Bonus Shall Be Calculated On Basic + DA Only?

Dear all,

Though i am a member of this forum since 2005, this is my first post.

I need some clarification on Payment of Bonus Act 1965.

As per my knowledge and section 2 serial number 21 of payment of bonus act 1965 where the definition for "Salary or Wages" bonus should be calculated basis on Earned Gross salary and not on Basic + DA.

(21) "salary or wage" means all remuneration (other than remuneration in respect of overtime work) capable of

being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment or of work done in such employment and includes dearness allowance (that is to say, all cash payments, by whatever name called, paid to an employee on account of a rise in the cost of living), but does not include--

(i) any other allowance which the employee is for the time being entitled to;

(ii) the value of any house accommodation or of supply of light, water, medical attendance or other

amenity or of any service or of any concessional supply of foodgrains or other articles;

(iii) any travelling concession;

(iv) any bonus (including incentive, production and attendance bonus);

(v) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employee under any law for the time being in force;

(vi) any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or

any ex gratia payment made to him;

(vii) any commission payable to the employee.

Explanation.--Where an employee is given in lieu of the whole or part of the salary or wage payable to him,

free food allowance or free food by his employer, such food allowance or the value of such food shall, for the

purpose of this clause, be deemed to form part of the salary or wage of such employee;

But, i saw in this forum, number of peer expressed that bonus shall be calculated on Basic + DA only.

Can any one clarify on it.

I can clarify you. But I need your Salary Structure. What are the components included in your salary structure?
In your question itself you can see that they have showed, as per definition, Bonus to be calculated on all the components excluding (i) to (vii) in the salary structure.
In most salary structure, if you exclude (i) to (vii), the remaining will be Basic & DA in the salary structure. That's why they calculate Bonus on "Basic+DA".

Dear Mr. Saravan,
Our salary components are Basic, DA, HRA, Conveyance & Special allce. I hope this the normal structure followed by all companies. According to it, we could ignore HRA only.
Now a days, all details/clarification can get in the citehr. Hence, most of the owners search it and act as intimated in the citehr. Not ready to go through the applicable acts.

Mr. Selvam,
You can even exclude conveyance and Special Allowance which has been mentioned in the excluded list in point nos. (iii) and (i) respectively.

As per the amendment to payment of Bonus Act 2015, ceiling of Rs.7000/- is applicable?

Mr. Mani,
It is the minimum ceiling.
Bonus should satisfy all the below points:
1. 8.33% to 20% of (Basic + DA) X 12 (months) and that amount should not be less than Rs. 7,000; (if that amount is less than Rs. 7,000, then, Rs. 7,000 has to be paid to those employees as a flat rate).
2. (Basic + DA) should not be less than minimum wages
3. Maximum allowed (Basic + DA) is Rs. 20,000.

Dear Saravanan,
1. The special allowance is a permanent component paid out every month, not given as a time being one.
2. Conveyance allowance is a fixed component to get IT exemption. Since, it is providing to each and every employee irrespective of whether they come by walk, by bus, own vehicle, etc., in my view, it could not consider as a travelling concession like providing as a honor to renowned/esteemed persons.