpiry of the time limit specified forpayment of bonus.
To co-operate with the Inspector,produce before him theregisters/records maintained, and suchother information as may be required bythem.
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RIGHTS
An employer has the following rights:
Right to forfeit bonus of an employee,who has been dismissed from service forfraud, riotous or violent behavior, ortheft, misappropriation or sabotage ofany property of the establishment.
Right to make permissible deductionsfrom the bonus payable to an employee,such as, festival/interim bonus paid andfinancial loss caused by misconduct ofthe employee.
Right to refer any disputes relating toapplication or interpretation of anyprovision of the Act, to the Labour Courtor Labour Tribunal.
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RIGHTS OF EMPLOYEES
Right to claim bonus payable under
the Act and to make an application tothe Government, for the recovery ofbonus due and unpaid, within oneyear of its becoming due.
Right to refer any dispute to the
Labour Court/Tribunal. Employees, to whom the Payment of
Bonus Act does not apply, cannotraise a dispute regarding bonus under
the Industrial Disputes Act. Right to seek clarification and obtaininformation, on any item in theaccounts of the establishment
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RECOVERY OF BONUS DUE
Where any bonus is due to an
employee by way of bonus, employeeor any other person authorised by himcan make an application to theappropriate government for recovery of
the money due. If the government is satisfied that
money is due to an employee by wayof bonus, it shall issue a certificate for
that amount to the collector who thenrecovers the money.
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Such application shall be made within one
yearfrom the date on which the money
became due to the employee.
However the application may be entertainedafter a year if the applicant shows that there
was sufficient cause for not making the
application within time.
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OFFENCES AND PENALTIES For contravention of the provisions of the Act or
rules the penalty is imprisonment upto 6months, or fine up to Rs.1000, or both.
For failure to comply with the directions orrequisitions made the penalty is imprisonmentupto 6 months, or fine up to Rs.1000, or both.
In case of offences by companies, firms, bodycorporate or association of individuals, itsdirector, partner or a principal officerresponsible for the conduct of its business, shall
be deemed to be guilty of that offence, unlessthe person concerned proves that the offencewas committed without his knowledge or that heexercised all due diligence
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Thank You