PAYMENT OF BONUS ACT 1965

Presented by Pranjali kambe.

INTRODUCTION
Bonus is a concept to bounty or payment by way of gift. Bonus also is a method of shearing of profits with the workers.

Eligibility
Bonus under Payment of Bonus Act,1965 is required to be to employees whose salary ( Basic) is of less than Rs.10000.00 per month during the accounting year for which bonus is to be paid. connecttoashok@gmail.com

Computation of number of working days. [Sec 14]

Following causes should not deducted from the total number of working days;
leave with salary or wages. absent due to temporary disablement caused by accident arising out of and in the course of his employment. maternity leave with salary.

CALCULATION OF BONUS

1.) Calculate the Statutory bonus 2.) Calculate the Available Surplus.

MEANING OF STATUTORY BONUS

Statutory Bonus means bonus payable as per statute, i.e., the Payment of Bonus Act. As per the Act, an amount equal to 8.33% of the Basic + Dearness allowance

paid to an employee who is eligible for bonus is to be paid irrespective of availability of surplus or profit. Therefore, 8.33% is the statutory minimum bonus payable. However, depending upon availability of profit, the employer shall pay bonus subject to a maximum of 20%.

Payment of bonus act 1965

gives to the employees a statutory right to a share in the profits of his employer. Prior of the Act some employees used to get bonus but that was so if their employers were pleased to pay the same. Payment of bonus act 1965 all the confirmed employees whose basis is less than or equal to 10000/- per month is eligible for statutory bonus @ rate of 8.33% of Basic pay.

HOW STATUTORY BONUS CALCULATE

The Act enables the employees to get a minimum bonus equivalent to one month's salary or wages (8.33% of annual earnings) whether the employer makes any profit or not. But the Act also puts a ceiling on the bonus and the maximum bonus payable under the Act is equivalent to about 2, 1/2 months' salary or wage (20% of annual earnings). pravin12s2yahoo.com

MEANING OF AVAILABLE SURPLUS

Available Surplus = Gross Profit [as per section 4] -Depreciation admissible u/s 32 of the Income tax Act - Development allowance Calculate the gross profit in the manner specified in: First Schedule, in case of a banking company, or Second Schedule, in any other case.

Computation of gross profits

CALCULATE THE AVAILABLE SURPLUS

Available Surplus = Gross Profit 1.) - Depreciation admissible u/s 32 of the Income tax Act 2.) - Development allowance 3.) - Direct taxes payable for the accounting year 4.) - Sums specified in the Third Schedule 5.) + Direct Taxes in respect of such gross profits as reduced by the amount of bonus, for the immediately preceding accounting year. 6.) - Direct Taxes in respect of gross profits for the immediately preceding accounting year

FORMULA OF AVAILABLE SURPLUS

1. Direct taxes payable for the accounting year (calculated as per sec-7)- sums specified in the third schedule. 2. Direct taxes (calculated as per sec-7) in respect of gross profit for the immediately preceding accounting year. 3. 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. 26

ALLOCABLE SURPLUS
(Allocable Surplus = 60% of Available Surplus, 67% in case of foreign companies). The bonus is to be paid out of the allocable surplus. The allocable surplus so computed is distributed amongst the employees in proportion to salary or wages received by them during the relevant accounting year. In case of a foreign company, the allocable surplus is 67 percent of the available surplus and in other cases it is 60 percent (section 4,5 and 7)

Applicability :
Applicability Every factory or an establishment employing not less than 20 employees during an accounting year.
The establishment once covered under the Act shall continue the coverage even if the number of employees falls below 20 subsequently.

DISQUALIFICATION FOR BONUS:

An employee shall be disqualified from
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 sabotage of any property of the establishment.

MINIMUM BOUNS
Bonus should be paid along with the salary Every year, every employer shall be bound to pay bonus to every employee. a minimum bonus which shall be 8.33% cent of the salary or wage earned by the employee during the accounting year or 100/- rupees, whichever is higher. Bonus shall be payable in case of profits or losses in the accounting year.

MAXIMUM BOUNS
In case the allocable surplus amount [Section 2(4)] exceeds the minimum bonus (8.33%) payable amount to employees, the employer is bound to pay extra percentage of bonus.
But maximum of 20% of bonus is payable to the every employee on the wage or salary earned during the year.

ex..(3500x12x20/100)

SET ON
(In case of huge profits,)

Excess allocable surplus remain after paying the maximum bonus of 20% on the wage or salary of the employee, Should be carried forward to the next following year to be utilized for the purpose of payment of bonus in case of the shortage of the allocable surplus or losses occur. This is called as Set-On

SET OFF
(in case of losses occur)
When there are no profits (available surplus or allocable surplus) or the amount falls short or deficiency for payment of minimum bonus to employees 8.33%, such deficiency amount should be adjusted to the current accounting year from the Set-On amount which was carried forward in case of excess allocable surplus in the previous year. This is called as Set-Off.

TIME LIMIT FOR PAYMENT OF BOUNS

The bonus should be paid in cash within 8 months from the close of the accounting year where there is a dispute regarding payment of bonus pending before any authority under section 22,within a month from a date on which the award becomes enforceable or the settlement comes into operation ,in respect of such disputes;

OFFENCES AND PENALTIES (SEC. 28):

For contravention of the provisions of the Act or rules the penalty is imprisonment up to 6 months, or fine up to Rs.1000, or both. For failure to comply with the directions or requisitions made the penalty is imprisonment up to 6 months, or fine up to Rs.1000, or both. In case of offences by companies, firms, body corporate or association of individuals, its director, partner or a principal officer responsible for the conduct of its business, shall be deemed to be guilty of that offence, unless the person concerned proves that the offence was committed without his knowledge or that he exercised all due diligence.