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A bonus is a kind of incentive or reward by an employer to the employees in addition to their salary or basic pay. Bonus is generally paid to employees based on the exceptional job performance of the employees, however, payment of Bonus is also governed by the statute under Payment of Bonus Act, 1965.
Payment of Bonus Act prescribes the regulations under which employers are entitled to pay bonusses to their employees.
Applicability of Payment of Bonus Act, 1965: Payment of Bonus Act is applicable to
Employees eligible under Payment of Bonus Act: Employees meeting both the following conditions are entitled to receive Bonus from their employer as prescribed under the Act:
Calculation of Bonus: Ceiling limit of Rs. 7,000 per month has been prescribed under the law, whereby the Bonus shall be computed at the prescribed ceiling limit or minimum wages notified under Minimum Wage Rules of respective state, whichever is higher.
The bonus is computed at 8.33% of the above-mentioned ceiling limit or minimum wages notified, whichever is higher.
Minimum and Maximum Bonus Payable:
Minimum Bonus is 8.33% of the prescribed ceiling limit as mentioned above.
Maximum Bonus is 20% of the prescribed ceiling limit as mentioned above.
Timeline for payment of Bonus: The bonus under the act is payable within 8 months from the close of the accounting year.
Filing of Return: Annual Return in Form-D is required to be filed as prescribed on or before 1st February of each year.
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