Sections 29 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.
Section 29 of the Code on Wages, 2019 disqualifies an employee from bonus if he is dismissed for fraud, riotous or violent behaviour on the premises, theft, misappropriation or sabotage of the establishment's property, or conviction for sexual harassment. Section 30 treats all departments, undertakings and branches of an establishment as one for computing bonus, with an exception for those that keep their own accounts.
An employee dismissed from service for fraud, riotous or violent behaviour while on the premises, theft, misappropriation or sabotage of any property of the establishment, or conviction for sexual harassment is disqualified from bonus under the Code (s.29). For computing bonus, all departments, undertakings and branches are parts of the same establishment (s.30), unless a separate balance sheet and profit and loss account is prepared and maintained for that unit for the year, in which case it is a separate establishment, unless it was already treated as part of the establishment immediately before that accounting year.
Section 29: who is disqualified
Section 29 opens with "Notwithstanding anything contained in this Code". An employee shall be disqualified from receiving bonus under this Code if he is dismissed from service for:
| Clause | Ground |
|---|---|
| (a) | Fraud |
| (b) | Riotous or violent behaviour while on the premises of the establishment |
| (c) | Theft, misappropriation or sabotage of any property of the establishment |
| (d) | Conviction for sexual harassment |
Five points follow from the wording.
- Dismissal is the trigger. The section uses the words "if he is dismissed from service for". Allegation, suspension, a show-cause notice or a pending inquiry do not by themselves disqualify. The employee must actually have been dismissed on one of the grounds.
- The ground must be the reason for dismissal. An employee dismissed for another reason, such as poor performance, does not fall under s.29, even if there was some incident too.
- Clause (b) is tied to the premises. Riotous or violent behaviour has to be "while on the premises of the establishment". Violence outside the premises is not within the words.
- Clause (d) needs a conviction. The wording is "conviction for sexual harassment", not dismissal on a finding by an internal committee. The text is silent on whether a dismissal following an internal inquiry, without a court conviction, is covered. Employers should obtain advice before withholding bonus on that basis. Where the Code cites criminal law, note that from 1 July 2024 the Code of Criminal Procedure, 1973 and the Indian Penal Code were replaced by the BNSS and the BNS; this section does not cite either.
- Whole bonus. The text says the employee is disqualified "from receiving bonus under this Code". It does not provide for a partial bonus, nor for the accounting year to which the disqualification relates. Section 38 separately lets an employer deduct a financial loss caused by misconduct from the bonus payable for that accounting year; see sections 37 and 38.
The text does not prescribe a procedure for deciding the disqualification. It is the dismissal, and its basis, that carry it. Because bonus for a disqualified employee affects the bonus pool and a dispute can follow, HR teams often seek advice before withholding. Our employment and labour law advisory team can review the dismissal record and the ground relied on.
Illustration (hypothetical). Two employees at one establishment have each worked the full accounting year. One is dismissed in December for theft of stock, established in an inquiry. The other is dismissed in the same month for repeated lateness. Under s.29 the first is disqualified from bonus for the Code's purposes. The second is not within s.29, since lateness is not one of the four grounds, and bonus remains payable subject to the rest of the Chapter.
Section 30: departments, undertakings and branches
Where an establishment consists of different departments or undertakings or has branches, whether in the same place or in different places, all of them are treated as parts of the same establishment for computing bonus under the Code.
Proviso. If, for any accounting year, a separate balance sheet and profit and loss account is prepared and maintained for a department, undertaking or branch, that unit is treated as a separate establishment for computing bonus for that year, unless immediately before the commencement of that accounting year it was treated as part of the establishment for the purpose of computing bonus.
| Situation | Treatment for bonus |
|---|---|
| Branch with no separate accounts | Part of the one establishment |
| Branch with separate balance sheet and profit and loss account, first year of separate accounts | Separate establishment for that year |
| Same branch, already treated as part of the establishment just before the year began | Stays part of the establishment, despite the separate accounts |
The effect is practical. Profit in one branch can be pooled with losses in another when allocable surplus is worked out, unless the proviso applies. A branch that began keeping separate accounts only to isolate a loss will find the last limb of the proviso stops it.
The section's use of "for that year" suggests the test is applied each year. The text is silent on whether a unit that was once separated and then merged back must be tested again; a plain reading is that the test applies year by year. Check this against any State guidance.
For the meaning of "establishment", see our article on the definitions of employee, employer, worker and establishment. The gross profits that this treatment feeds into are dealt with in sections 32 and 33.
What the Central Rules add
The Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026) apply only where the Central Government is the appropriate Government. Where the State Government is the appropriate Government, the State's own wage rules apply. In the Rules text read for this article, there is no rule that prescribes a procedure for s.29 or changes the s.30 test. For the old-law comparison see our guide on disqualification from bonus under the Payment of Bonus Act.
Need help with bonus disqualification or branch accounts?
A bonus withheld on the wrong ground, or a branch wrongly separated, can become a dispute. Our employment and labour law advisory team can examine the dismissal record or the branch accounting position and advise on how the Code applies.
Key takeaways
- Disqualification under s.29 follows a dismissal for fraud, riotous or violent behaviour on the premises, theft, misappropriation or sabotage of property, or conviction for sexual harassment.
- Suspension, allegation or a pending inquiry is not enough; dismissal is the trigger.
- Clause (d) speaks of conviction; the text is silent on internal-committee findings alone.
- Branches, departments and undertakings are one establishment for bonus unless separate accounts are kept and the unit was not previously treated as part of the establishment.
- The Central Rules read here add no procedure for either section.
Read next
- Sections 27 and 28: proportionate reduction in bonus and working days
- Section 31: payment of bonus out of allocable surplus
- Sections 37 and 38: customary or interim bonus and deductions from bonus
- Disqualification from bonus under the old Act
Disclaimer: Based on the Code on Wages, 2019 (as enacted) and, where noted, the Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026), as on 1 October 2026. The Code is in force from 21 November 2025; State Governments make their own rules for establishments where the State is the appropriate Government, and wage rates are notified separately. Verify the current position before acting.