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CS Professional · Labour Laws and Practice · Law of Wages

Nilgiri Engineering started selling goods from a new plant in the accounting year 2019-20. For its bonus obligations, which statement is correct under the Code on Wages, 2019?

For the first five accounting years following the year of first sale, bonus is payable only in a year in which the establishment derives profit, and it is calculated without applying set on and set off. Modified set on and set off applies in years six and seven, and normal rules from year eight.

  1. AIn each of the first five accounting years following the sale year, bonus is payable only for a year in which it derives profit, computed without applying set on and set offCorrect
  2. BBonus is payable in every year from the start, whether or not profit is derived, computed with set on and set off
  3. CBonus is payable only from the eighth year, as earlier years are exempt
  4. DFrom the sixth year onwards, set on and set off are never applied

Explanation

Section 26(6) provides that in the first five accounting years following the sale year, bonus is payable only for a year in which profit is derived, calculated without applying section 36. Sixth and seventh years apply section 36 with modifications, and from the eighth year it applies as for other establishments. The option denying set on and set off from the sixth year is wrong.

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