Taxability of Bonus received by Individuals

The bonus as may be received by the employee is fully taxable in the hands of the employee on receipt basis and is included in the gross salary in the year in which the bonus is received. Further, the Bonus act gives guidance on this point, and states that the provisions are applicable to (a) Every factory; and (b) Every other establishment in which twenty or more persons are employed on any day during an accounting year. For this purpose, the following would mean: “Employee” means any person (other than an apprentice) employed on a salary or wage not exceeding 10,000 per month in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied. Eligibility for bonus: Every employee shall be entitled to be paid bonus in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year. Payment of minimum bonus: Every employer shall be bound to pay in respect of every accounting year whether or not the employer has any allocable surplus in the accounting year, a minimum bonus which shall be 8.33% of the salary or wage earned by the employee during the accounting year or Rs. 100, whichever is higher. Employee less than 15 years of age at the beginning of the accounting year shall be entitled to a minimum bonus of 8.33% of salary or wages or Rs. 60, whichever is higher. Payment of maximum bonus: Maximum bonus is payable when allocable surplus is greater than minimum bonus payable for that year, the employer shall bound to pay to every employee, which shall be an amount in proportion to the salary or wages earned by the employee subject to the maximum of 20% of such salary or wages. Where an employee has not worked for all the working days in an accounting year, the minimum bonus of Rs.100 or 60 (as the case may be), shall be proportionately reduced. This provision shall be applicable when the minimum bonus of Rs. 100 or 60 is higher than 8.33% of salary or wage. Computation of number of working days: For this purposes, an employee shall be deemed to have worked in an establishment in any accounting year also on the days on which– (a)  he has been laid off under an agreement or orders under the Industrial Employment Act, or under any other law applicable to the establishment; (b) he has been on leave with salary or wage; (c) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and (d)the employee has been on maternity leave with salary or wage, during the accounting year. Disqualification for bonus: An employee shall be disqualified from receiving bonus under this Act, if he is dismissed from service for- (a) Fraud; or (b) Riotous or violent behaviour while on the premises of the establishment; or (c) Theft, misappropriation or sabotage of any property of the establishment. Timely and efficient tax planning go long way in lowering your total taxes by employing and taking advantages of in-built provisions of tax exemptions, deductions, concessions, rebates, reliefs, allowances and other benefits granted by the tax laws so that the incidence of tax is reduced. We at have the expertise to guide you in lowering your tax outgo and thus enhancing your total take away.We at provide full year support solving all your tax issues, in addition to filing of your return of income with excellent tax planning. Please join us now in pursuit of simplifying individual taxation! 

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