Payment of Bonus CHAPTER V: Draft Code on Wages (Central) Rules 2020 : Notification

COMPUTATION OF GROSS PROFITS

Accounting year ending ………

Add back provision for:

(a) Bonus to employees

(b) Depreciation

(c) Development Rebate Reserve

(d) Any other reserves

Total of Item No.2………..

Rs…………

See foot-note (1)

Add back also:

(a) Bonus paid to employees in respect of previous accounting years.

(b) The amount debited in respect of gratuity paid  or payable to employees in excess of the aggregate of –

(i) the amount, if any, paid to, or provided for payment to, an approved gratuity fund; and

(ii) the amount actually paid to employees on their retirement or on termination of their employment for any reason.

(c) Donations in excess of the amount admissible for income-tax .

(d) Capital expenditure (other than capital expenditure on scientific research which is allowed as a deduction under any law for the time being in force relating to direct taxes) and capital losses (other than losses on sale of capital assets on which depreciation has been allowed for income tax).

(e) Any amount certified by the Reserve Bank of India in terms of sub-section (2) of section 34A of the Banking Regulation Act, 1949 (10 of 1949).

(f) Losses of, or expenditure relating to, any business situated outside India.

Total of Item No.3………..

See foot-note (1)

See foot-note (1)

Add also income, profits or gains (if any ) credited directly to published or disclosed reserves, other than-

(i)     capital receipts and capital profits (including profits on the sale of capital assets on such depreciation has not been allowed for income-tax);

(ii)       profits of, and receipts relating to , any business situated outside India;

(iii)            income of foreign banking companies from investment outside India.

Net total of Item No.4…….

4…

Deduct :

(a)     Capital receipts and capital profits (other than profits on the sale of assets on which depreciation has been allowed for income-tax).

(b)       Profits of, and receipts relating to any business situated outside India.

(c)     Income of foreign banking companies from investments outside India .

(d)      Expenditure or losses (if any   )   debited   directly   to

published or disclosed reserves, other than –

(i)        capital expenditure and capital losses (other  than losses on sale of capital assets on which depreciation has not been allowed for income-tax );

(ii)        losses of any business situated outside India.

(e)       In the case of foreign bankingcompanies proportionate administrative (overhead) expenses of head- office allocable to Indian business.

(f)    Refund of any excess direct tax paid for previous accounting years and excess provision if any of previous accounting years, relating to bonus, depreciation or development rebate, if written back.

(g)    Cash subsidy, if any, given by the government or by anybody corporate established by any law for the time being in force or by any other agency through budgetary grants, whether given directly or through any agency for specified purposes and the proceeds of which are reserved for such purposes .

Total of Item No. 6 ……

See foot-note (2)

See foot-note (2)

See foot-note (3)

See foot-note (2)

See foot-note (2)

Explanation: In sub-item (b) of Item 3, “approved gratuity fund” has the same meaning assigned to it in clause (5) of section 2 of the Income Tax Act,1961.

* Where the profit subject to taxation is shown in the Profit and Loss account and the provision made for taxes on income is shown, the actual provision for taxes on income shall be deducted from the profit.

Foot-notes:-

(1) If, and to the extent, charged to Profit and Loss Account.
(2) If, and to the extent, credited to Profit and Loss Account.
(3) In the proportion of Indian Gross Profit (Item No. 7) to Total World Gross Profit (as per consolidated profit and loss account adjusted as in Item No. 2 above only)]

COMPUTATION OF GROSS PROFITS

Net  profit  as  per  profit  and  loss account

(a) Bonus to employees

(b) Depreciation.

(c)  Direct taxes, including the provision (if any), for previous accounting years

(d)  Development rebate / investment allowance / development allowance reserve.

(e)  Any other reserves

Total of Item No.2……..

See foot-note (1)

See foot-note (1)

Add back also :

(a) Bonus paid to employees in respect of previous accounting years.

(aa) The amount debited in respect of gratuity paid or payable to employees in excess of the aggregate of-

(i)      the amount, if any, paid to, or provided for payment to, an approved gratuity fund; and

(ii)        the amount actually paid to employees on their retirement or on termination of their employment for any reason.

(b)    Donations in excess of the amount admissible for income-tax .

(c)      Any annuity due, or commuted value of any annuity paid, under the provisions of section 280D of the Income Tax Act during the accounting year.

(d)      Capital expenditure (other than capital expenditure on scientific research which is allowed as a deduction under any law for the time being in force relating to direct taxes) and capital losses (other than losses on sale of capital assets on which depreciation has been allowed for income  tax  or  agricultural  income-

tax.).

(e) Losses of , or expenditure relating to, any business situated outside India.

Total of Item No.3………..

See foot-note (1)

See foot-note (1)

Add also income, profits or gains (if any) credited directly to reserves, other than-

(i)    capital receipts and capital profits (including profits  on  the sale of capital assets on which depreciation has not been allowed for income-tax or agricultural income-tax);

(ii)    profits of, and receipts relating to, any business situated outside India;

(iii)     income of foreign concerns from investments outside India.

Net total of Item No.4……..

Rs…………..

Deduct :

(a) Capital receipts and capital profits (other  than  profits  on  the  sale  of assets on which depreciation has been allowed for income-tax or agricultural income-tax).

(b) Profits of, and receipts relating to, any business situated outside India.

(c) Income of foreign concerns from investment outside India.

(d)  Expenditure  or  losses  (if  any  ) debited  directly  to  reserves,  other than-

(i)  capital  expenditure  and  capital losses (other than losses on sale of capital assets on which depreciation has not been allowed for income-tax ; or agricultural income-tax;

(ii)  losses  of  any  business  situated outside India.

(e) In the case of foreign concerns proportionate administrative (overhead)  expenses  of  head  office allocable to Indian business.

(f) Refund of any direct tax paid for previous accounting years and excess provision,         if      any,       of      previous accounting  years  relating  to  bonus, depreciation, taxation or development rebate or development allowance, if written back.

(g) Cash subsidy, if any, given by the government or by any body corporate established by any law for the time being in force or by any other agency through budgetary grants, whether given directly or through any agency for specified purposes and the proceeds of which are reserved for such purposes.
Total of Item No.6

See foot-note (2)

See foot-note (2)

See foot-note (2)

See foot-note (3)

See-foot-note (2)

Gross Profits for purposes of bonus (Item No.5 minus Item No.6 )

(1) If, and to the extent, charged to Profit and Loss Account.
(2) If, and to the extent, credited to Profit and Loss Account.
(3) In the proportion of Indian Gross Profit (Item No. 7) to Total World Gross Profit (as per consolidated Profit and Loss Account, adjusted as in Item No. 2 above only).

(1)

(3)

(ii) 8.5 percent of its paid up equity share capital as at the commencement of the accounting year;

(iii) 6 percent of its reserves shown in its balance sheet as at the commencement of the accounting year, including any profits carried forward from the previous accounting year :

Provided that where the employer is a foreign company within the meaning of section 2 (42) of the Companies Act ,2013 (18 of 2013) , the total amount to be deducted under this item shall be 8.5 percent on the aggregate of the value of the net fixed assets and the current assets of the company in India after deducting the amount of its current liabilities (other than any amount shown as payable by the company to its Head Office whether towards any advance made by the Head Office or otherwise or any interest paid by the company to its Head Office ) in India.

(ii) 7.5 per cent of its paid up equity share capital as at the commencement of the accounting year ;

(iii) 5 per cent of its reserves shown in its balance sheet as at the commencement of the accounting year, including any profits carried forward from the previous accounting year;

(iv) any sum which, in respect of the accounting year, is transferred by it-

(a) to a reserve fund under sub-section (1) of section 17 of the Banking Regulation Act, 1949 (10 of 1949 ); or

(b) to any reserves in India in pursuance of any direction or advice given by the Reserve Bank of India,

whichever is higher:

Provided that where the banking company is a foreign company within the meaning of section 2 (42) of the Companies Act , 2013 (18 of 2013 ), the amount to be deducted under this item shall be the aggregate of-

(i) the dividends payable to its preference shareholders for the accounting year at the rate at which such dividends are payable on such amount as bears the same proportion to its total preference share capital as its total working funds in India bear to its total world working funds;

(ii) 7.5 per cent of such amount as bears the same proportion to its total paid up equity share capital as its total working funds in India bear to its total working funds.

(iii) 5 per cent of such amount as bears the same proportion to its total disclosed reserves as its total working funds in India bear to its total world working funds;

(iv) any sum which, in respect of the accounting year, is deposited by it with the Reserve Bank of India under sub-clause (ii) of clause (b) of sub-section

(2) of section 11 of the Banking Regulation Act, 1949 (10 of 1949) , not exceeding the amount required under the aforesaid provision to be so deposited.]

(i) 8.5 per cent of its paid up capital as at the commencement of the accounting year;

(ii) 6 per cent of its reserves, if any, shown in its balance sheet as at the commencement of the accounting year, including any profits carried forward from the previous accounting year.

(i) 8.5 per cent of the capital invested by such society in its establishment as evidenced from its books of accounts at the commencement of the accounting year;

(ii) such sums as has been carried forward in respect of the accounting year to a reserve fund under any law relating to co-operative societies for the time being in force.

8.5 per cent of the capital invested by him in his establishment as evidenced from his books of accounts at the commencement of the accounting year:

Provided that where such employer is a person to whom Chapter XXII-A of the income Tax Act applies , the annuity deposit payable by him under the provisions of that Chapter during the accounting year shall also be deducted:

Provided further that where such employer is a firm, an amount equal to 25 per cent of the gross profits derived by it from the establishment in respect of the accounting year after deducting depreciation in accordance with the provisions of clause (a) of section 6 by way of remuneration to all the partners taking part in the conduct of business of the establishment shall also be deducted, but where the partnership agreement, whether oral or written, provides for the payment of remuneration to any such partner, and –

(i)    the total remuneration payable to all such partners is less than the said 25 per cent the amount payable, subject to a maximum of forty-eight thousand rupees to each such partner; or

(ii)     the total remuneration payable to all such partners is higher than the said 25 per cent , such percentage, or a sum calculated at the rate of forty – eight thousand rupees to each such partner, whichever is less , shall be deducted under this proviso:

Provided  also that  where  such  employer  is  an  individual  or  a  Hindu Undivided Family –

(i)     an amount equal to 25 per cent of the  gross profits derived by such employer from the establishment in respect of the accounting year after deducting depreciation in accordance with the provisions of clause (a) of section 34; or

(ii)    forty-eight thousand rupees,

(iii)  whichever is less by way of remuneration to such employer, shall also be deducted.

Explanation : The expression “reserves” occurring in column (3) against Item Nos. 1(iii), 2(iii) and 3(ii) shall not include any amount set apart for the purpose of-

(2)

(2)

(2)

(2)

(2)

(6)

94,167

(8)

(9)

(9)