Payment of Bonus CHAPTER V: Draft Code on Wages (Central) Rules 2020 : Notification
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CHAPTER V
Payment of Bonus
21. Calculation of set on or set off for the sixth accounting year.– For the sixth accounting year, set on or set off, as the case may be,shall be made under clause (i) of sub-section (7) of section 26, in the manner illustrated in Schedule A, 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.
22. Calculation of set on or set off for the seventh accounting year.-For the seventh accounting year, set on or set off, as the case may be, shall be made under clause (ii) of sub-section (7) of section 26, in the manner illustrated in Schedule A, 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.
23. Computation of gross profits under clause (a) of section 32.-The gross profits derived by an employer from an establishment in respect of the accounting year shall in the case of banking company, be calculated in the manner specified in Schedule B.
Schedule B
COMPUTATION OF GROSS PROFITS |
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[See rule 23]
Accounting year ending ……… |
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Item No. | Particulars | Amount ย of ย sub- Items | Amount of main Items | Remarks |
Rs. | Rs. | |||
*1. | Net Profit as shown in the Profit and Loss Account after making usual and necessary provisions. | |||
2. |
Add back provision for: (a) Bonus to employees (b) Depreciation (c) Development Rebate Reserve (d) Any other reserves Total of Item No.2โฆโฆโฆ.. |
Rsโฆโฆโฆโฆ |
See foot-note (1)
See foot-note (1) |
|
3. |
Add back also: (a) Bonus paid to employees in respect of previous accounting years. (b) The amount debited in respect of gratuity paidย or payable to employees in excess of the aggregate of โ (i) the amount, if any, paid to, or provided for payment to, an approved gratuity fund; and (ii) the amount actually paid to employees on their retirement or on termination of their employment for any reason. (c) Donations in excess of the amount admissible for income-tax . (d) Capital expenditure (other than capital expenditure on scientific research which is allowed as a deduction under any law for the time being in force relating to direct taxes) and capital losses (other than losses on sale of capital assets on which depreciation has been allowed for income tax). (e) Any amount certified by the Reserve Bank of India in terms of sub-section (2) of section 34A of the Banking Regulation Act, 1949 (10 of 1949). (f) Losses of, or expenditure relating to, any business situated outside India. Total of Item No.3โฆโฆโฆ.. |
ย Rsโฆโฆโฆ. |
See foot-note (1)
See foot-note (1) |
|
4. |
Add also income, profits or gains (if any ) credited directly to published or disclosed reserves, other than- (i)ย ย ย ย capital receipts and capital profits (including profits on the sale of capital assets on such depreciation has not been allowed for income-tax); (ii)ย ย ย ย ย ย profits of, and receipts relating to , any business situated outside India; (iii)ย ย ย ย ย ย ย ย ย ย ย income of foreign banking companies from investment outside India. Net total of Item No.4โฆโฆ. |
Rsโฆโฆโฆโฆ | ||
5. | Total of Item Nos.1, 2, 3 and
4โฆ |
Rsโฆโฆโฆโฆ | ||
6. |
Deduct : (a)ย ย ย ย Capital receipts and capital profits (other than profits on the sale of assets on which depreciation has been allowed for income-tax). (b)ย ย ย ย ย ย Profits of, and receipts relating to any business situated outside India. (c)ย ย ย ย Income of foreign banking companies from investments outside India . (d)ย ย ย ย ย Expenditure or losses (if anyย ย )ย ย debitedย ย directlyย ย to published or disclosed reserves, other than โ (i)ย ย ย ย ย ย ย capital expenditure and capital losses (other ย than losses on sale of capital assets on which depreciation has not been allowed for income-tax ); (ii)ย ย ย ย ย ย ย losses of any business situated outside India. (e)ย ย ย ย ย ย In the case of foreign bankingcompanies proportionate administrative (overhead) expenses of head- office allocable to Indian business. (f)ย ย ย Refund of any excess direct tax paid for previous accounting years and excess provision if any of previous accounting years, relating to bonus, depreciation or development rebate, if written back. (g)ย ย ย Cash subsidy, if any, given by the government or by anybody corporate established by any law for the time being in force or by any other agency through budgetary grants, whether given directly or through any agency for specified purposes and the proceeds of which are reserved for such purposes . Total of Item No. 6 โฆโฆ |
ย Rsโฆโฆโฆโฆโฆ.. | ย See foot-note (2)
See foot-note (2)
See foot-note (2)
See foot-note (3)
See foot-note (2)
See foot-note (2) |
|
7. | Gross profits for purposes of bonus (Item No. 5 minus Item No. 6) | Rsโฆโฆโฆโฆโฆ.. | ||
Explanation: In sub-item (b) of Item 3, “approved gratuity fund” has the same meaning assigned to it in clause (5) of section 2 of the Income Tax Act,1961. * Where the profit subject to taxation is shown in the Profit and Loss account and the provision made for taxes on income is shown, the actual provision for taxes on income shall be deducted from the profit. Foot-notes:- (1) If, and to the extent, charged to Profit and Loss Account. |
24. .Computation of gross profits under clause (b) of section 32.-The gross profits derived by an employer from an establishment in respect of the accounting year in a case other than banking company, be calculated in the manner specified in Schedule C.
Schedule C
COMPUTATION OF GROSS PROFITS |
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[(See rule 24] Accounting year endingโฆโฆโฆโฆโฆ |
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Item No. | Particulars | Amount. Of sub- Items | Amount. Of main Items | Remarks |
Rs. | Rs. | |||
1. |
Net ย profit ย as ย per ย profit ย and ย loss account |
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2. | Add back provision for :
(a) Bonus to employees (b) Depreciation. (c)ย Direct taxes, including the provision (if any), for previous accounting years (d)ย Development rebate / investment allowance / development allowance reserve. (e)ย Any other reserves Total of Item No.2โฆโฆ.. |
Rsโฆโฆโฆโฆโฆโฆ |
See foot-note (1)
See foot-note (1) |
|
3. |
Add back also : (a) Bonus paid to employees in respect of previous accounting years. (aa) The amount debited in respect of gratuity paid or payable to employees in excess of the aggregate of- (i)ย ย ย ย ย the amount, if any, paid to, or provided for payment to, an approved gratuity fund; and (ii)ย ย ย ย ย ย ย the amount actually paid to employees on their retirement or on termination of their employment for any reason. (b)ย ย ย Donations in excess of the amount admissible for income-tax . (c)ย ย ย ย ย Any annuity due, or commuted value of any annuity paid, under the provisions of section 280D of the Income Tax Act during the accounting year. (d)ย ย ย ย ย Capital expenditure (other than capital expenditure on scientific research which is allowed as a deduction under any law for the time being in force relating to direct taxes) and capital losses (other than losses on sale of capital assets on which depreciation has been allowed for income ย tax ย or ย agricultural ย income- tax.). (e) Losses of , or expenditure relating to, any business situated outside India. Total of Item No.3โฆโฆโฆ.. |
ย Rsโฆโฆโฆ.. |
See foot-note (1)
See foot-note (1) |
|
4. |
Add also income, profits or gains (if any) credited directly to reserves, other than- (i)ย ย ย capital receipts and capital profits (including profitsย onย the sale of capital assets on which depreciation has not been allowed for income-tax or agricultural income-tax); (ii)ย ย ย profits of, and receipts relating to, any business situated outside India; (iii)ย ย ย ย income of foreign concerns from investments outside India. Net total of Item No.4โฆโฆ.. |
Rsโฆโฆโฆโฆ.. |
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5. | Total of Item Nos. 1, 2, 3 and 4โฆ | Rsโฆโฆโฆโฆ.. | ||
6. |
Deduct : (a) Capital receipts and capital profits (other ย than ย profits ย on ย the ย sale ย of assets on which depreciation has been allowed for income-tax or agricultural income-tax). (b) Profits of, and receipts relating to, any business situated outside India. (c) Income of foreign concerns from investment outside India. (d) ย Expenditure ย or ย losses ย (if ย any ย ) debited ย directly ย to ย reserves, ย other than- (i) ย capital ย expenditure ย and ย capital losses (other than losses on sale of capital assets on which depreciation has not been allowed for income-tax ; or agricultural income-tax; (ii) ย losses ย of ย any ย business ย situated outside India. (e) In the case of foreign concerns proportionate administrative (overhead) ย expenses ย of ย head ย office allocable to Indian business. (f) Refund of any direct tax paid for previous accounting years and excess provision,ย ย ย ย ย ย ย ย ifย ย ย ย ย any,ย ย ย ย ย ย ofย ย ย ย ย previous accounting ย years ย relating ย to ย bonus, depreciation, taxation or development rebate or development allowance, if written back. (g) Cash subsidy, if any, given by the government or by any body corporate established by any law for the time being in force or by any other agency through budgetary grants, whether given directly or through any agency for specified purposes and the proceeds of which are reserved for such purposes. |
ย Rsโฆโฆโฆโฆโฆ |
See foot-note (2) See foot-note (2) See foot-note (2) See foot-note (3) See-foot-note (2) |
|
7. |
Gross Profits for purposes of bonus (Item No.5 minus Item No.6 ) |
Rsโฆโฆโฆโฆโฆ | ||
Explanation: In sub-item (aa) of Item 3, “approved gratuity fund” has the same meaning assigned to it in clause (5) of section 2 of the Income Tax Act, 1961. | ||||
Foot-notes:-
(1) If, and to the extent, charged to Profit and Loss Account. |
25. Deduction of further sums under clause (c) of section 34.-The further sums as are specified in respect of the employer in Schedule D shall be deducted from the gross profit as prior charges under clause (c) of section 34.
Schedule D
[See rule 25]
Item No. | Category of employer | Further sums to be deducted | ||
(1) |
(2) |
(3) |
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1. | Company, other than a banking company. | (i) The dividends payable on its preference share capital for the accounting year calculated at the actual rate at which such dividends are payable;
(ii) 8.5 percent of its paid up equity share capital as at the commencement of the accounting year; (iii) 6 percent of its reserves shown in its balance sheet as at the commencement of the accounting year, including any profits carried forward from the previous accounting year : Provided that where the employer is a foreign company within the meaning of section 2 (42) of the Companies Act ,2013 (18 of 2013) , the total amount to be deducted under this item shall be 8.5 percent on the aggregate of the value of the net fixed assets and the current assets of the company in India after deducting the amount of its current liabilities (other than any amount shown as payable by the company to its Head Office whether towards any advance made by the Head Office or otherwise or any interest paid by the company to its Head Office ) in India. |
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2. | Banking company | (i) The dividends payable on its preference share capital for the accounting year calculated at the rate at which such dividends are payable ;
(ii) 7.5 per cent of its paid up equity share capital as at the commencement of the accounting year ; (iii) 5 per cent of its reserves shown in its balance sheet as at the commencement of the accounting year, including any profits carried forward from the previous accounting year; (iv) any sum which, in respect of the accounting year, is transferred by it- (a) to a reserve fund under sub-section (1) of section 17 of the Banking Regulation Act, 1949 (10 of 1949 ); or (b) to any reserves in India in pursuance of any direction or advice given by the Reserve Bank of India, whichever is higher: Provided that where the banking company is a foreign company within the meaning of section 2 (42) of the Companies Act , 2013 (18 of 2013 ), the amount to be deducted under this item shall be the aggregate of- (i) the dividends payable to its preference shareholders for the accounting year at the rate at which such dividends are payable on such amount as bears the same proportion to its total preference share capital as its total working funds in India bear to its total world working funds; (ii) 7.5 per cent of such amount as bears the same proportion to its total paid up equity share capital as its total working funds in India bear to its total working funds. (iii) 5 per cent of such amount as bears the same proportion to its total disclosed reserves as its total working funds in India bear to its total world working funds; (iv) any sum which, in respect of the accounting year, is deposited by it with the Reserve Bank of India under sub-clause (ii) of clause (b) of sub-section (2) of section 11 of the Banking Regulation Act, 1949 (10 of 1949) , not exceeding the amount required under the aforesaid provision to be so deposited.] |
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3. | Corporation |
(i) 8.5 per cent of its paid up capital as at the commencement of the accounting year; (ii) 6 per cent of its reserves, if any, shown in its balance sheet as at the commencement of the accounting year, including any profits carried forward from the previous accounting year. |
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4. | Co-operative society |
(i) 8.5 per cent of the capital invested by such society in its establishment as evidenced from its books of accounts at the commencement of the accounting year; |
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(ii) such sums as has been carried forward in respect of the accounting year to a reserve fund under any law relating to co-operative societies for the time being in force. |
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5. | Any other employer not falling under any of the aforesaid categories |
8.5 per cent of the capital invested by him in his establishment as evidenced from his books of accounts at the commencement of the accounting year: Provided that where such employer is a person to whom Chapter XXII-A of the income Tax Act applies , the annuity deposit payable by him under the provisions of that Chapter during the accounting year shall also be deducted: Provided further that where such employer is a firm, an amount equal to 25 per cent of the gross profits derived by it from the establishment in respect of the accounting year after deducting depreciation in accordance with the provisions of clause (a) of section 6 by way of remuneration to all the partners taking part in the conduct of business of the establishment shall also be deducted, but where the partnership agreement, whether oral or written, provides for the payment of remuneration to any such partner, and โ (i)ย ย ย the total remuneration payable to all such partners is less than the said 25 per cent the amount payable, subject to a maximum of forty-eight thousand rupees to each such partner; or (ii)ย ย ย ย the total remuneration payable to all such partners is higher than the said 25 per cent , such percentage, or a sum calculated at the rate of forty โ eight thousand rupees to each such partner, whichever is less , shall be deducted under this proviso: Provided ย also that ย where ย such ย employer ย is ย an ย individual ย or ย a ย Hindu Undivided Family – (i)ย ย ย ย an amount equal to 25 per cent of theย gross profits derived by such employer from the establishment in respect of the accounting year after deducting depreciation in accordance with the provisions of clause (a) of section 34; or (ii)ย ย ย forty-eight thousand rupees, (iii)ย whichever is less by way of remuneration to such employer, shall also be deducted. |
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Explanation : The expression “reserves” occurring in column (3) against Item Nos. 1(iii), 2(iii) and 3(ii) shall not include any amount set apart for the purpose of- |
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(i) payment of any direct tax which, according to the balance-sheet, would be payable; (ii) meeting any depreciation admissible in accordance with the provisions of clause (a) of section 34; (iii) payment of dividends which have been declared, but shall include,- (a) any amount, over and above the amount referred to in clause-(i) of this Explanation, set apart as specific reserve for the purpose of payment of any direct tax; and (b) any amount set apart for meeting any depreciation in excess of the amount admissible in accordance with the provisions of clause (a) of section 34. |
26. Manner of carrying forward under sub-section (1) of section 36.– 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 illustrated in Schedule A.
Schedule A
[See rules 21, 22, 26 and 27]
In this Schedule, the total amount of bonus equal to 8.33 per cent of the annual salary or wage payable to all the employees is assumed to be Rs. 1,04,167. Accordingly, the maximum bonus to which all the employees are entitled to be paid (twenty per cent of the annual salary or wage of all the employees) would be Rs. 2,50,000.
Year | Amount equal to sixty per cent. or sixty-seven per cent., as the case may be, of available surplus allocable as bonus | Amountย ย ย ย ย ย ย payableย ย ย ย ย ย ย ย as bonus | Set on or Set off ofย the year carried forward | Total set on or set off carried forward | |
1 | 2 | 3 | 4 | 5 | 6 |
Rs. | Rs. | Rs. | Rs. | Of (year) | |
1. | 1,04,167 | 1,04,167** | Nil | Nil | |
2. | 6,35,000 | 2,50,000* | Set on 2,50,000* | Set on 2,50,000* |
(2) |
3. | 2,20,000 | 2,50,000* (inclusive of 30,000 from year-2) | Nil | Set on 2,20,000 |
(2) |
4. | 3,75,000 | 2,50,000* | Set on | Set on |
(2) |
1,25,000 | 2,20,000 | ||||
1,25,000 | (4) | ||||
5. | 1,40,000 | 2,50,000* (inclusive of | Nil | Set on |
(2) |
1,10,000 from year-2) | 1,10,000 | ||||
1,25,000 | (4) | ||||
6. | 3,10,000 | 2,50,000* | Set on | Set on |
(2) |
60,000 | Nil + | ||||
1,25,000 | (4) | ||||
60,000 | (6) | ||||
7. | 1,00,000 | 2,50,000* (inclusive of 1,25,000 from year-4 and 25,000 from year- 6) | Nil | Set on 35,000 |
(6) |
8. | Nil | 1,04,167**(inclusive of 35,000 from year-6) | Set off | Set off | |
(due to loss) | 69,167 | 69,167 | (8) | ||
9. | 10,000 | 1,04,167** | Set off 94,167 | Set off 69,167
94,167 |
(8) (9) |
10. | 2,15,000 | 1,04,167** (after setting off 69,167 from year-8ย ย ย ย ย ย ย ย ย ย ย ย ย andย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย 41,666 from year-9) | Nil | Set off 52,501 |
(9) |
Notes:-
* Maximum.
+ The balance of Rs. 1,10,000 set on from year-2 lapses.
** Minimum
27. Manner of carrying forward under sub-section (2) of section 36.– 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 rule 26 which could be utilized 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 illustrated in Schedule A.
COMMENTS