The Payment of Bonus Act, 1965

(1) This Act may be called the Payment of BonusAct, 1965. (2) It extends to the whole of India 1***. (3) Save as otherwise provided in this Act, it shall apply to-- (a) every factory; and (b) every other establishment in which twenty or more persons are employed on any dayduring an accounting year: 2[Provided that the appropriate Government may, after giving not less than two months' notice ofits intention so to do, by notification in the Official Gazette, apply the provisions of this Act witheffect from such accounting year as may be specified in the notification, to any establishment or classof establishments [including an establishment being a factory within the meaning of sub-clause (ii) ofclause (m) of section 2 of the Factories Act, 1948 (63 of 1948)] employing such number of personsless than twenty as may be specified in the notification; so, however, that the number of persons sospecified shall in no case be less than ten.] (4) Save as otherwise provided in this Act, the provisions of this Act shall, in relation to a factoryor other establishment to which this Act applies, have effect in respect of the accounting yearcommencing on any day in the year 1964 and in respect of every subsequent accounting year: 3[Provided that in relation to the State of Jammu and Kashmir*, the reference to the accountingyear commencing on any day in the year 1964 and every subsequent accounting year shall beconstrued as reference to the accounting year commencing on any day in the year 1968 and everysubsequent accounting year:] 4[Provided further that when the provisions of this Act have been made applicable to anyestablishment or class of establishments by the issue of a notification under the proviso tosub-section (3), the reference to the accounting year commencing on any day in the year 1964 andevery subsequent accounting year or, as the case may be, the reference to the accounting yearcommencing on any day in the year 1968 and every subsequent accounting year, shall, in relation tosuch establishment or class of establishments, be construed as a reference to the accounting yearspecified in such notification and every subsequent accounting year.] (5) An establishment to which this Act applies 5*** shall continue to be governed by this Actnotwithstanding that the number of person employed therein falls below twenty 6[or, as the case maybe, the number specified in the notification issued under the proviso to sub-section (3)].

In this Act, unless the context otherwise requires,-- (1) "accounting year" means-- (i) in relation to a corporation, the year ending on the day on which the books andaccounts 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 ofthe company laid before it in annual general meeting is made up, whether that period is a yearor 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 closedand balanced on any day other than the 31st day of March, then, at the option of theemployer, 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 thissub-clause shall not again be exercised except with the previous permission in writing of theprescribed authority and upon such conditions as that authority may think fit; (2) "agricultural income" shall have the same meaning as in the Income-tax Act; (3) "agricultural income-tax law" means any law for the time being in force relating to thelevy of tax on agricultural income; (4) "allocable surplus" means-- (a) in relation to an employer, being a company 1[(other than a banking company)] whichhas not made the arrangements prescribed under the Income-tax Act for the declaration andpayment within India of the dividends payable out of its profits in accordance with theprovisions of section 194 of that Act, sixty-seven per cent. of the available surplus in anaccounting year; (b) in any other case, sixty per cent. of such available surplus; 2* * * * * (5) "appropriate Government" means-- (i) in relation to an establishment in respect of which the appropriate Government underthe Industrial Disputes Act,1947 (14 of 1947), is the Central Government, the CentralGovernment; (ii) in relation to any other establishment, the Government of the State in which that otherestablishment is situate; (6) available surplus means the available surplus computed under section 5; (7) "award" means an interim or a final determination of any industrial dispute or of anyquestion relating thereto by any Labour Court, Industrial Tribunal or National Tribunalconstituted under the Industrial Disputes Act, 1947 (14 of 1947), or by any other authorityconstituted under any corresponding law relating to investigation and settlement of industrialdisputes in force in a State and includes an arbitration award made under section 10A of that Actor under that law; (8) "banking company" means a banking company as defined in section 5 of the BankingCompanies Act, 1949 (10 of 1949), and includes the State Bank of India, any subsidiary bank asdefined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), 3[anycorresponding new bank specified in the First Schedule to the Banking Companies (Acquisitionand Transfer of Undertakings) Act, 1970 (5 of 1970), 1[any corresponding new bank constitutedunder section 3 of the Banking Companies (Acquisition and Transfer of Undertakings)Act, 1980 (40 of 1980),] any co-operative bank as defined in clause (vii) of section 2 of theReserve bank of India Act, 1934 (2 of 1934),] and any other banking institution which may benotified in this behalf by the Central Government; (9) "company" means any company as defined is section 3 of the CompaniesAct, 1956 (1 of 1956), and includes a foreign company within the meaning of section 591 of thatAct; (10) "co-operative society" means a society registered or deemed to be registered under theCo-operative Societies Act, 1912 (2 of 1912), or any other law for the time being in force in anyState relating to co-operating societies; (11) "corporation" means any body corporate established by or under any Central, Provincialor State Act but does not include a company or a co-operative society; (12) "direct tax" means-- (a) any lax chargeable under-- (i) the Income-tax Act; (ii) the Super Profits Tax Act, 1963 (14 of 1963); (iii) the Companies (Profits) Surtax Act, 1964 (7 of 1964); (iv) the agricultural income-tax law; and (b) any other tax which, having regard to its nature or incidence, may be declared by theCentral Government, by notification in the Official Gazette, to be a direct tax for the purposesof this Act; (13) "employee" means any person (other than an apprentice) employed on a salary or wagenot exceeding 4[twenty-one thousand rupees] per mensem in any industry to do any skilled orunskilled manual, supervisory, managerial, administrative, technical or clerical work for hire orreward, whether the terms of employment be express or implied; (14) "employer" includes-- (i) in relation to an establishment which is a factory, the owner or occupier of the factory,including the agent of such owner or occupier, the legal representative of a deceased owner oroccupier and where a person has been named as a manager of the factory under clause (f) ofsub-section (1) of section 7 of the Factories Act, 1948 (63 of 1948), the person so named; and (ii) in relation to any other establishment, the person who, or the authority which, has theultimate control over the affairs of the establishment and where the said affairs are entrustedto a manager, managing director or managing agent, such manager, managing director ormanaging agent; (15) "establishment in private sector" means any establishment other than an establishment inpublic sector; (16) "establishment in public sector" means an establishment owned, controlled or managedby-- (a) a Government company as defined in section 617 of the CompaniesAct, 1956 (1 of 1956); (b) a corporation in which not less than forty per cent. of its capital is held (whethersingly or 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; (17) "factory" shall have the same meaning as in clause (m) of section 2 of the FactoriesAct, 1948 (63 of 1948); (18) "gross profits" means the gross profits calculated under section 4; (19) "Income-tax Act" means the Income-tax Act, 1961 (43 of 1961); (20) "prescribed" means prescribed by rules made under this Act; (21)" salary or wage" means all remuneration (other than remuneration in respect of overtimework) capable of being expressed in terms of money, which would, if the terms ofemployment, express or implied, were fulfilled, be payable to an employee in respect of hisemployment or of work done in such employment and includes dearness allowance (that is to say,all cash payments, by whatever name called, paid to an employee on account of a rise in the costof living), but does not include-- (i) any other allowance which the employee is for the time being entitled to; (ii) the value of any house accommodation or of supply of light, water, medicalattendance or other amenity or of any service or of any concessional supply of foodgrains orother articles; (iii) any travelling concession; (iv) any bonus (including incentive, production and attendance bonus); (v) any contribution paid or payable by the employer to any pension fund or providentfund or for the benefit of the employee under any law for the time being in force; (vi) any retrenchment compensation or any gratuity or other retirement benefit payable tothe employee or any ex gratia payment made to him; (vii) any commission payable to the employee. Explanation.--Where an employee is given in lieu of the whole or part of the salary or wagepayable to him, free food allowance or free food by his employer, such food allowance or thevalue of such food shall, for the purpose of this clause, be deemed to from part of the salary orwage of such employee; (22) words and expressions used but not defined in this Act and defined in the IndustrialDisputes Act, 1947 (14 of 1947), shall have the meanings respectively assigned to them in thatAct.

Where anestablishment consists of different department or undertakings or has branches, whether situated inthe same place or in different places, all such departments or undertakings or branches shall be treatedas parts of the same establishment for the purpose of computation of bonus under this Act: Provided that where for any accounting year a separate balance-sheet and profit and loss accountare prepared and maintained in respect of any such department or undertaking or branch, then, suchdepartment or undertaking or branch shall be treated as a separate establishment for the purpose ofcomputation of bonus, under this Act for that year, unless such department or undertaking or branchwas, immediately before the commencement of that accounting year treated as part of theestablishment for the purpose of computation of bonus.

1[4. Computation of gross profits.--The gross profits derived by an employer from anestablishment in respect of any accounting year shall-- (a) in the case of a banking company, be calculated in the manner specified in the FirstSchedule; (b) in any other case, be calculated in the manner specified in the Second Schedule.]

The available surplus in respect of any accounting yearshall be the gross profits for that year after deducting therefrom the sums referred to in section 6: 1[Provided that the available surplus in respect of the accounting year commencing on any day inthe year 1968 and in respect of every subsequent accounting year shall be the aggregate of-- (a) the gross profits for that accounting year after deducting therefrom the sums referred to insection 6; and (b) an amount equal to the difference between-- (i) the direct tax, calculated in accordance with the provisions of section 7, in respect ofan amount equal to the gross profits of the employer for the immediately precedingaccounting year; and (ii) the direct tax, calculated in accordance with the provisions of section 7, in respect ofan amount equal to the gross profits of the employer for such preceding accounting year afterdeducting therefrom the amount of bonus which the employer has paid or is liable to pay tohis employees in accordance with the provisions of this Act for that year.]