308. Bonus – Whether deduction under clause (ii), first proviso, is admissible if it is within the minimum 8.33 per cent of salary and maximum 20 per cent of salary as per limits laid down under the Payment of Bonus Act
Reference is invited to Board’s Circular No. 287, dated 4-12-1980 [Sl. No. 307 ante]. Under first proviso to section 36(1)(ii) deduction for payment of bonus or commission to an employee for services rendered by him is restricted to the amount payable under the Payment of Bonus Act, 1965. Under this Act, a minimum of 8.33 per cent and a maximum of 20 per cent of salary is payable as bonus depending on the circumstances of the case. Deduction under first proviso to section 36(1)(ii) is not necessarily restricted to the minimum of 8.33 per cent of the salary in all cases. Whatever amount of bonus is payable in the case within these two limits under the Payment of Bonus Act, is admissible for deduction under the first proviso to section 36(1)(ii ).
Circular : No. 414 [F. No. 204/21/80-IT(A-II)], dated 14-3-1985