26. Eligibility for bonus, etc.—(1) There shall be paid to every employee, drawing wages not
exceeding such amount per mensem, as determined by notification, by the appropriate Government, by
his employer, who has put in at least thirty days work in an accounting year, an annual minimum bonus
calculated at the rate of eight and one-third per cent. of the wages earned by the employee or one hundred
rupees, whichever is higher whether or not the employer has any allocable surplus during the previous
accounting year.
(2) For the purpose of calculation of the bonus where the wages of the employee exceeds such
amount per mensem, as determined by notification by the appropriate Government, the bonus payable to
such employee under sub-sections (1) and (3) shall be calculated as if his wage were such amount, so
determined by the appropriate Government or the minimum wage fixed by the appropriate Government,
whichever is higher.
(3) Where in respect of any accounting year referred to in sub-section (1), the allocable surplus
exceeds the amount of minimum bonus payable to the employees under that sub-section, the employer
shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting
year, bonus which shall be an amount in proportion to the wages earned by the employee during the
accounting year, subject to a maximum of twenty per cent. of such wages.
(4) In computing the allocable surplus under this section, the amount set on or the amount set off
under the provisions of section 36 shall be taken into account in accordance with the provisions of that
section.
(5) Any demand for bonus in excess of the bonus referred to in sub-section (1), either on the basis of
production or productivity in an accounting year for which the bonus is payable shall be determined by an
agreement or settlement between the employer and the employees, subject to the condition that the total
bonus including the annual minimum bonus referred to in sub-section (1) shall not exceed twenty per
cent. of the wages earned by the employee in the accounting year.
(6) In the first five accounting years following the accounting year in which the employer sells the
goods produced or manufactured by him or renders services, as the case may be, from such establishment,
bonus shall be payable only in respect of the accounting year in which the employer derives profit from
such establishment and such bonus shall be calculated in accordance with the provisions of this Code in
relation to that year, but without applying the provisions of section 36.
(7) For the sixth and seventh accounting years following the accounting year in which the employer
sells the goods produced or manufactured by him or renders services, as the case may be, from such
establishment, the provisions of section 36 shall apply subject to the following modifications, namely:--
(i) for the sixth accounting year set on or set off, as the case may be, shall be made, in the manner
as may be prescribed by the Central Government, taking into account the excess or deficiency, if any,
as the case may be, of the allocable surplus set on or set off in respect of the fifth and sixth accounting
years;
(ii) for the seventh accounting year set on or set off, as the case may be, shall be made, in the
manner as may be prescribed by the Central Government, taking into account the excess or
deficiency, if any, as the case may be, of the allocable surplus set on or set off in respect of the fifth,
sixth and seventh accounting years.
(8) From the eighth accounting year following the accounting year in which the employer sells the
goods produced or manufactured by him or renders services, as the case may be, from such establishment,
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the provisions of section 36 shall apply in relation to such establishment as they apply in relation to any
other establishment.
Explanation 1.—For the purpose of sub-section (6), an employer shall not be deemed to have derived
profit in any accounting year, unless—
(a) he has made provision for depreciation of that year to which he is entitled under the Incometax Act or, as the case may be, under the agricultural income tax law; and
(b) the arrears of such depreciation and losses incurred by him in respect of the establishment for
the previous accounting years have been fully set off against his profits.
Explanation 2.—For the purposes of sub-sections (6), (7) and (8), sale of the goods produced or
manufactured during the course of the trial running of any factory or of the prospecting stage of any
mine or an oil-field shall not be taken into consideration and where any question arises with regard to
such production or manufacture, the appropriate Government may, after giving the parties a
reasonable opportunity of representing the case, decide upon the issue.
(9) The provisions of sub-sections (6), (7) and (8) shall, so far as may be, apply to new departments or
undertakings or branches set up by existing establishments.
27. 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 under sub-section (1) of section 26, if such
bonus is higher than eight and one third per cent. of the salary or wage of the days such employee has
worked in that accounting year, shall be proportionately reduced.
28. Computation of number of working days.—For the purposes of section 27, an employee shall
be deemed to have worked in an establishment in any accounting year also on the days on which,—
(a) he has been laid off under an agreement or as permitted by standing orders under the
Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes
Act, 1947 (14 of 1947), or under any other law applicable to the establishment;
(b) he has been on leave with salary or wages;
(c) he has been absent due to temporary disablement caused by accident arising out of and in the
course of his employment; and
(d) the employee has been on maternity leave with salary or wages, during the accounting year.
29. Disqualification for bonus.—Notwithstanding anything contained in this Code, an employee
shall be disqualified from receiving bonus under this Code, if he is dismissed from service for—
(a) fraud; or
(b) riotous or violent behaviour while on the premises of the establishment; or
(c) theft, misappropriation or sabotage of any property of the establishment; or
(d) conviction for sexual harassment.
30. Establishments to include departments, undertakings and branches.—Where an
establishment consists of different departments or undertakings or has branches, whether situated in the
same place or in different places, all such departments or undertakings or branches shall be treated as
parts of the same establishment for the purpose of computation of bonus under this Code:
Provided that where for any accounting year a separate balance sheet and profit and loss account are
prepared and maintained in respect of any such department or undertaking or branch, then, such
department or undertaking or branch shall be treated as a separate establishment for the purpose of
computation of bonus, under this Code for that year, unless such department or undertaking or branch
was, immediately before the commencement of that accounting year treated as part of the establishment
for the purpose of computation of bonus.
31. Payment of bonus out of allocable surplus.—(1) The bonus shall be paid out of the allocable
surplus which shall be an amount equal to sixty per cent. in case of a banking company and sixty-seven
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per cent. in case of other establishment, of the available surplus and the available surplus shall be the
amount calculated in accordance with section 33.
(2) Audited accounts of companies shall not normally be questioned.
(3) Where there is any dispute regarding the quantum of bonus, the authority notified by the
appropriate Government having jurisdiction may call upon the employer to produce the balance sheet
before it, but the authority shall not disclose any information contained in the balance sheet unless agreed
to by the employer.
32. Computation of gross profits.—The gross profits derived by an employer from an establishment
in respect of the accounting year shall,—
(a) in the case of a banking company, be calculated in the manner as may be prescribed by the
Central Government;
(b) in any other case, be calculated in the manner as may be prescribed by the Central
Government.
33. Computation of available surplus.—The available surplus in respect of any accounting year
shall be the gross profits for that year after deducting there from the sums referred to in section 34:
Provided that the available surplus in respect of the accounting year commencing on any day in a year
after the commencement of this Code and in respect of every subsequent accounting year shall be the
aggregate of—
(a) the gross profits for that accounting year after deducting there from the sums referred to in
section 34; and
(b) an amount equal to the difference between—
(i) the direct tax, calculated in accordance with the provisions of section 35, in respect of an
amount equal to the gross profits of the employer for the immediately preceding accounting year;
and
(ii) the direct tax, calculated in accordance with provisions of section 35, in respect of an
amount equal to the gross profits of the employer for such preceding accounting year after
deducting there from the amount of bonus which the employer has paid or is liable to pay to his
employees in accordance with the provisions of this Code for that year.
34. Sums deductible from gross profits.—The following sums shall be deducted from the gross
profits as prior charges, namely:—
(a) any amount by way of depreciation admissible in accordance with the provisions of subsection (1) of section 32 of the Income-tax Act or in accordance with the provisions of the agricultural
income-tax law, for the time being in force, as the case may be;
(b) subject to the provisions of section 35, any direct tax which the employer is liable to pay for
the accounting year in respect of his income, profits and gains during that year;
(c) such further sums in respect of the employer as may be prescribed by the Central Government.
35. Calculation of direct tax payable by employer.—For the purposes of this Code, any direct tax
payable by the employer for any accounting year shall, subject to the following provisions, be calculated
at the rates applicable to the income of the employer for that year, namely:—
(a) in calculating such tax no account shall be taken of,—
(i) any loss incurred by the employer in respect of any previous accounting year and carried
forward under any law for the time being in force relating to direct taxes;
(ii) any arrears of depreciation which the employer is entitled to add to the amount of the
allowance for depreciation for any succeeding accounting year or years under sub-section (2)
of section 32 of the Income-tax Act;
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(b) where the employer is a religious or a charitable institution to which the provisions of section
41 do not apply and the whole or any part of its income is exempt from the tax under the Income-tax
Act, then, with respect to the income so exempted, such institution shall be treated as if it were a
company in which the public are substantially interested within the meaning of that Act;
(c) where the employer is an individual or a Hindu undivided family, the tax payable by such
employer under the Income-tax Act shall be calculated on the basis that the income derived by him
from the establishment is his only income;
(d) where the income of any employer includes any profits and gains derived from the export
of any goods or merchandise out of India and any rebate on such income is allowed under any
law for the time being in force relating to direct taxes, then, no account shall be taken of such
rebate;
(e) no account shall be taken of any rebate other than development rebate or investment
allowance or development allowance or credit or relief or deduction (not hereinbefore mentioned in
this section) in the payment of any direct tax allowed under any law for the time being in force
relating to direct taxes or under the relevant annual Finance Act, for the development of any industry.
36. Set on and set off of allocable surplus.—(1) Where for any accounting year, the allocable
surplus exceeds the amount of maximum bonus payable to the employees in the establishment under
section 26, then, the excess shall, subject to a limit of twenty per cent. of the total salary or wage of the
employees employed in the establishment in that accounting year, be carried forward for being set on in
the succeeding accounting year and so on up to and inclusive of the fourth accounting year to be utilised
for the purpose of payment of bonus in such manner as may be prescribed by the Central Government.
(2) Where for any accounting year, there is no available surplus or the allocable surplus in respect of
that year falls short of the amount of minimum bonus payable to the employees in the establishment under
section 26, and there is no amount or sufficient amount carried forward and set on under sub-section (1)
which could be utilised for the purpose of payment of the minimum bonus, then, such minimum amount
or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding
accounting year and so on up to and inclusive of the fourth accounting year in such manner as may be
prescribed by the Central Government.
(3) The principle of set on and set off as may be provided in rules by the Central Government under
this Code shall apply to all other cases not covered by sub-section (1) or sub-section (2) for the purpose of
payment of bonus under this Code.
(4) Where in any accounting year any amount has been carried forward and set on or set off under this
section, then, in calculating bonus for the succeeding accounting year, the amount of set on or set off
carried forward from the earliest accounting year shall first be taken into account.
37. Adjustment of customary or interim bonus against bonus payable under this Code.—Where
in any accounting year,—
(a) an employer has paid any puja bonus or other customary bonus to employee; or
(b) an employer has paid a part of the bonus payable under this Code to an employee before the
date on which such bonus becomes payable,
then, the employer shall be entitled to deduct the amount of bonus so paid from the amount of bonus
payable by him to the employee under this Code in respect of that accounting year and the employee shall
be entitled to receive only the balance.
38. Deduction of certain amounts from bonus payable.—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 Code in respect of that accounting year only and the employee shall be entitled to receive the
balance, if any.
39 .Time limit for payment of bonus.—(1) All amounts payable to an employee by way of bonus
under this Code shall be paid by crediting it in the bank account of the employee by his employer within a
period of eight months from the close of the accounting year:
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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 to 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.
(2) Notwithstanding anything contained in sub-section (1), where there is a dispute regarding
payment of bonus pending before any authority, such bonus shall be paid, within a period of one month
from the date on which the award becomes enforceable or the settlement comes into operation, in respect
of such dispute:
Provided that if, there is a dispute for payment at the higher rate, the employer shall pay eight and
one-third per cent. of the wages earned by the employee as per the provisions of this Code within a period
of eight months from the close of the accounting year.
40. Application of this Chapter to establishments in public sector in certain cases.—(1) If in any
accounting year an establishment in public sector sells any goods produced or manufactured by it or
renders any services, in competition with an establishment in private sector, and the income from such
sale or services or both, is not less than twenty per cent. of the gross income of the establishment in public
sector for that year, then, the provisions of this Chapter shall apply in relation to such establishment in
public sector as they apply in relation to a like establishment in private sector.
(2) Save as otherwise provided in sub-section (1), nothing in this Chapter shall apply to the
employees employed by any establishment in public sector.
41. Non-applicability of this Chapter.—(1) Nothing in this Chapter shall apply to—
(a) employees employed by the Life Insurance Corporation of India;
(b) seamen as defined in clause (42) of section 3 of the Merchant Shipping Act, 1958 (44 of
1958);
(c) employees registered or listed under any scheme made under the Dock Workers (Regulation
of Employment) Act, 1948 (9 of 1948), and employed by registered or listed employers;
(d) employees employed by an establishment under the authority of any department of the Central
Government or a State Government or a local authority;
(e) employees employed by—
(i) the Indian Red Cross Society or any other institution of a like nature including its
branches;
(ii) universities and other educational institutions;
(iii) institutions including hospitals, chamber of commerce and social welfare institutions
established not for purposes of profit;
(f) employees employed by the Reserve Bank of India;
(g) employees employed by public sector financial institution other than a banking company,
which the Central Government may, by notification, specify, having regard to—
(i) its capital structure;
(ii) its objectives and the nature of its activities;
(iii) the nature and extent of financial assistance or any concession given to it by the
Government; and
(iv) any other relevant factor;
(h) employees employed by inland water transport establishments operating on routes passing
through any other country; and
(i) employees of any other establishment which the appropriate Government may, by notification,
exempt having regard to the overall benefits under any other scheme of profit sharing available in
such establishments to the employees.
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(2) Subject to the provisions of sub-section (1) and notwithstanding anything contained in any other
provisions of this Chapter, the provisions of this Chapter shall apply to such establishment in which
twenty or more persons are employed or were employed on any day during an accounting year.