This document summarizes key aspects of India's Payment of Bonus Act 1965. It outlines that the Act applies to factories and other establishments with 20 or more employees. It discusses how bonus is calculated based on allocable surplus and sets out limits on minimum and maximum bonus payable. Exceptions and penalties for non-compliance are also summarized.

2. except
 Factory
Any other establishment
Public sector(Share capital held by Govt>40%)
Note : For some establishment POBA will apply even if the
number of employees are below 20 under two conditions,
oMinimum of 10 employees
oNotified in gazette.
Once applies, applied forever.

3. All the employees
Con 01: 30 days (or) more.
Con 02: Salary less than (or) equal to
10,000.
Note : Working days includes Casual leaves, sick leaves………….etc.

6. Calculation of available surplus u/s 5.
oGross profit u/s 4 xxx
oLess :Prior profits u/s6 xxx
oAdd :Tax savings(previous accounting year)* xxx
Available surplus xxx
Banking 60%
Allocable
surplus Other than
67%
banking
Note : Subject to conditions of limits

7. SET ON :
Allocable surplus exceeds maximum bonus.
Then the excess shall, subject to limit of 20% of salary will be
carried forward for set on in next 4 accounting years.
SET OFF:
Allocable surplus is nil or less than or equal to the minimum
bonus.
In this case the minimum or the deficiency is carried
forward to next 4 accounting years.
Note: The set on or the set off is adjusted in calculation of bonus payable.

8. oCalculation of bonus payable
oGross profit xxx
oLess prior charges xxx
oAdd Tax savings xxx
oAvailable surplus xxx
oALLOCABLE SURPLUS(60/ 67%)
oLess set OFF xxx
oAdd set on xxx
oBONUS PAYABLE xxx

9. SALARY= BASIC SALARY+DA+FFA+RA+city.
The minimum for majors is RS 100.
The minimum for minors between 14 to 15 is RS 60.
The maximum bonus payable is RS 8400 (3500*20%*12months).
The minimum bonus payable is RS 1200 (100*12) (OR) for minors 720(60*12).
Note: the bonus i.e minimum/maximum is calculated on RS3500 p.m (or) the
salary less than RS3500 i.e salary of employee (or) RS 3500 which ever is lower

10. REASONS:
 Having regard to employers financial position and other
relevant circumstances &
It will not be in the public interest to pay the bonus Act.
CONDITIONS:
1.Must given opportunity for being heard
2.can’t be given retrospectively
3.Through notification in the official gazette
4.It may be granted for the limited period
5.further,appropriate govt may impose certain conditions as it
may think so.

11. OFFENCE PENALTY
Contraventions of
any provisions
6 months imprisonment
and /or Rs 10,000 or both
Default in complying
with Act
Note : If the offence is committed with the knowledge of director criminal liability is
awardable on director and civil liability on company.

12. Where a dispute regarding payment of bonus pending before
any authority under section 22 with in 1 month on date on which
the award or settlement comes into operation
In any other case
With in period of 8 months from closure of accounting year.
This period of 8 months may be extended up to a maximum of
two years by appropriate government, on an application being
made by the employer.
Collector - arrears of land revenue.
Inspector-Powers.
Note : Interest of 9% is awarded to employee form the date it becomes due.

13. Calculated on number of units produced.
It needs an agreement between employer and
employee.
Subjected to conditions imposed u/s31A.
oAn such agreement which results into the
relinquishment of employees right to claim the
minimum bonus is NULL & VOID.
oIf bonus payable under such agreement is in excess
of 20% of the salary, such employees are not entitled
to excess of 20%.
Note: This section over rides entire Act.(units instead of profits).

14. 5 accounting years from starting of commercial
productivity in which the employers earns profit.
From 8th year the provisions of section 15 will apply.
Deemed profit:
After employer made provisions for depreciation as per
Income tax Act.
Set off’s unabsorbed depreciation and unabsorbed
losses.
Period of trail run is excluded.
Note: The establishment is not deemed to be new one for changes in location, ownership,
management.