Is There a Law Mandating Bank Payments for Salaries in Manufacturing Companies?

Is there any Act/Law via the Finance Ministry or any other Governmental Agency whereby salary payment for regular permanent employees of a manufacturing company can be made mandatory through bank payment only? Is there any case in any court of law related to the above subject?

Quoting The Payment of Wages Act, 1936:

6. Wages to be paid in current coin or currency notes - All wages shall be paid in current coin or currency notes or in both. [Provided that the employer may, after obtaining the written authorization of the employed person, pay him the wages either by cheque or by crediting the wages into his bank account.]

Thanks & Regards

As per my opinion, please refer to IT Act Section 40A(3). According to the act, cash expenditure exceeding 20,000 Rs is not allowed. Therefore, we need to pay salaries through cheques only if the payment is more than 20,000 Rs. For amounts below that, cash payments are permissible.

Thank you,

Regards,
Ashish

Kindly go through section (6) of the Payment of Wages - Amended, attached herewith. Hope this will help you.

Cheers.

I did not find any change in the contents of Sl.6 even in the amended act. By the way, the Chief Minister of West Bengal had informed that all state government salary payments will be made through the bank. Is there any government notification in this regard?

I am aware of the section as per the IT Act, but I am surprised that even the court did not do anything to enforce this. There is a court case pending since 2004. It hasn't come up for the final hearing as yet.

Thanks & Regards

I think your attention slipped from it. The Section (6) is as follows:

6. Wages to be paid in current coin or currency notes

All wages shall be paid in current coin or currency notes or in both: [Provided that the employer may, after obtaining the written authorization of the employed person, pay him the wages either by cheque or by crediting the wages in his bank account].

Regards

Some employees (around 66 of them) in my organization want their salary in cash only. This is creating problems. There is a legal case pending since 2004 with some employees who wanted payment only through cash, while the company wanted 100% bank payment only. The law is archaic and needs modification.

The Act says that it is up to the employee to take their salary in whichever way (cash, cheque, or bank payment) they want. If it's through cheque or bank, then a written authorization is needed from the employee. We want to disburse salary only through the bank.

Thanks & Regards

Maharashtra Leads in Amending Payment of Wages Act

Maharashtra is the first state in India that has amended the Payment of Wages (POW) Act, making it mandatory to pay wages and salaries above Rs. 3,000 per month through bank transfers or crossed cheques. In Maharashtra, there is no choice on this.

Gujarat and Other States to Follow

Gujarat is likely to be the second state to do the same. Other states may follow suit, but until then, payments can only be made with the approval of the employees. Therefore, a standard procedure is to have employees sign the agreement upon joining and, if possible, amend the standing orders to include the requirement of salary payment only through banks.

Exemptions Under the Income Tax Act

The restriction on cash payments exceeding Rs. 30,000 under the Income Tax Act does not apply to salaries. There are exemptions for cash payments made under any other law.

Please note that almost all states have amended the Payment of Wages Rules, making it mandatory to pay salary through cheque or bank transfer only, not in cash. You can find circulars/notifications from states such as Maharashtra, Delhi, Haryana, Madhya Pradesh, Karnataka, etc., which have issued such notifications.

Legal Challenges with Cash Salary Payments

Thanks, Bhuwan. Some employees (around 66 of them) in my organization want their salary in cash only. This is creating problems. There is a legal case pending since 2004 with some of the employees who wanted payment only through cash while the company wanted 100% bank payment only. The law is archaic and needs modification.

The Act says that it is up to the employee to take salary in whichever way (cash, cheque, or bank payment) he wants to. If it's through cheque or through the bank, then a written authorization is needed from the employee. We want to disburse salary only through the bank.

Thanks & Regards

For some reason, I am not able to find any notification on compulsory bank transfers through Google except for Maharashtra. I would appreciate it if you could provide me with a link for Delhi and Karnataka.

We are some employees working in XYZ company and have been working here for the past one and a half years. However, for the last three months, our salaries have been overdue from the company's side. This situation has caused us numerous problems in our daily lives. In this regard, we seek your opinion on the steps we can take. Please assist us in this situation.

Thank you.

Regards

We have more than 100 laborers who don't have either salary accounts or personal bank accounts. Is there any grace period provision for the disbursement of salary in this case, as it has become compulsory to disburse the salary through bank accounts only?

Dear Sir,

Is it mandatory today to pay salary/wages through a banker's check or electronically (e.g., NEFT, RTGS, etc.) rather than in cash? Please provide any circulars or notifications available.

Thank you.

As per the Payment of Wages Act, every employer has to pay workers' wages by the 7th and 10th of each month; it can be through a cheque or direct NEFT to the worker's account.

Compliance with Payment of Wages Act

However, my question is if a business partner is paying workers' salaries through a cheque to the bank for creating the wages amount on the 7th only, is this in compliance? The cheque is deposited to the bank by the business partner, but the amount is not credited to the worker's account by the respective bank.

Please provide clarity on this matter. What does the act say? Is the salary deposited to the bank through a cheque by the business partner on the 7th considered compliant or not?

Thank you.

As per the Payment of Wages Act, every employer has to pay workers' wages by the 7th and 10th of each month. Payments can be made through a cheque or direct NEFT transfer to the worker's account.

However, my question is if a business partner pays the workers' salary through a cheque to the bank for crediting the wages amount on the 7th only, does this practice comply with the regulations? Although the cheque is deposited to the bank by the business partner, the amount is not credited to the worker's account by the respective bank.

Please provide clarity on this matter. What does the act state? Is the salary being deposited to the bank through a cheque by the business partner on the 7th considered compliant or not?

Thank you.