payment of bonus act 197 in india

8/9/2019 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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payment of bonus act 197 in india

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