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Contents PAYMENT OF BONUS ACT, 1965 PAGE
1.
Short title, extent and application
1
2.
Definitions
2
3.
Establishments to include departments, undertakings and branches
9
4.
Computation of gross profits
9
5.
Computation of available surplus
10
6.
Sums deductible from gross profits
11
7.
Calculation of direct tax payable by the employer
14
8.
Eligibility for bonus
15
9.
Disqualification for bonus
15
10.
Payment of minimum bonus
15
11.
Payment of maximum bonus
17
12.
Calculation of bonus with respect to certain employees
18
13.
Proportionate reduction in bonus in certain cases
19
14.
Computation of number of working days
19
15.
Set on and set off of allocable surplus
19
16.
Special provisions with respect to certain establishments
20
17.
Adjustment of customary or interim bonus against bonus payable under the Act
22
18.
Deduction of certain amounts from bonus payable under the Act
23
19.
Time-limit for payment of bonus
23
20.
Application of Act to establishments in public sector in certain cases
25
21.
Recovery of bonus due from an employer
26
I-5
CONTENTS
I-6 PAGE
22.
Reference of disputes under the Act
26
23.
Presumption about accuracy of balance-sheet and profit and loss account of corporations and companies
26
24.
Audited accounts of banking companies not to be questioned
27
25.
Audit of accounts of employers, not being corporations or companies
28
26.
Maintenance of registers, records, etc.
28
27.
Inspectors
28
28.
Penalty
29
29.
Offences by companies
30
30.
Cognizance of offences
31
31.
Protection of action taken under the Act
32
31A.
Special provision with respect to payment of bonus linked with production or productivity
33
32.
Act not to apply to certain classes of employees
33
33.
[Omitted by the Payment of Bonus (Amendment) Act, 1976, w.r.e.f. 25-9-1975]
36
34.
Effect of laws and agreements inconsistent with the Act
36
35.
Savings
37
36.
Power of exemption
37
37.
[Omitted by the Payment of Bonus (Amendment) Act, 1976, w.r.e.f. 25-9-1975]
38
38.
Power to make rules
38
39.
Application of certain laws not barred
38
40.
Repeal and saving
38
FIRST SCHEDULE
39
SECOND SCHEDULE
43
THIRD SCHEDULE
46
FOURTH SCHEDULE
49
SUBJECT INDEX
51
PAYMENT OF BONUS RULES, 1975 1. Short title and commencement
55
2. Definitions
55
3. Authority for granting permission for change of accounting year
55
I-7
CONTENTS PAGE
4. Maintenance of registers
55
5. Annual return
56
FORM A: Computation of the Allocable Surplus under section 2(4)
56
FORM B: Set on and Set off of Allocable Surplus under section 15
57
FORM C: Bonus Paid to Employees for the Accounting Year
57
FORM D: Unified Annual Return Form
58
Payment of Bonus Act, 1965 [SHALL BE REPEALED BY CODE ON WAGES, 2019, WITH EFFECT FROM A DATE YET TO BE NOTIFIED]
[21 OF 1965]* 1
[An Act to provide for the payment of bonus to persons employed in certain establishments on the basis of profits or on the basis of production or productivity and for matters connected therewith] BE it enacted by Parliament in the Sixteenth Year of the Republic of India as follows:—
Short title, extent and application. 1. (1) This Act may be called the Payment of Bonus Act, 1965. (2) It extends to the whole of India 2[***]. (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 day during an accounting year: 3
[Provided that the appropriate Government may, after giving not less than two months’ notice of its intention so to do, by notification in the Official Gazette, apply the provisions of this Act with effect from such accounting year as may be specified in the notification, to any establishment or class of establishments [including an establishment being a factory within the meaning of sub-clause (ii) of clause (m) of section 2 of the Factories Act, 1948 (63 of 1948)], employing such number of persons less than twenty as may be specified in the notification ; so, however, that the number of persons so specified 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 factory or other establishment to which this Act applies, have effect in respect of the accounting year commencing on any day in the year 1964 and in respect of every subsequent accounting year:
*Dated 25-9-1965. 1. Substituted for “An Act to provide for the payment of bonus to persons employed in certain establishments and for matters connected therewith” by the Payment of Bonus (Amendment) Act, 1976, w.r.e.f. 25-9-1975. 2. Words “except the State of Jammu and Kashmir” omitted by the Central Labour Laws (Extension to Jammu and Kashmir) Act, 1970, w.e.f. 1-9-1971. 3. Inserted by the Payment of Bonus (Amendment) Act, 1976, w.r.e.f. 25-9-1975.
1
S. 2
PAYMENT OF BONUS ACT, 1965
2
4
[Provided that in relation to the State of Jammu and Kashmir, the reference to the accounting year commencing on any day in the year 1964 and every subsequent accounting year shall be construed as reference to the accounting year commencing on any day in the year 1968 and every subsequent accounting year:] 5
[Provided further that when the provisions of this Act have been made applicable to any establishment or class of establishments by the issue of a notification under the proviso to sub-section (3), the reference to the accounting year commencing on any day in the year 1964 and every subsequent accounting year or, as the case may be, the reference to the accounting year commencing on any day in the year 1968 and every subsequent accounting year, shall, in relation to such establishment or class of establishments, be construed as a reference to the accounting year specified in such notification and every subsequent accounting year.]
(5) An establishment to which this Act applies 6[* * *] shall continue to be governed by this Act notwithstanding that the number of persons employed therein falls below twenty 5[or, as the case may be, the number specified in the notification issued under the proviso to sub-section (3)]. Definitions. 2. 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 and account 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;
4. Inserted by the Central Labour Laws (Extension to Jammu and Kashmir) Act, 1970, w.e.f. 1-9-1971. 5. Inserted by the Payment of Bonus (Amendment) Act, 1976, w.r.e.f. 25-9-1975. 6. Words “under clause (b) of sub-section (3)” omitted, ibid.
3
PAYMENT OF BONUS ACT, 1965
S. 2
(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 the levy of tax on agricultural income; (4) “allocable surplus” means— (a) in relation to an employer, being a company 7[(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, sixty-seven per cent of the available surplus in an accounting year; (b) in any other case, sixty per cent of such available surplus; 8
[* * *]
(5) “appropriate Government” means— (i) in relation to an establishment in respect of which the appropriate Government under the Industrial Disputes Act, 1947 (14 of 1947), is the Central Government, the Central Government; (ii) in relation to any other establishment, the Government of the State in which that other establishment 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 any question relating thereto by any Labour Court, Industrial Tribunal, or National Tribunal constituted under the Industrial Disputes Act, 1947 (14 of 1947), or by any other authority constituted under any corresponding law relating to investigation and settlement of industrial disputes in force in a State and includes an arbitration award made under section 10A of that Act or under that law; (8) “banking company” means a banking company as defined in section 5 of the Banking Companies Act, 1949 (10 of 1949), and includes the State Bank of India, any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959(38of 1959), 9[any corresponding new bank specified in the First Schedule to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), 10[any corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980),] any co-operative Bank as defined in clause (bii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934)], and any other banking institution which may be notified in this behalf by the Central Government; 7. Inserted by the Payment of Bonus (Second Amendment) Act, 1980, w.r.e.f. 21-8-1980. Earlier these words were omitted by the Payment of Bonus (Amendment) Act, 1976, w.r.e.f. 25-9-1975. 8. Words “and includes any amount treated as such under sub-section (2) of section 34,” omitted by the Payment of Bonus (Amendment) Act, 1976, w.r.e.f. 25-9-1975. 9. Inserted, ibid. 10. Inserted by the Payment of Bonus (Second Amendment) Act, 1980, w.r.e.f. 21-8-1980.
Payment of Bonus Act 1965 with Payment of Bonus Rules 1975 – Bare Act with Section Notes AUTHOR : PUBLISHER : DATE OF PUBLICATION : EDITION : : ISBN NO No. of Pages : : BINDING TYPE
Taxmann’s Editorial Board Taxmann December 2025 2026 Edition 9789371262897 68 Paperback
Rs. 125 DESCRIPTION Payment of Bonus Act, 1965, with the Payment of Bonus Rules, 1975 [Bare Act with Section Notes] by Taxmann is an authoritative and up-to-date statutory compilation of the law governing the payment of bonus to employees in India. The book consolidates the complete text of the principal Act, allied Rules, Schedules, and prescribed Forms, supported by well-structured section-wise notes. It serves as a reliable reference for understanding, interpreting, and applying the bonus payment framework across industrial, commercial, and service establishments, covering key aspects such as eligibility, computation, payment, compliance, enforcement, and dispute resolution under the Act. This book is intended for the following audience: • Legal Practitioners & Judges • HR Managers & Compliance Officers • Employers, Companies & Business Owners • Chartered Accountants & Auditors • Trade Unions & Employee Representatives • Law Students & Academicians • Researchers & Policy Analysts The Present Publication is the 2026 Edition, covering the amended and updated text of the Payment of Bonus Act [Act No. 21 of 1965] and Rules, with the following noteworthy features: • [Authentic & Updated Text] Verbatim and fully amended text of the Act and Rules, updated with the law as applicable up to date • [Pre-amendment Provisions] Earlier versions of provisions included through amendment footnotes for historical and transitional clarity • [Section-wise Notes] Concise explanatory notes highlighting legislative intent, statutory scope, and practical application • [Editorial Explanations] Structured editorial guidance to assist in applying computation and compliance provisions • [Rules, Schedules & Forms] Complete coverage of the Payment of Bonus Rules 1975, including statutory registers, computation formats, set-on/set-off illustrations, and the Unified Annual Return • [Judicial References] Select Supreme Court and High Court rulings referenced for interpretative clarity • [Practice-oriented] Designed for practical use by legal professionals, HR teams, compliance managers, and consultants • [User-friendly Layout] Clear typography, professional presentation, and durable binding for regular reference • [Quick Reference Tools] Detailed contents and a comprehensive subject index for easy navigation
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