Section 18: Deductions which may be made from wages

Finin2min analysis — what the section actually does

Full statutory text — Section 18

18. Deductions which may be made from wages.—(1) Notwithstanding anything contained in any
other law for the time being in force, there shall be no deductions from the wages of the employee, except
those as are authorised under this Code.
    Explanation.— For the purposes of this sub-section, —
       (a) any payment made by an employee to the employer or his agent shall be deemed to be a
    deduction from his wages;
        (b) any loss of wages to an employee, for a good and sufficient cause, resulting from—
            (i) the withholding of increment or promotion, including the stoppage of an increment; or
            (ii) the reduction to a lower post or time-scale; or
            (iii) the suspension, shall not be deemed to be a deduction from wages in a case where the
        provisions made by the employer for such purposes are satisfying the requirements specified in
        the notification issued by the appropriate Government in this behalf.
     (2) Deductions from the wages of an employee shall be made in accordance with the provisions of
this Code, and may be made only for the following purposes, namely:—
        (a) fines imposed on him;
        (b) deductions for his absence from duty;
         (c) deductions for damage to or loss of goods expressly entrusted to the employee for custody; or
    for loss of money for which he is required to account, where such damage or loss is directly
    attributable to his neglect or default;
        (d) deductions for house-accommodation supplied by the employer or by appropriate Government
    or any housing board set up under any law for the time being in force, whether the Government or
    such board is the employer or not, or any other authority engaged in the business of subsidising
    house-accommodation which may be specified in this behalf by the appropriate Government by
    notification;

        (e) deductions for such amenities and services supplied by the employer as the appropriate
    Government or any officer specified by it in this behalf may, by general or special order, authorise
    and such deduction shall not exceed an amount equivalent to the value of such amenities and services.
      Explanation.—For the purposes of this clause, the expression “services” does not include the
   supply of tools and raw materials required for the purposes of employment;
       (f) deductions for recovery of—
            (i) advances of whatever nature (including advances for travelling allowance or conveyance
        allowance), and the interest due in respect thereof, or for adjustment of overpayment of wages;
            (ii) loans made from any fund constituted for the welfare of labour, as may be prescribed by
        the appropriate Government, and the interest due in respect thereof;
        (g) deductions for recovery of loans granted for house-building or other purposes approved by the
    appropriate Government and the interest due in respect thereof;
        (h) deductions of income-tax or any other statutory levy levied by the Central Government or
    State Government and payable by the employee or deductions required to be made by order of a court
    or other authority competent to make such order;
        (i) deductions for subscription to, and for repayment of advances from any social security fund or
    scheme constituted by law including provident fund or pension fund or health insurance scheme or
    fund known by any other name;
       (j) deductions for payment of co-operative society subject to such conditions as the appropriate
    Government may impose;
        (k) deductions made, with the written authorisation of the employee, for payment of the fees and
    contribution payable by him for the membership of any Trade Union registered under the Trade
    Unions Act, 1926 (16 of 1926);
        (l) deductions for recovery of losses sustained by the railway administration on account of
    acceptance by the employee of counterfeit or base coins or mutilated or forged currency notes;
         (m) deductions for recovery of losses sustained by the railway administration on account of the
    failure of the employee to invoice, to bill, to collect or to account for the appropriate charges due to
    the railway administration whether in respect of fares, freight, demurrage, wharf age and cranage or
    in respect of sale of food in catering establishments or in respect of commodities in grain shops or
    otherwise;
        (n) deductions for recovery of losses sustained by the railway administration on account of any
    rebates or refunds incorrectly granted by the employee where such loss is directly attributable to his
    neglect or default;
        (o) deductions, made with the written authorisation of the employee, for contribution to the Prime
    Minister's National Relief Fund or to such other fund as the Central Government may, by notification,
    specify.
     (3) Notwithstanding anything contained in this Code and subject to the provisions of any other law
for the time being in force, the total amount of deductions which may be made under sub-section (2) in
any wage period from the wages of an employee shall not exceed fifty per cent. of such wages.
    (4) Where the total deductions authorised under sub-section (2) exceed fifty per cent. of the wages,
the excess may be recovered in such manner, as may be prescribed.
    (5) Where any deduction is made by the employer from the wages of an employee under this section
but not deposited in the account of the trust or Government fund or any other account, as required under
the provisions of the law for the time being in force, such employee shall not be held responsible for such
default of the employer.

How to apply this provision

1. Primary statutory test — (1) Notwithstanding anything contained in any other law for the time being in force, there shall be no deductions from the wages of the employee, except those as are authorised under this Code.
2. Additional operative limb — Explanation.— For the purposes of this sub-section, — (a) any payment made by an employee to the employer or his agent shall be deemed to be a deduction from his wages;
3. Qualification / exception to test — Explanation.— For the purposes of this sub-section, — (a) any payment made by an employee to the employer or his agent shall be deemed to be a deduction from his wages; (b) any loss of wages to an employee, for a good and sufficient cause, resulting from— (i) the withholding of increment or promotion, including the stoppage of an increment; or (ii) the…
4. Numerical or timing control — (3) Notwithstanding anything contained in this Code and subject to the provisions of any other law for the time being in force, the total amount of deductions which may be made under sub-section (2) in any wage period from the wages of an employee shall not exceed fifty per cent. of such wages.
5. Central Rule mapping — 13, 17, 18. Read the mapped provision together with this text rather than treating the concordance as a substitute for it.
6. Evidence file — retain facts and records proving the role/status of: Employer, Employee / worker, Appropriate Government, Central Government, State Government, Authority / officer.

Rules, forms and cross-references

A direct concordance is not exhaustive. Central/State jurisdiction, schemes, authority appointments, saved instruments and later notifications may change the practical route without changing the section wording.

Worked example

Q&A — Section 18

Source & verification trail