Bonus Calculation Confusion: Is It Based on the Calendar Year or Financial Year?

Dear All, kindly guide me on what the period for calculation of the bonus is - is it the calendar year or the financial year?

Regards,
kscc

How much time can an employer take to pay the bonus? I think it is 8 months.

Regards.

Yes, it is within 8 months. Read the relevant section of the Payment of Bonus Act:

(a) Where there is a dispute regarding payment of bonus pending before any authority under Sec.22, within a month from the date on which the award becomes enforceable or the settlement comes into operation, in respect of such dispute;

(b) In any other case, within a period of eight months from the close of the accounting year:

Regards,
Pon

As a bonus is to be calculated on the profit/loss (allocable surplus) of the company, it is based on the financial year and not the calendar year. The bonus must be paid within a period of eight months from the close of the accounting year.

Bonus Payment Exemption for New Establishments

Any establishment that is newly set up is exempt from paying bonuses to its employees in the first five years. However, if the employer earns profits within the first five years, then they are required to pay bonuses to their employees.

Bonus Payment Timeline According to the Bonus Act

Per the Bonus Act, bonuses shall be paid within 8 months after the completion of the financial year.

Regards,
Naran Vadher

The bonus needs to be released within 8 months from the date of closure of the financials of that organization.

Regards,
Prakash

Please refer to section 16 of the Payment of Bonus Act, 1965 for your query. Regarding your question on how long any new establishment can be exempt from paying the same, please let me know.

Regards,
R.N. Khola
(M) [Phone Number Removed For Privacy Reasons]

Bonus Exemption and Payment Guidelines for New Establishments

Any establishment, not any branch or expansion, which is newly set up is exempted from paying bonuses to its employees in the first five years. The employer can be exempted for the next two years if they are not gaining profit. However, if they gain profit in the first five years, they have to pay bonuses to their employees. After seven years, if the employer does not gain any profit, they are bound to pay a minimum bonus, i.e., 8.33%, to their employees. Bonuses have to be distributed to employees within eight months from the closing of the financial year.

Bonus Disbursement Timing

The bonus may be disbursed before the end of December after the close of the financial year. However, as per the Income Tax Act, any expenses debited or provision made in the profit and loss account of the previous year should be disbursed before September of the year to be allowed; otherwise, it will be disallowed by the IT Act.

Regards,
Murugan B
Madurai

Bonus Calculation Period

The period for the calculation of the bonus starts from 1st April to 31st March of every year.

Thanks & Regards,

Yogesh Kulkarni
Assistant Manager – HR

Contact No.: [Phone Number Removed For Privacy Reasons]
Email ID: [Email Removed For Privacy Reasons]

TIME-LIMIT FOR PAYMENT OF BONUS

Please refer to Sec 19 of the Payment of Bonus Act, which provides that all amounts payable to an employee by way of bonus under the Act shall be paid in cash by his employer:

- (a) Where there is a dispute regarding payment of bonus pending before any authority under Sec 22, within a month from the date on which the award becomes enforceable or the settlement comes into operation in respect of such dispute.

- (b) In any other case, within eight months from the close of the accounting year.

Provided that the appropriate Government or such authority, as the case may specify in this behalf, may, upon an application made to it by the employer and for sufficient reasons, by order, extend the said period of eight months to such further period or periods as it thinks fit. However, the total period so extended shall not in any case exceed two years.

It is neither a calendar year nor a financial year but an accounting year.

Now, what is the accounting year? Please refer to Sec. 2 sub-sec-1, which defines the Accounting year.

I hope the above will clear your doubts.