PAYMENT OF BONUS ACT, 1965

Applicability:
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. Sec1
The Act not applicable to certain employees of LIC, General Insurance, Dock Yards, Red Cross, Universities  & Educational Institutions, Chambers of Commerce, Social Welfare Institutions, Building Contractors,, etc. Sec.32.

Eligibility of Bonus:
An Employee will be entitled only when he has worked for 30 working days in the subject year. Sec.8

Minimum Bonus:
An establishment has to pay bonus @ 8.33% of the salary or Rs.100 (on completion of 5 years in existence in business after 1st Accounting year, even if there is no profit). Sec.10

Components of Bonus:
Salary or wages includes dearness allowance but no other allowance e.g overtime, house rent, incentive or commission. Sec.2 (21)

Wages /Salary Ceiling:

  • Employees drawing wages up to Rs.10,000/- per month or less.
  • However, for calculation purposes Rs.3,500/- per month maximum will be considered for bonus calculation even if an employee is drawing up to Rs. 10,000/- per month. Sec.12.

Maintenance of Registers and Records:

  • Form-A: A register showing the computation of the allocable surplus. clause (4) of section 2.
  • Form-B: A register showing the set-on and set-off of the allocable surplus. Section15.
  • Form-C: A register showing the details of the amount of bonus due, the deductions, and the amount actually disbursed to each of the employees. Sec.17 and 18.

Submission of Return:
In Form D to the inspector within 30 days of the expiry of time limit. Sec.19. Rule 5

Time Limit for Payment of Bonus:
Within 8 months from the close of accounting year. Sec.19

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