Payment of bonus-Allowability under section 36(1)(ii) of the Income-tax Act, 1961-Regarding - Income Tax - 414/1985

Payment of bonus-Allowability under section 36(1)(ii) of the Income-tax Act, 1961-Regarding Circular No. 414 Dated 14/3/1985 To All Commissioners of Income-tax. Sir, Subject: Payment of bonus-Allowability under section 36(1)(ii) of the Income-tax Act, 1961-Regarding. Reference is invited to Board's Circular No. 287 dated 4th December, 1980. Under first proviso to section 36(1)(ii) of the Income-tax Act, 1961, 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% and a maximum of 20% of salary is payable as bonus depending on the circumstances of the case. Deduction under first proviso to section 36(1)(ii) of the Income-tax Act is not necessarily restricted to the minimum of 8.33% 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, 1965, is admissible for deduction under the first proviso to section 36(1)(ii) of the Income-tax Act, 1961. Yours faithfully, (Sd.) Girish Dave, Under Secretary to the Government of India.