Deductions from explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Chapter III of the Code on Wages (Bihar) Rules, 2026 (rules 11 to 19) tells an employer in Bihar how far deductions from wages can go, which authority approves a fine, what must be explained to the employee before a deduction for damage or loss, and how advances and loans are recovered. This article takes each of those obligations in turn, with the rule number and the period as printed.
The rules are the Code on Wages (Bihar) Rules, 2026, as notified on 30 June 2026 and published in the Bihar Gazette (Extraordinary) No. Patna 696 of 1 July 2026. Total deductions above fifty per cent of wages are carried forward (rule 12). The Deputy Labour Commissioner having jurisdiction approves fines and must decide within 30 days, failing which the application is deemed rejected (rules 13 and 15). Advances are recovered in installments within the same fifty per cent ceiling (rule 18).
Later amendments and State notifications under these rules should be checked in the State Gazette. Rule 1(3) says the rules come into force "from the date of publication in official Gazette". An employer revising its payroll policy can ask for a payroll compliance audit before the first cycle under the new rules.
The fifty per cent ceiling (rule 12)
Rule 12 deals with the case where the total deductions authorised under section 18(2) of the Code exceed fifty percent of an employee's wages. The excess is carried forward and recovered from the wages of succeeding wage periods, in installments so that recovery in any month does not exceed fifty percent of the employee's wages in that month. Rule 11 adds that recovery of loans approved by the State Government and made from any fund constituted for the welfare of labour, with interest, is subject to any direction or circular the State Government issues from time to time.
For the Central rule on recovery of deductions and fines, see rules 13 to 16 of the Central Rules. The Bihar rules choose their own authority and periods, set out below.
Fines: authority, notice and approval (rules 13 to 15)
| Step | Rule | What the rule prints |
|---|---|---|
| Authority for section 19(1) | 13 | The Deputy Labour Commissioner having jurisdiction over the place of work of the employee |
| Notice of fines | 14 | Displayed in physical form or electronically, in Hindi and English, at conspicuous places in the premises; a copy sent forthwith to the Inspector-cum-Facilitator by registered post or electronically |
| Approval of a fine | 15 | Employer gives intimation, electronically or in writing, with detailed particulars to the Deputy Labour Commissioner |
| Decision | 15 | After hearing the employee and the employer; within 30 days of receipt, failing which the application is deemed to be rejected |
The practical point is the deemed rejection. If the Deputy Labour Commissioner does not decide within thirty days, the employer cannot treat silence as approval. The notice displayed must also be readable: rule 14 wants it so that every concerned employee can easily read the contents. All fines and realisations are recorded in the register in Form IV (rule 43(2)).
Intimating other deductions (rule 16)
Where an employer makes a deduction under the proviso to section 20(2) of the Code, rule 16(1) requires intimation, electronically or otherwise, to the Inspector-cum-Facilitator having jurisdiction within 10 days from the date of the deduction, explaining the reason. The Inspector-cum-Facilitator examines the intimation, and if the explanation contravenes the Code or the rules, initiates appropriate action under the Code against the employer within thirty days from receipt (rule 16(2)).
Deductions for damage or loss (rule 17)
An employer who wants to deduct for damage or loss under section 21(1) of the Code must first explain to the employee, personally and also in writing, the damage or loss of goods expressly entrusted to the employee for custody, or the loss of money for which the employee is required to account, and how the damage or loss is directly attributable to the neglect or default of the employee. The employee is then given an opportunity of being heard. Any deduction made is intimated to the employee within fifteen days from the date of deduction. All such deductions are recorded in the register in Form IV (rule 43(3)).
The Central companion rules are explained in our post on rules 17 and 18 of the Central Rules, deductions for absence and for damage or loss. Bihar's chapter prints a rule on damage or loss (rule 17); it prints no separate Bihar rule headed deductions for absence.
Advances and loans (rules 18 and 19)
Rule 18 covers two kinds of advance: advances of money given after employment begins (section 23(b)) and advances of wages not already earned (section 23(c)). Recovery is made from wages in installments the employer determines, so that all installments in a wage period do not exceed fifty percent of the employee's wages, subject to the ceiling in rule 12. The particulars of recovery are recorded in the register in Form IV.
Rule 19 says deductions for the recovery of loans granted for house building or other purposes approved by the State or Central Government, with the interest due, are as per the extant instructions or guidelines of the State Government regulating the extent of such loans and the rate of interest. The rules print no percentage or rupee limit for those loans.
For the Central rule, see rules 19 and 20 of the Central Rules on recovery of advances and loans.
Contractor-employed workers (rules 46 and 47)
Although they sit in the miscellaneous chapter, two rules touch payment. Where employees are employed through a contractor, the proprietor of the establishment pays the contractor the amount payable for the wages of the employees in accordance with the Code (rule 46). If the contractor fails to pay minimum bonus under section 26, the principal employer, on written information from the employees or a registered trade union and after confirming the failure, pays the minimum bonus (rule 47).
A worked example
Patliputra Textiles Pvt Ltd imposes a fine on a loom operator for a recorded lapse. Under rules 13 and 15 the company sends particulars to the Deputy Labour Commissioner having jurisdiction, who hears both sides and decides within thirty days. Until approval comes, the company should not deduct. Later it also deducts from the same operator's wages for damaged goods entrusted to him. It first explains the loss to him in person and in writing, hears him, records the deduction in Form IV and tells him within fifteen days. With an advance outstanding as well, the month's total deductions must stay within fifty per cent of wages, and any excess moves to the next wage period.
Need help with wage deductions in Bihar?
Deductions are among the easiest places for a wage dispute to start. Our payroll compliance audit can check your deduction heads, notices and Form IV entries against the Bihar rules before an Inspector-cum-Facilitator asks.
Key takeaways
- Deductions above fifty percent of wages in a month are carried forward (rule 12).
- The Deputy Labour Commissioner approves fines and decides within 30 days; silence means deemed rejection (rules 13 and 15).
- Other deductions under section 20(2) are intimated to the Inspector-cum-Facilitator within 10 days (rule 16).
- Deductions for damage or loss need a personal and written explanation, a hearing and intimation within fifteen days (rule 17).
- Advances are recovered in installments within the fifty per cent ceiling and recorded in Form IV (rule 18).
Read next
- Code on Wages (Bihar) Rules, 2026: working hours, weekly rest, night shift and overtime
- Code on Wages (Bihar) Rules, 2026: undisbursed dues, claims, appeals, compounding and the State Advisory Board
- Rules 13 to 16 of the Central Rules: recovery of deductions and procedure for fines
- Rules 19 and 20 of the Central Rules: recovery of advances and loans
Disclaimer: Based on the State or Union territory rules named above, as notified under the Labour Codes and consulted on 4 October 2026. Later amendments, State notifications, fees and forms should be checked in the State Gazette and on the State labour department website. This article is general information, not legal advice; check the official text before acting.