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PAYMENT OF BONUS ACT, 1965

Applicability

  1. (a) Every factory (as def. in factories Act). & (b) Every other establishment in which 20 or more persons (less than 20 but 10 or more it appropriate govt. notifies) are employed on any day subject to certain exemptions.
  2. Employees' drawing remuneration of र 21,000/ or more and those who have worked for less than 30 days are not eligible to receive bonus under the Act. (Salary limit of र 3,500/- enhanced to र 10,000/- w.e.f. 1-4 2006 & further enhanced to र 21,OOO/- w.e.f. 1-4-2015)
  3. Bonus to be paid within eight months from the expiry of the accounting year.

Eligibility

  1. Every person (other than an apprentice) drawing salary up to र 21,000/- per month.
  2. Every person drawing salary not exceeding र 7,000/or minimum wage per month. He is entitled to get bonus on his entire salary or wage.
  3. Every person drawing salary or wage exceeding र 7,000/ or minimum wage whichever is higher, the bonus payable to him is to be calculated as if his salary or wage were र 7,000/- or minimum wage whichever is higher.

Components of Bonus

Salary or wages includes dearness allowance but no other allowances e.g. over time, house rent, incentive or commission

Benefit

  1. Subject to other provisions.-Minimum bonus shall be 8.33% of salary/wages earned or र 100 whichever is higher
  2. If allocable surplus exceeds the amount of minimum bonus, then bonus shall be payable at higher rate subject to a maximum 20% of Salary/Wages.
  3. Computation of bonus is to be worked out as per Schedule I to IV of the Act
  4. Payment of Bonus exceeding र 3,000/to be paid by cheque only in Maharashtra State

Method of Bonus Calculation

  1. Calculate 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 rebate or investment allowance or 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 account year (-) Direct Taxes in respect of such gross profits as reduced by the amount of Bonus for the immediately preceding accounting year.
  3. Calculate the 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 Off from the previous year. as illustrated in the Fourth Schedule
  5. The Allocable Surplus so computed is distributed amongst the employees in proportion to salary or wages

Penal Provision

Imprisonment up to 6 month and or fine up to र 1000/-