CHAPTER IV

PAYMENT OF BONUS

26. (1) There shall be paid to every employee, drawing wages not exceeding such

amount per mensem, as determined by notification, by the appropriate Government, by his

employer, who has put in at least thirty days work in an accounting year, an annual minimum

bonus calculated at the rate of eight and one-third per cent. of the wages earned by the

employee or one hundred rupees, whichever is higher whether or not the employer has any

allocable surplus during the previous accounting year.

(2) For the purpose of calculation of the bonus where the wages of the employee

exceeds such amount per mensem, as determined by notification by the appropriate

Government, the bonus payable to such employee under sub-sections (1) and (3) shall be

calculated as if his wage were such amount, so determined by the appropriate Government

or the minimum wage fixed by the appropriate Government, whichever is higher.

(3) Where in respect of any accounting year referred to in sub-section (1), the allocable

surplus exceeds the amount of minimum bonus payable to the employees under that

sub-section, the employer shall, in lieu of such minimum bonus, be bound to pay to every

employee in respect of that accounting year, bonus which shall be an amount in proportion

to the wages earned by the employee during the accounting year, subject to a maximum of

twenty per cent. of such wages.

(4) In computing the allocable surplus under this section, the amount set on or the

amount set off under the provisions of section 36 shall be taken into account in accordance

with the provisions of that section.

(5) Any demand for bonus in excess of the bonus referred to in sub-section (1), either

on the basis of production or productivity in an accounting year for which the bonus is

payable shall be determined by an agreement or settlement between the employer and the

employees, subject to the condition that the total bonus including the annual minimum

bonus referred to in sub-section (1) shall not exceed twenty per cent. of the wages earned

by the employee in the accounting year.

(6) In the first five accounting years following the accounting year in which the

employer sells the goods produced or manufactured by him or renders services, as the case

may be, from such establishment, bonus shall be payable only in respect of the accounting

year in which the employer derives profit from such establishment and such bonus shall be

calculated in accordance with the provisions of this Code in relation to that year, but

without applying the provisions of section 36.

(7) For the sixth and seventh accounting years following the accounting year in

which the employer sells the goods produced or manufactured by him or renders services,

as the case may be, from such establishment, the provisions of section 36 shall apply

subject to the following modifications, namely:—

(i) for the sixth accounting year set on or set off, as the case may be, shall be

made, in the manner as may be prescribed by the Central Government, 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;

(ii) for the seventh accounting year set on or set off, as the case may be, shall

be made, in the manner as may be prescribed by the Central Government, 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.

(8) From the eighth accounting year following the accounting year in which the

employer sells the goods produced or manufactured by him or renders services, as the case

may be, from such establishment, the provisions of section 36 shall apply in relation to such

establishment as they apply in relation to any other establishment.

Explanation 1.––For the purpose of sub-section (6), an employer shall not be deemed

to have derived profit in any accounting year, unless––

(a) he has made provision for depreciation of that year to which he is entitled

under the Income-tax Act or, as the case may be, under the agricultural income tax

law; and

(b) the arrears of such depreciation and losses incurred by him in respect of the

establishment for the previous accounting years have been fully set off against his

profits.

Explanation 2.––For the purposes of sub-sections (6), (7) and (8), sale of the goods

produced or manufactured during the course of the trial running of any factory or of the

prospecting stage of any mine or an oil-field shall not be taken into consideration and where

any question arises with regard to such production or manufacture, the appropriate

Government may, after giving the parties a reasonable opportunity of representing the case,

decide upon the issue.

(9) The provisions of sub-sections (6), (7) and (8) shall, so far as may be, apply to new

departments or undertakings or branches set up by existing establishments.