Understanding Salary Components: Does Special Allowance Affect Bonus Act Eligibility in India?

Hi, if any organization provides salary in the following heads - basic, HRA, and special allowance, with special allowance being paid to all employees, should we include basic + special allowance under wages to check the eligibility of the applicability of the Bonus Act?

For example, if one person is receiving 15,000 as basic salary and 10,000 as special allowance per month, totaling 25,000, would the Bonus Act be applicable to him or not?

Hi Naveen,

Under the Payment of Bonus Act, 1965, the term "wages" is defined as all remuneration capable of being expressed in terms of money, which would include basic salary and dearness allowance (if any), but excludes other allowances like house rent allowance (HRA), overtime, bonus, and special allowances.

For the purpose of determining eligibility for the Payment of Bonus Act:

Basic Salary and Dearness Allowance (DA) (if applicable) are considered as wages. Special Allowance is generally not considered a part of wages under the Bonus Act, as it is typically treated separately from basic salary and DA.

In your example:

Basic Salary: ₹15,000
Special Allowance: ₹10,000
Total Salary: ₹25,000

However, for the purpose of the Bonus Act, only the Basic Salary (₹15,000) would typically be considered when determining eligibility.

Eligibility for Bonus Act:

As per the Payment of Bonus Act, the Act is applicable to employees whose salary (basic + DA) does not exceed ₹21,000 per month. Since in your example, the basic salary is ₹15,000, the employee would be eligible for the bonus under the Act, as their "wages" are below the threshold.

Thanks