Page 238 - DMGT306_MERCANTILE_LAWS_II

Unit 12: Payment of Bonus Act, 1965

(b) a corporation in which not less than forty per cent of its capital is held (whether singly or Notes
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;
The provisions of the Payment of Bonus Act, 1965 do not ordinarily apply to an establishment in
public sector. However, if the following two conditions are satisfied by such establishment in
any accounting year, the provisions of the Act shall apply to such establishment as they apply to
an establishment in the private sector:
(a) If in any accounting year, an establishment in the public sector sells goods produced or
manufactured by it or renders any services, in competition with an establishment in private
sector; and
(b) The income from such sale or services is not less than 20% of the gross income of the
establishment in public sector in that year. (Section 20)
(7) Establishment in Private Sector

“Establishment in Private Sector” means any establishment other than an establishment in
public sector.

Self Assessment

Fill in the blanks:

4. The ........................... in respect of any accounting year shall be the gross profits for that year
after deducting there from the sums referred to in section 6.
5. The ........................... tax, calculated in accordance with the provisions of section 7, in respect
of an amount equal to the gross profits of the employer for the immediately preceding
accounting year.
6. Establishment in ........................... Sector means any establishment other than an
establishment in public sector.

12.3 Eligibility and Disqualification of Bonus

The explanation and criteria for eligibility and disqualification of bonus are given below:

12.3.1 Eligibility for Bonus [Sec 8]

Every employee receiving salary or wages upto 3,500 p.m. and engaged in any kind of work
whether skilled, unskilled, managerial, supervisory etc. is entitled to bonus for every accounting
year if he has worked for at least 30 working days in that year.

Notes This ceiling of 3,500 has been revised to 10,000 with effect from November, 2007.

“Salary or wages” means all remuneration (other than remuneration in respect of overtime
work), includes dearness allowance but does not include:

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