PAYMENT OF BONUS ACT 1965
Bonus is a very controversial issue in the field of industrial relations. Before 1965, till the enactment of the Payment of Bonus Act, 1965 demand for Bonus was not a statutory but a judicial right. One of the main reasons for all these complications was the absence of an express legislative definition of the term “Bonus.” This was not remedied under the Bonus Act also. Keeping in view the above issue, the article seeks to take up an overview of the nature of the term “Bonus” as it has evolved through the years and its present form in the Payment of Bonus Act, 1965. The term “Bonus” has not been defined in any legislative enactment. Even the recent Payment of Bonus (amendment) Bill, 2002 has not defined the term. Pronouncements by committees, courts however to a great extent give an insight into the nature of Bonus. The word “Bonus” owes a Latin origin. It means “gift or boon.” The Corpus Juris Secundum states that it has been said to carry the idea of uncertainty and indefiniteness, something that may or may not be paid depending on the varying circumstances.
PAYMENT OF BONUS ACT 1965
Important Provisions;
Applicability
of Act (Sec 1)
Every factory wherein 10 or more persons are employed with the aid of power or An establishment In which 20 or more persons are employed without the aid of power on any day during an accounting year.
Every factory wherein 10 or more persons are employed with the aid of power or An establishment In which 20 or more persons are employed without the aid of power on any day during an accounting year.
Establishment: Establishment
includes departments, undertakings and branches, etc.
Computation of
available surplus (Sec.5):
The following sums shall be
deducted from the gross profits as prior charges, namely:-
(a) any amount. by way
of depreciation admissible in accordance with the provisions of
sub-section (1) of section 32 of the Income-tax Act, or in accordance with the
provisions of the agricultural income-tax law, as the case may be:
Provided that where an
employer has been paying bonus to his employees under a settlement or an award
or agreement made before the 29th May, 1965, and subsisting on that date after
deducting from the gross profits notional normal depreciation,
then, the amount of depreciation to be deducted under this clause shall, at the option of such employer
(such option to be exercised once and within one year from that date) continue
to be such notional normal depreciation;
(b) Any amount by way
of 2[development rebate or investment allowance or development allowance]
which the employer is entitled to deduct from his income under the income-tax
Act;
(c) subject to the
provision of section 7, any direct tax which the employer is liable to pay for
the accounting year in respect of his income, profit and gain during that year;
Components of
Bonus:- Sec. 2(21) : Salary or wages includes dearness allowance but no other
allowances e.g. over-time, house rent, incentive or commission.
Separate
establishment (Sec. 3) : I profit loss accounts are prepared and
mainland in respect of any such department or undertaking or branch, then such
department or undertaking or branch is treated as a separate establishment.
Disqualification
and Deduction of Bonus: Sec 1:
• On dismissal of an
employee for fraud; or
• riotous or violent behaviour while on the premises of the establishment; or
• theft, misappropriation or sabotage of any property of the establishment; or
• riotous or violent behaviour while on the premises of the establishment; or
• theft, misappropriation or sabotage of any property of the establishment; or
• Misconduct of causing
financial loss to the employer to the extent that bonus can be deducted for
that year.
Computation of
gross profits: For banking company, as per
First Schedule. For others, as per Second Schedule.
Eligibility of
Bonus: An employee will be entitled only when he has worked for 30 working days
in that year. Sec. 8
Payment of
Minimum Bonus: 8.33% of the salary or Rs.100
(on completion of 5 years after 1st Accounting year even if there is no
profit). Sec. 10
Eligible
Employees: – Employees, drawing wages up
to Rs.10000/- per month or less. For calculation purposes Rs.3500
per month maximum will be taken even if an employee is drawing up to Rs.3500
per month. (Sec. 12)
Time Limit for
Payment of Bonus: Within 8 months from the close
of accounting year. (Sec. 19)
Set-off and
Set-on: As per Schedule IV. Sec. 15
Submission of
Return: In Form D to the inspector within 30 days of the expiry of time limit
under Section 19. Rule 5
Maintenance of
Registers and Records etc. Sec. 2(21) :
• A register showing the
computation of the allocable surplus referred to In clause (4) of section 2, in
Form A.
• A register showing the set-on and set-off of the allocable surplus, under section 15, in Form B.
• A register showing the set-on and set-off of the allocable surplus, under section 15, in Form B.
• A register showing the
details of the amount of bonus due to each of the employees, the deductions
under sections 17 and 18 and the amount actually disbursed, In Form C.
Non applicability
of the Act: – Act not applicable to
certain employees of LIC. General Insurance, Dock Yards, Red Cross,
Universities* Educational Institutions, Chambers of Commerce, Social Welfare
Institutions. etc.Sec.32
Penalty : For
contravention of any provision of the Act or the Rules: Up to 6 months or with
fine up to Rs.1000. Sec.28.
Read also;
Read also;
Data Sheet
1.
The Payment of Bonus
Act, 1965 provides for the payment of bonus to persons employed in certain
establishments, employing 20 or more persons, on the basis of profits or on the
basis of production or productivity and matters connected therewith.
2.
The minimum bonus of
8.33% is payable by every industry and establishment under section 10 of the
Act. The maximum bonus including productivity linked bonus that can be paid in
any accounting year shall not exceed 20% of the salary/wage of an employee under
the section 31 A of the Act.
3.
Details of amendments
to the Payment of Bonus Act, 1965:
S. No.
|
Year of Amendment
|
Eligibility limit
(Rs. Per Month) |
Calculation ceiling
(Rs. Per Month) |
1.
|
1965
|
Rs. 1600
|
Rs. 750
|
2.
|
1985
|
Rs. 2500
|
Rs. 1600
|
3.
|
1995
|
Rs.3500
|
Rs. 2500
|
4.
|
2007
|
Rs. 10000
|
Rs. 3500
|
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