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Tutorial 7: POBA,1965 provisions for "New Establishment"
Tutorial 7: POBA,1965 provisions for "New Establishment"
In this tutorial we will be evaluating provisions of POBA as are applicable to new establishments. The lawmaker has ensured that bonus liability in initial years shall not act as detrimental in the regular business operations of the entity because in initial years of set up of business, time is required to reach the break even level. For further discussion on this tutorial, continue reading:
For tutorial 6, kindly visit the following link:
The provisions of POBA as are applicable to new establishments are as follows:
For the first 5 accounting years, following the accounting year in which employer sells the goods produced or renders services, bonus shall be payable only for those accounting years, in which employer derives profit. For calculation of profit, effect for the following shall be incorporated:
a) Provision for Depreciation as per Section 32 of Income Tax Act, 1961.
b) Arrears of such depreciation and losses incurred in previous accounting years, to the extent not set off in earlier years.
In the 6th and 7th accounting years, Section 15 of the Act which deals with allocable surplus, would be applicable with certain modifications.
In the 8th accounting year onwards, Section 15 would be applicable as applicable to any other establishment.
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