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Unit 12: Payment of Bonus Act, 1965

Self Assessment Notes

State whether the following statements are true or false:
1. The Act is enforced through the Central Industrial Relations Machinery (CIRM).
2. During the 2nd World War, bonus again became a live issue when industries started
making extraordinary losses.
3. All amounts payable to an employee by way of bonus under this Act shall be paid in cash
by his employer within a month from the date on which the award become enforceable or
the settlement comes into operation, in respect of any dispute regarding payment of
bonus.
12.2 Definitions

In this Act, unless the context otherwise requires -

(1) Accounting Year

“Accounting Year” means-
(i) in relation to a corporation, the year ending on the day on which the books and accounts of
the corporation are 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 before 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 day 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 be exercised except with the previous permission in writing of the prescribed
authority and upon such conditions as that authority may think fit.
(2) Allocable Surplus

“Allocable Surplus” means-
(a) in relation to an employer, being a company (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% of the available surplus in an accounting year;

(b) in any other case, 60% of such available surplus;

(3) Available Surplus

“Available surplus” means the available surplus computed under Sec.5. The available surplus in
respect of any accounting year shall be the gross profits for that year after deducting therefrom
the sums referred to in section 6:

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