HITESH Parde
Hello,
Good Afternoon!!!!

My total salary is about INR 54,000/- and out of this my basic salary is INR 25,000/- p.m. My company wants to pay bonus to all employees but as per the Payment of Bonus Act we escaped as our basic salary is more than 21000/-. Please advise.

From India, undefined
PROFESSIONALS AND BUSINESSES PARTICIPATING IN DISCUSSION
Madhu.T.K
Industrial Relations And Labour Laws
Saswatabanerjee
Partner - Risk Management
Suresh2511
Labour Consultant
KK!HR
Management Consultancy
HITESH Parde
Chartered Accountant

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Madhu.T.K
3769

If the company is ready to pay bonus to all employees irrespective of the salary ceiling fixed under the Act for entitlement, what is the issue? You can pay it. There is nothing wrong in paying bonus to employees drawing salary of more than Rs 21000. Some companies pay it as ex gratia. In my opinion there is no need to pay it under separate head but you can pay it as Bonus itself because there is no such compulsion even under the Income Tax Act that you should not pay bonus to employees who get salary above Rs 21000.
From India, Kannur
KK!HR
1344

Profit sharing Bonus can be of two different types, one is the statutory bonus as per the Payment of Bonus Act 1965 and the other is the non-statutory payment which is known by different names like Customary Bonus, Spl. Incentive, Festival Bonus, Diwali Bonus etc. Companies have evolved schemes to share the profit amongst all employees including those not covered too.
From India, Mumbai
suresh2511
239

The company can pay a maximum of INR 50,400 as a 20% Bonus. Anything above that amount is taxable for the company. However, any amount in excess of 50400 can be paid as ex-gratia, or the entire amount can be paid as ex-gratia, thereby avoiding the 20% cap.

Suresh

From India, Thane
Madhu.T.K
3769

Dear Suresh, can you please state which section of the Payment of Bonus Act or Income Tax Act says that more than 20% of (gross) salary is taxable? I have seen such a provision under Payment of Gratuity Act that any amount received by way of gratuity over and above Rs 20 lakhs taxable for the individual. Bonus being a condition of service, is an expenditure of an employer and it is like any payment made by him. I doubt if the payment over 20% of bonus qualifying salary will be disallowed by the Income tax department. If it is to be disallowed, then the entire amount exceeding 20% of minimum wages or Rs 7000 whichever is higher which should be disallowed because under the Payment of Bonus Act the rate of bonus is arrived on the basis of allocable surplus etc and I am afraid any organisation will go through such processes when the actual practice is either to declare a percentage of earnings by way of salary as bonus or arrive at a rate after negotiating with the trade unions.

For Income tax purpose, again, the expense is allowed even if it is genuine and if not genuine it will be disallowed even if you call it with different name, like ex gratia for bonus. Therefore, if the employer wishes to pay bonus, pay it. He can call it bonus or exgratia, or whatever he things fit.

From India, Kannur
saswatabanerjee
2324

Suresh

There is no provision under income tax act that says bonus higher than a specified amount is taxable for the company. Amounts paid to an employee is a genuine expense for the company and is always considered as valid expenditure.

From India, Mumbai
nageshdeshmane
Bonus Act insist to pay Bonus upto basic Salary Rs. 21000/- per month. Management can pay it even for employees drawing basic salary exceeding Rs.21000/- per month. Management can term that amount as they wish.
From India, Pune

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