Section 38: Deduction of certain amounts from bonus payable
Reviewed by Finin2min Editorial Desk · Last reviewed 30 August 2026
Allows deduction from bonus for financial loss caused by employee misconduct in the same accounting year, within the statutory boundary.
Principal remaining provisions commenced on 21 November 2025 under S.O. 5322(E), read with the earlier partial commencement; check section-specific footnotes in the current India Code text.
Provision / India Code ↗ · Official Act PDF ↗ · 2026 Central Rules ↗
Finin2min analysis — what the section actually does
Operative clauses
- Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the employee under this Code in respect of that accounting year only and the employee shall be entitled to receive the balance, if any.
Provisos, explanations & qualifications
- No proviso/explanation was separately extracted from this section text.
Thresholds and timelines in the text
- Deduction of certain amounts from bonus payable.—Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the employee under this Code in respect of that accounting year only and the…
Actors expressly appearing in the text
Employer, Employee / worker
Full statutory text — Section 38
38. Deduction of certain amounts from bonus payable.—Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the employee under this Code in respect of that accounting year only and the employee shall be entitled to receive the balance, if any.
How to apply this provision
- Primary statutory test — Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the employee under this Code in respect of that accounting year only and the employee shall be entitled to receive the balance, if any.
- Numerical or timing control — Deduction of certain amounts from bonus payable.—Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the employee under this Code in respect of that accounting year only and the…
- Evidence file — retain facts and records proving the role/status of: Employer, Employee / worker.
Rules, forms and cross-references
Direct 2026 Central Rule mapping
Forms mapped
No prescribed form is directly mapped in the current concordance.
Other sections cited in this text
Related Labour Hub resources
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
An employer configuring payroll for deduction of certain amounts from bonus payable should first identify the employee and wage period, then apply the exact provision and any linked rule. The system rule should be tested against a sample payslip and bank/payment record. A text point to test is: “Deduction of certain amounts from bonus payable.—Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the e”
Illustration only; it is not statutory text or a substitute for applying the actual facts, jurisdiction, current rule/scheme and official instrument.
Q&A — Section 38
What does Section 38 of the Code on Wages cover?
Allows deduction from bonus for financial loss caused by employee misconduct in the same accounting year, within the statutory boundary.
What is the main legal requirement or power in Section 38?
The first operative clause identified from the official text is: “Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the employee under this Code in respect of that accounting year only and the employee shall be entitled to receive the balance, if any.” Read it with the remaining subsections and any proviso below.
Does Section 38 contain a proviso or explanation?
No standalone proviso or explanation was extracted from this section text. Check the full text below for clause-level qualifications.
What time limit, percentage or amount appears in Section 38?
The provision contains this numerical/time expression: “Deduction of certain amounts from bonus payable.—Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the employee under this Code in respect of that accounting year only and the…” Apply it only in the clause and context in which it appears.
Which 2026 Central Rules are linked to Section 38?
No direct Central Rule is recorded in the current concordance. That does not exclude a relevant scheme, notification, State rule or enabling provision.
Is Section 38 currently operative?
Principal remaining provisions commenced on 21 November 2025 under S.O. 5322(E), read with the earlier partial commencement; check section-specific footnotes in the current India Code text.
Source & verification trail
Act: Code on Wages, 2019 — official India Code PDF ↗
Central Rules: Code on Wages (Central) Rules, 2026 — G.S.R. 343(E), 8 May 2026 ↗
Official library: Ministry of Labour & Employment — Labour Codes ↗
Source check: 20 August 2026. Individual professional interpretation should be re-reviewed when the section, rules, notification, scheme, State overlay or controlling judgment changes.