Calculation Of Bonus

The method for calculation of annual bonus is as follows:

1. Calculate the gross profit profit in the manner specified in-
   1. First Schedule, in case of a banking company, or
   2. Second Schedule, in any other case.

2. Calculate the Available Surplus.

   Available Surplus = A+B, where A = Gross Profit – Depreciation admissible u/s 32 of the Income tax Act - Development allowance - Direct taxes payable for the accounting year (calculated as per Sec.7) – Sums specified in the Third Schedule.

   B = Direct Taxes (calculated as per Sec. 7) in respect of gross profits for the immediately preceding accounting year – Direct Taxes in respect of such gross profits as reduced by the amount of bonus, for the immediately preceding accounting year.

3. Calculate Allocable Surplus

   Allocable Surplus = 60% of Available Surplus, 67% in case of foreign companies.

4. Make adjustment for ‘Set-on’ and ‘Set-off’. For calculating the amount of bonus in respect of an accounting year, allocable surplus is computed after considering the amount of set on and set offf from the previous years, as illustrated in Fourth Schedule.

5. The allocable surplus so computed is distributed amongst the employees in proportion to salary or wages received by them during the relevant accounting year.

In case of an employee receiving salary or wages above Rs. 2,500 the bonus payable is to be calculated as if the salary or wages were Rs. 2,500 p.m. only.