The Payment of Bonus Act, 1965 came into force on April 1, 1965 to regulate the payment of bonus to employees based on profits. It applies to establishments with 20 or more employees. Key provisions include: - Section 12 deals with disqualification for bonus due to employee misconduct. - Section 17 outlines a time limit for paying bonus within 8 months of the accounting year. - Bonus is calculated based on available surplus with a minimum of 8.33% and maximum of 20%. The Act aims to legally require employers to pay bonus and provides mechanisms for dispute resolution. It does not apply to certain public sector organizations and those with alternative bonus agreements.

1. PAYMENT OF BONUS
ACT,1965

2. 1) When did The Payment of Bonus Act 1965, come into force?
A) 01 April 1965
B) 01 March 1965
C) 01 May 1965
D) 25 September, 1965
2) Which section of The Payment of Bonus Act 1965 deals with Disqualification for bonus?
A. Section 12 of the Payment of Bonus Act 1965
B. Section 9 of the Payment of Bonus Act 1965
C. Section 14 of the Payment of Bonus Act 1965
D. Section 20 of the Payment of Bonus Act 1965
3) Which section of the Payment of Bonus Act 1965 deals with Time-limit for payment of bonus?
A) A. Section 17 of the Payment of Bonus Act 1965
B) B. Section 19 of the Payment of Bonus Act 1965
C) C. Section 14 of the Payment of Bonus Act 1965
D) D. Section 15 of the Payment of Bonus Act 1965
4. Bonus is an ex - gratia payment.
a. True
b. False

3. 5) In which year did the government set up the tripartite commission?
a. 1951
b. 1972
c. 1961
d. 1965
6) The bonus act is the outcome of the recommendation made by the _________.
a. State government
b. Central government
c. Labour Court
d. Tripartite commission
7) The act is not applicable to _______ except those operating in competition with
similar other private undertakings.
a. Public enterprises
b. Private enterprises
c. Factories
d. Banks except RBI and LIC
8) Which section in the act deals with the computation of available surplus?
a. Section 3
b. Section 3A
c. Section 5
d. Section 1

4. 9) As per the act what is the minimum number of days an employee must have worked in an establishment to be
eligible for bonus?
a. 240 working days
b. 30 working days
c. 120 working days
d. 365 working days
10) On what grounds an employee will be disqualified from getting bonus?
a. Fraud
b. Riotous or violent behaviour while on the premises
c. Theft, misappropriation or sabotage of any property of the establishment
d. All of the above
11) What is the minimum amount of bonus paid to an employee?
a. 8.33%
b. 8.5%
c. 8%
d. 8.3%
12) The maximum amount of bonus to be paid in an accounting year as per section 10 of this act is ____.
a. 8.33%
b. 10%
c. 20%
d. 15%

5. 13) If any employee is found guilty of misconduct causing financial loss to the employer, then it is lawful for the
employer to deduct the amount of loss from the amount of bonus payable by him to the employee.
a. True
b. False
14) What is the mode of paying bonus to the employee as specified in the act?
a. Cash
b. Cheque
c. Account transfer
d. In kind
15) The payment of bonus shall be made within ______ from the date on which the award becomes enforceable or
the settlement comes into operation where there is dispute regarding payment of bonus.
a. 15 days
b. On the day of settlement
c. 1 month
d. None of the above
16) Where an employee dismissed but reinstated with back wages will be entitled to bonus.
(a) Yes
(b) No

6. 17) The payment of bonus should be made within a period of _____ months from the close of the accounting year.
a. 2 months
b. 6 months
c. 8 months
d. None of the above
18) A Temporary workman will be entitled to bonus.
(a) Yes
(b) No
19) A Temporary workman entitled to bonus on the basis of
(a) Total No. of days worked
(b) All working days
(c) No bonus will be allowable
(d) None of the above.
20) Where any employee dismissed because of Riotous/ Violent behaviour in the premises whether he is eligible for
bonus.
(a) Yes
(b) No

7. INTRODUCTION
• The practice of bonus in India appears to have originated during
WW1 when certain textile mills granted 10% wages as war bonus to
their workers in 1917. In certain cases of Industrial disputes demand
for payment of bonus was also included.
• In 1950, the Full Bench of the Labour Appellate Tribunal evolved a
formula for determination of bonus, A please was made to raise that
formula in 1959
• At the second and third meetings of the 18th session of Standing
Labour Committee (G.O.I) held in New Delhi in March /April 1960,
it was agreed that a commission be appointed to go into the question
of bonus and evolve suitable norms.

8. CONTINUED…
• A Tripartite Commission was set up by the G.O.I to consider in
comprehensive manner, the question of payment of bonus based on
profits to employees employed in establishments and to make
recommendations to the Government.
• The Government of India accepted the recommendation of the
Commission subject to certain modifications.
• The payment of Bonus Ordinac,1965, was promulgated on 29th
May,1965. to replace the said ordinance the Payment of Bonus Bill was
introduced in the parliament.

9. DEFINITION OF BONUS
 According to New English Dictionary- A boon or gift over and above
what is normally due as remuneration to the receiver and which is, holy to
the good.
 'Bonus' is something to the good; especially extra dividend to the
shareholders of the company; distribution of profits to the
insurance policyholders

10. OBJECTIVES OF PAYMENT OF BONUS
ACT,1965
• It aims to regulate the amount of bonus to be paid to the persons
employed in establishments based on its profit and productivity.
• To impose a legal responsibility upon the employer of every
establishment covered by the Act to pay the bonus to employees.
• To designate the minimum and maximum percentage of bonus.
• To prescribe the formula for calculating bonus.
• To provide redressal mechanism.

11. APPLICABILITY OF PAYMENT OF BONUS
ACT,1965
 Under section 1 of the Act, it is specified that the Payment of Bonus Act is applicable to the whole
of India.
 It applies to any factory or establishment which had twenty or more workers employed on any day
during the year.
 The act does not apply to the non-profit making organisations.
 It is not applicable to establishments such as LIC, hospitals which are excluded under Section 32.
 It is not applicable to establishments where employees have signed an agreement with the
employer.
 It is not applicable to establishments exempted by the appropriate government like sick units.
 According to the Bonus Act, any different departments or undertakings or branches of an
establishment of whether located in the same place or at different areas should be considered as
parts of the similar establishment for computation of bonus under the Act..

12. Definition of Establishment:
The term establishment is not defined in the Act. It is far
wider term than factory which has a special legal
connotation and meaning . Sec 3, however provides that
where an establishment consist of different department
and undertakings or has branches whether situated in
the same place or in different places, all such
departments and undertakings or branches shall be
treated as parts of the same establishment for the
purpose of computation of bonus under the Act

13. Definition.-
Unless the context otherwise requires,-
(1) “accounting year” means -
(i) in relation to a corporation, the year ending on the day on which the books and accounts of the corporation
to be closed and balanced.
(ii) in relation to a company, the period in respect of which any profit and loss account of the company laid
it in annual general meeting is made up, whether that period is a year or not;
(iii) in any other case -
(a) the year commencing on the 1st day of April; or
(b) if the accounts of an establishment maintained by the employer thereof are closed and balanced on any
other than the 31st day of March, then, at the option of the employer, the year ending on the day on which its
accounts are so closed and balanced:
Provided that an option once exercised by the employer under paragraph (b) of this sub-clause shall not again
exercised except with the previous permission in writing of the prescribed authority and upon such conditions
that authority may think fit;

14. “allocable surplus”Sec2(4) means-
(a) in relation to an employer, being a company 3 [(other than a banking company)] which has not made the
arrangements prescribed under the Income-tax Act for the declaration and payment within India of the
dividends payable out of its profits in accordance with the provisions of section 194 of that Act, 67% per cent of the
available surplus in an accounting; year;
(b) in any other case, 60%of such available surplus;
“appropriate Government” sec2(5) means
(i) in relation to an establishment in respect of which the appropriate Government under the Industrial Disputes Act,
1947, is the Central Government, the Central Government;
(ii) in relation to any other establishment, the Government of the State in which that other establishment is situate;
“available surplus”Sec2(6) means the available surplus computed under section 5, other relevant sections for this are
sec4,6,7
i. Under Section 4 gross profits are to be calculated in a manner specified in the first and the second schedule
ii. The available surplus and respect of any accounting year is the gross profit for that year after detecting their from
the sums referred to in section 6 (Section 5)
iii. According to Section 6 the sums to be deducted from the gross profit as priority charges are any amount of
depreciation any amount by way of development rebate or investment allowance or development allowance any
direct tax calculator according to the provision of section 7 (which deals with calculation of direct tax by the
employer )and other sums mention in the third schedule

15. “award” sec 2(7) means
An interim or a final determination of any industrial dispute or of any question relating thereto by any Labour Court,
Industrial Tribunal or National Tribunal constituted under the Industrial Disputes Act, 1947, or by any other authority
constituted under any corresponding law relating to investigation and settlement of industrial disputes in force in a
State and includes an arbitration award made under section 10A of that Act or under that law
“banking company” Sec2(8 means)
a banking company as defined in section 5 of the Banking Regulation Act, 1949, and includes the State Bank of India,
any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 any corresponding new bank
specified in the First Schedule to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, any
corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Under
takings) Act, 1980 any co-operative bank as defined in sec2(b)(ii) of the Reserve Bank of India Act, 1934 and any other
banking institution which may be notified in this behalf by the Central Government;
“company” Sec2(9) means any company as defined is section3 of the Companies Act, 1956, and includes a foreign
company
“co-operative society” Sec2(10) means
society registered or deemed to be registered under the Co-operative Societies Act, 1912 or any other law for the time
being in force in any State relating to co-operating societies;

16. “corporation” Sec 2(11) means
any body corporate established by or under any Central, Provincial or State Act but does not include a company or a
cooperative society
“direct tax” sec 2(12) means-
(a) any tax chargeable under-
(i) the Income-tax Act;
(ii) the Super Profits Tax Act, 1963);
(iii) the Companies (Profits) Surtax Act, 1964;
(iv) the agricultural income-tax law; and
(b) any other tax which, having regard to its nature or incidence, may by declared by the Central Government, by
notification in the Official Gazette, to be a direct tax for the purposes of this Act;
“employee” sec 2 (13) means
any person (other than an apprentice) employed on a salary or wage not exceeding Rs 21000 per month limit increased
from Rs 10000 by payment of bonus amendment Act 2016 in any industry to do any skilled or unskilled manual,
supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment
be express or implied;

17. “employer sec 2(14) includes –
(i) in relation to an establishment which is a factory, the owner or occupier of the factory, including the agent of such
owner or occupier, the legal representative of a deceased owner or occupier and the manager of the factory
(ii) In relation to any other establishment the person who are authority which has the ultimate control over the affairs of
the establishment where the set of interested to a manager of managing director is the employer
“establishment in private sector” Sec 2(15) means
any establishment other than an establishment in public sector;
“establishment in public sector”Sec 2(16) means
an establishment owned, controlled or managed by-
(a) a Government company as defined in section 617 of the Companies Act, 1956
(b) a corporation in which not less than forty per cent of its capital is held (whether singly or taken together) by-
(i) the Government; or
(ii) the Reserve Bank of India; or
(iii) a corporation owned by the Government or the Reserve Bank of India

18. “factory”sec 2(17)
It shall have the same meaning as in clause (m) of section 2 of the Factories Act, 1948
“gross profits” sec2(17)means
the gross profits calculated under section 4;
“Income-tax Act”sec2(19) means
the Income-tax Act, 1961
“prescribed” means prescribed by rules made under this Act;
“salary or wage”sec 2(21) means
all remuneration (other than remuneration in respect of over-time work) capable of being expressed in terms of money,
which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his
employment or of work done in such employment and includes dearness allowance (that is to say, all cash payments,
by whatever name called, paid to an employee on account of a rise in the cost of living), includes-
1. Lay off compensation
2. DA
3. CCA
4. Retaining allowance

19. does not include
(i)any other allowance which the employee is for the time being entitled to;
(ii) the value of any house accommodation or supply of light, water, medical attendance or other amenity or of any
service or of any concessional supply of food grains or other articles;
(iii) any traveling concession;
(iv) any bonus (including incentive, production and attendance bonus);
(v) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the
employee under any law for the time being in force;
(vi) any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or any ex
gratia payment made to him;
(vii) any commission payable to the employee.
Explanation. – Where an employee is given in lieu of the whole or part of the salary or wage payable to him, free food
allowance or free food by his employer, such food allowance or the value of such food shall, for the purpose of this
clause, be deemed to from part of the salary or wage of such employee;

20. ELIGIBILTY
Section 8: Every employee receiving salary or wages engaged in any kind of work whether skilled, unskilled, managerial,
manual, supervisory, administrative, technical or clerical work for hire or reward etc. is entitled to bonus for every
accounting year, whether the terms of employment be express or implied, only if he has worked for at least 30 working
days in that year [Section 2(10)].
Section 32-Act not to apply to certain classes of employees employed by :
Employees of the general insurance companies, LIC, Central/State Government establishments, Indian Red Cross Society,
Universities and Educational Institutions, Hospitals, Chambers of Commerce, Reserve Bank of India, Industrial Finance
Corporation of India, Unit Trust of India, And all other Financial Corporation established under Section 3, or any Joint
Financial Corporation established under Section 3-A, of the State Financial Corporations Act, 1951, Social Welfare
Institutions, Local Bodies, etc. are not entitled to bonus under the Act. What they are paid as Bonus, is Ex-gratia payment.
• Contractors on building operations, deposit insurance corporation of India, the National Bank for Agriculture and Rural
Development, UTI of India, , Industrial Development Bank of India, SIDBI, National Housing Bank, any other financial
Institution other than Banking company, being a establishment in public sector, which the Central Government may by
notification in the official gazette, specify having regard to (i) it capital structure,(ii) its objective and nature of its
activities, (iii) the nature and extent of fin assistance or any concession,(iv) any other relevant factor.
• Inland water transport establishments operating on routes passing through any other country.

21. Power of exemption section 36
The properties government may having regard to the financial position and other relevant circumstances of any
establishment for class of establishments, exempt by notification in the Official Gazzette, such establishment of class of
establishments from all or any of the provisions of the payments of Bonus Act. It may do so if it is of the opinion that it
will not be in Public Interest to apply all or any of the provisions of the act to such establishment of class of
establishments. It may exempt such establishments or class of establishment from the application of such provisions of
the act for such period as a be specified in the notification and impose such conditions as it may think fit to impose
Order refusing exemption under section 36 should be speaking one
An order passed in a proceeding under section 36 refusing exemption must be speaking one as the proceedings under
the section are quasi judicial if it is passed without giving reasons it is invalid. In case of general observations in the
order that a company is not entitled for exemption in public interest in view of its financial position and other relevant
circumstances the order is not speaking one. Financial position detailing liabilities and assets etc of the company and
specific circumstances which were refusal of exemption should find place in order.

22. Section 2 (13) Apprentice is not eligible for Bonus.
•Bonus is payable only annually and it cannot be directed to be paid on half-yearly basis.
• When an employee is not eligible for the statutory bonus but the company wants to share bonus, it can be given as ex-gratia.
Power of exemption (sec 36)

23. AN EMPLOYEE IN THE FOLLOWING CASES IS ALSO ENTITLED TO BONUS:
(1) A temporary workman on the basis of total number of days worked by him.
(2) An employee of a seasonal factory is entitled to proportionate bonus and not minimum bonus,
as prescribed by the Act.
(3) A part-time employee, as a sweeper engaged on a regular basis.
(4) A retrenched employee, provided he has worked for minimum qualifying period.
(5) A probationer is an employee and as such is entitled to bonus.
(6) A dismissed employee re-instated with back wages is entitled to bonus.
(7) A piece rated worker is entitled to bonus.
Section 16. SPECIAL PROVISIONS WITH RESPECT TO CERTAIN ESTABLISHMENTS:
The newly set up (whether before or after the commencement of this Act) establishment
is exempted from paying bonus to its employees in the first 5 years following the year in
which the employer sells the goods produced or manufactured by him. If, however, the
employer derives profit in any of the first 5 years, he has to pay bonus for that year. The
provision of set on and set off are not applicable in such cases.
sub-section (1), an establishment shall not be deemed to be newly set up merely by reason of a
change in its location, management, name or ownership

24. Section 9- DISQUALIFICATION FOR BONUS:
An employee shall be disqualified from receiving bonus, if he is dismissed from service for fraud or
riotous or violent behaviour while in the premises of the establishment or theft, misappropriation
or sabotage of any property of the establishment.
Section 10- MINIMUM BONUS:
The minimum bonus which an employer is required to pay even if he suffers losses during the
accounting year or there is no allocable surplus (except in case of new establishments), is 8.33% of the
salary or wages of the employee during the accounting year.
• Rs. 100 in case of employees above 15 years and Rs. 60 in case of employees below 15 years.
Whichever is higher.
MAXIMUM BONUS:
If in any accounting year, the allocable surplus exceeds the amount of minimum bonus, the employer
shall pay bonus in proportion to the salary or wages earned by the employee during that accounting
year, subject to maximum of 20% of such salary or wages.
Section 22- MODE AND TIME FOR PAYMENT
Bonus should be paid in Cash and within 8 months from the close of the accounting year. Bonus is
payable only annually. Since the financial year in India ends in March, payments have to be made by the end of
November of the next financial year.

25. EMPLOYERS’ OBLIGATIONS:
•To calculate and pay the annual bonus as required under the Act
•To submit an annul return of bonus paid to employees during the year, in Form D, to the Inspector, within 30 days of
the expiry of the time limit specified in section-19 for payment of bonus.
•To co-operate with the Inspector, produce before him the registers/records maintained, and such other information
as may be required by them (allocable surplus; set-on and set-off of the allocable surplus; details of the amount
payable as bonus, amount of deduction and actual amount paid to the employees).
•To get his account audited as per the directions of a Labour Court/Tribunal or of any such other authority.
EMPLOYERS’ RIGHTS:
• Right to forfeit bonus of an employee, who has been dismissed from service for fraud, riotous or violent behaviour,
or theft, misappropriation or sabotage of any property of the establishment.
• Right to make permissible deductions from the bonus payable to an employee, such as, festival/interim bonus paid
and financial loss caused by misconduct of the employee.
•Right to refer any disputes relating to application or interpretation of any provision of the Act, to the Labour Court or
Labour Tribunal.

26. RIGHTS OF EMPLOYEES:
1. Right to claim bonus payable under the Act and to make an application to the Government, for the
recovery of bonus due and unpaid, within one year of its becoming due.
2. Right to refer any dispute to the Labour Court/Tribunal Employees, to whom the Payment of Bonus
does not apply, cannot raise a dispute regarding bonus under the Industrial Disputes Act.
3. Right to seek clarification and obtain information, on any item in the accounts of the establishment.
Section13- PROPORTIONATE REDUCTION IN BONUS IN CERTAIN CASES:
Where an employee has not worked for all the working days in an accounting year, the minimum bonus
one hundred rupees or, as the case may be, of sixty rupees, if such bonus is higher than 8.33 per cent of
salary or wage for the days he has worked in that accounting year shall be proportionately reduced.
•Note- It is open to any employer to pay bonus linked with production or productivity instead of bonus
based on profits, if there is an agreement to that effect between him and his employees, but subject to
provisions of the Act in respect of payment of minimum and maximum basis. (Section-31 A).

27. TIME LIMIT FOR PAYMENT
Time limit for payment is specified in Section 19 of the Payment of Bonus Act,
1965.
 Section 19. Time-limit for payment of bonus
 [All amounts] payable to an employee by way of bonus under this Act shall be paid
in cash by his employer,-
 (a) where there is a dispute regarding payment of bonus pending before any
authority under section 22, within a month from the date on which the award
becomes enforceable or the settlement comes into operation, in respect of such
dispute;
 (b) in any other case, within a period of eight months from the close of the
accounting year.

28. CONTINUED…
 PROVIDED that the appropriate government or such authority as the appropriate
government may specify in this behalf may, upon an application made to it by the
employer and for sufficient reasons, by order, extend the said period of eight months
such further period or periods as it thinks fit; so, however, that the total period so
extended shall not in any case exceed two years.

29. KEY POINTS
1. The bonus should be paid in cash within one month from the date of enforcement of the
award or coming into operation of a settlement following an industrial dispute regarding
payment of bonus.
2. Or, within 8 months from the close of the accounting year.
3. However if there is sufficient cause extension may be applied for.

30. PENALTIES AND OFFENCES
 Penalty
Penalties are dealt with in Section 28 of the Payment of Bonus Act, 1965
 28. Penalty.—If any person—
a) contravenes any of the provisions of this Act or any rule made thereunder; or
b) to whom a direction is given or a requisition is made under this Act fails to comply with the
direction or requisition, he shall be punishable with imprisonment for a term which may extend to
six months, or with fine which may extend to one thousand rupees, or with both.

31. CONTINUED...
 Offences
Offences are dealt in Section 29.
 29. Offences by companies
(1) If the person committing an offence under this Act is a company, every person who, at the time
offence was committed was in charge of, and was responsible to, the company for the conduct of
business of the company, as well as the company, shall be deemed to be guilty of the offence and
shall be liable to be proceeded against and punished accordingly:
PROVIDED that nothing contained in this sub-section shall render any such person liable to any
punishment if he proves that the offence was committed without his knowledge or that he
all due diligence to prevent the commission of such offence.

32. CONTINUED…
 (2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has
been committed by a company and it is proved that the offence has been committed with the
consent or connivance of, or is attributable to any neglect on the part of, any director, manager,
secretary or other officer of the company, such director, manager, secretary or other officer shall
also be deemed to be guilty of that offence and shall be liable to be proceeded against and
punished accordingly.
 Explanation : For the purposes of this section,-
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "director" in relation to a firm means a partner in the firm.

33. Determination of bonus
1. Gross Profit sec 4 this is the 1st step it is calculated according to the sec 4
Computation of Gross Profit in case of banking Company as mentioned in the 1st schedule

36. CALCULATION OF BONUS
 1) Calculate the statutory bonus-
Meaning- statutory bonus means bonus payable as per the 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.
The Payment of Bonus Act, 1965 gives to the employee a statutory to share in the profits of his
employer.
Calculation- according to The Payment of bonus Act all the confirmed employees whose basic salary is
is less than or equal to Rs. 7,000 per month is eligible for statutory bonus @ of 8.33% of Basic pay but
the act also puts a ceiling on the bonus and the maximum bonus payable under the act is equivalent to
about 2 ½ months salary or wages ( 20% of annual earnings).
Where the salary or wage of an employee exceeds Rs. 7,000 per month, or the minimum wage for the
scheduled employment , as fixed by the appropriate government whichever is higher the bonus
payable to such an employee under section 10 or as the case maybe section 11 shall be calculated as if
the salary or wage were Rs. 7000 or the minimum wage for the scheduled employment, whichever is
higher. ( As amended W.e.f 1.4.2014)

37. EXAMPLE
 SITUATION A- where the basic salary of the employee is less than or equal to Rs. 7000
Q. If Rohan has a basic salary of Rs. 5000 per month then calculate bonus per month and per annum
Ans. Basic salary*8.33%= Bonus per month
5000*8.33% = Rs.416.5 per month * 12= Rs. 4,998 per annum
 SITUATION B- where the basic salary of the employee is higher than Rs. 7000
Q. If Rohan has a basic salary of Rs. 15,000 per month then calculate bonus per month & per annum
Ans. Basic salary*20%= Bonus per month
7000*20% = Rs. 1,400 per month*12= Rs. 16,800
 SITUATION C- where the basic salary of the employee is higher than Rs. 21,000
Ans. There is no bonus applicable to employees having a basic salary of more than Rs 21,000

39.  Available Surplus= Gross profit[as per sec 4] (- )Depreciation admissible under Sec 32 of the
income tax act (-) Development allowance.
 Calculate the gross profit in the manner specified in First schedule, in case of banking company
second schedule, in any other case.
 FORMULA OF AVAILABLE SURPLUS
i. Direct taxes payable for the accounting year ( calculated as per sec 7)-sums specified in third
schedule.
ii. Direct taxes ( calculated as per sec 7) in respect of gross profit for the immediately preceding
accounting year.
iii. Allocable surplus = 60% of available surplus, 67% in case of banking companies.
iv. Make adjustment for ‘set on’ and ‘set off’ for calculating the amount of bonus in respect of an
accounting year.
2) So….

40. ALLOCABLE SURPLUS
 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 Banking company, the allocable surplus is 67 percent of the available surplus and in
other cases it is 60 percent ( section 4,5 and 7)

41. WHO IS ENTITLED TO BONUS UNDER THE
PAYMENT OF BONUS ACT, 1965
 A temporary workman on the basis of total number of days worked by him.
 An employee of a seasonal factory is entitled to proportionate bonus and not minimum bonus as
prescribed by the act.
 A part time employee, as a sweeper engaged on a regular basis. ( ex – Automobile Karamchari sangh
vs industrial tribunal)
 A retrenched employee provided he has worked for a minimum qualifying period.(ex- East Asiatic P
ltd. Vs industrial tribunal 1961)
 A probationer is an employee and as such is entitled to bonus.( ex- Bank mudra Ltd v Employee’s
Union, 1970)
 A dismissed employee re instated with back wages is entitled to bonus.(ex- Gammon India ltd v
Niranjan das 1984)
 A piece rated worker is entitled to bonus (ex- Mathuradas Kani v L.A. tribunal

55. Definitions.—In this Act, unless the context otherwise requires,—
section 2(a) “appropriate Government” means—
(i) in relation to an establishment belonging to, or under the control of, the Central
Government or in relation to an establishment connected with a railway company, a major port, a
mine or an oilfield or a controlled industry, 1
[or in relation to an establishment having
departments or branches in more than one State,] the Central Government; and
(ii) in relation to any other establishment, the State Government;
Section 2 (aa) “authorised officer” means the Central Provident Fund Commissioner, Additional Central Provident
Fund Commissioner, Deputy Provident Fund Commissioner, Regional Provident Fund Commissioner or such other
officer as may be authorised by the Central Government, by notification in the Official Gazette;
“basic wages” means all emoluments which are earned by an employee while on duty or 3
On leave or on holidays with wages in either case] in accordance with the terms of the contract of
employment and which are paid or payable in cash to him, but does not include—
(i) the cash value of any food concession;
(ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to
an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance,
bonus commission or any other similar allowance payable to the employee in respect of his
employment or of work done in such employment;
(iii) any presents made by the employer;