THE PAYMENT OF WAGES ACT, 1936

Section 7 — Deductions which may be made from wages

(1)Notwithstanding the provisions of 2[the Railways Act, 1989 (24 of 1989)], the wages of an employed person shall be paid to him without deductions of any kind except those authorised by or under this Act. 3[Explanation I].-Every payment made by the employed person to the employer or his agent shall, for the purposes of this Act, be deemed to be a deduction from wages. 4[Explanation II.-Any loss of wages resulting from the imposition, for good and sufficient cause, upon a person employed of any of the following penalties, namely:— (i) the withholding of increment or promotion (including the stoppage of increment at an efficiency bar): (ii) the reduction to a lower post or time scale or to a lower stage in a time scale: or (iii) suspension, shall not be deemed to be a deduction from wages in any case where the rules framed by the employer for the imposition of any such penalty are in conformity with the requirements, if any, which may be specified in this behalf by 5[appropriate Government] by notification in the Official Gazette.] (2) Deductions from the wages of an employed person shall be made only in accordance with the provisions of this Act, and may be of the following kinds only, namely:— (a) fines; (b) deductions for absence from duty; (c) deductions for damage to or loss of goods expressly entrusted to the employed person 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; 6 [(d) deductions for house-accommodation supplied by the employer or by Government or any housing board set up under any law for the time being in force (whether the Government or the board is the employer or not) or any other authority engaged in the business of subsidizing house-accommodation which may be specified in this behalf by 5[appropriate Government] by notification in the Official Gazette;] (e) deductions for such amenities and services supplied by the employer as the 7*** 5[appropriate Government] 8[or any officer specified by it in this behalf] may, by general or special order, authorise;

Explanation— The word “services” in 9[this clause] does not include the supply of tools and raw materials required for the purposes of employment;]

1[(f) deductions for recovery of advances of whatever nature (including advances for travelling allowance or conveyance allowance), and the interest due in respect thereof, or for adjustment of over-payments of wages;

(ff) deductions for recovery of loans made from any fund constituted for the welfare of labour in accordance with the rules approved by 2[appropriate Government], and the interest due in respect thereof;

(fff) deductions for recovery of loans granted for house-building or other purposes approved by 2[appropriate Government] and the interest due in respect thereof;]

(g) deductions of income-tax payable by the employed person;

(h) deductions required to be made by order of a Court or other authority competent to make such order;

(i) deductions for subscriptions to, and for repayment of advances from any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies or any recognized provident fund as defined 3[in clause (38) of section 2 of the Income-tax Act, 1961 (43 of 1961)], or any provident fund fund approved in this behalf by 2[appropriate Government], during the continuance of such approval; 4***

5[(ii) deductions made with the written authorisation of—

(i) the employed person; or

(ii) the president or secretary of the registered trade union of which the employed person is a member on such conditions as may be prescribed,

for contribution to the National Defence Fund or to any Defence Savings Scheme approved by 2[appropriate Government];]

(j) deductions for payments to co-operative societies approved by 2[appropriate Government] 6[or Government] 6[or any officer specified by it in this behalf] or to a scheme of insurance maintained by the Indian Post Office; 7[and]

7[ 8[(k) deductions, made with the written authorisation of the person employed for payment of any premium on his life insurance policy to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or for the purchase of securities of the Government of India or of any 2[appropriate Government] or for being deposited in any Post Office Savings Bank in furtherance of any savings scheme of any such Government.]]

9[(kk) deductions made, with the written authorisation of the employed person, for the payment of of his contribution to any fund constituted by the employer or a trade union registered under the Trade Union Act, 1926 (16 of 1926), for the welfare of the employed persons or the members of their families, or both, and approved by 2[appropriate Government] or any officer specified by it in this behalf, during the continuance of such approval;

(kkk) deductions made, with the written authorisation of the employed person, for payment of the fees payable by him for the membership of any trade union registered under the Trade Unions Act, 1926 (16 of 1926);] 1[(l) deductions for payment of insurance premia on Fidelity Guarantee Bonds; (m) deductions for recovery of losses sustained by a railway administration on account of acceptance by the employed person of counterfeit or base coins or mutilated or forged currency notes; (n) deductions for recovery of losses sustained by a railway administration on account of the failure of the employed person to invoice, to bill, to collect or to account for the appropriate charges due to that administration whether in respect of fares, freight, demurrage, wharfage and carnage or in respect of sale of food in catering establishments or in respect of sale of commodities in grain shops or otherwise; (o) deductions for recovery of losses sustained by a railway administration on account of any rebates or refunds incorrectly granted by the employed person where such loss is directly attributable to his neglect or default;] 2[(p) deductions, made with the written authorisation of the employed person, for contribution to the Prime Minister‟s National Relief Fund or to such other Fund as the Central Government may, by notification in the Official Gazette, specify;] 3[(q) deductions for contributions to any insurance scheme framed by the Central Government for for the benefit of its employees.] 4[(3) Notwithstanding anything contained in this Act, the total amount of deductions which may be made under sub-section (2) in any wage-period from the wages of any employed person shall not exceed— (i) in cases where such deductions are wholly or partly made for payments to co-operative societies under clause (j) of sub-section (2), seventy-five percent. of such wages, and (ii) in any other case, fifty percent. of such wages: Provided that where the total deductions authorised under sub-section (2) exceed seventy-five percent. or, as the case may be, fifty percent. of the wages, the excess may be recovered in such manner as may be prescribed. (4) Nothing contained in this section shall be construed as precluding the employer from recovering from the wages of the employed person or otherwise any amount payable by such person under any law for the time being in force other than 5[the Railways Act, 1989 (24 of 1989)].] STATE AMENDMENT Kerala Amendment of section 7.—In section 7 of the Payment of Wages Act, 1936 (Central Act 4 of 1936), in sub-section (2), after clause (o), the following clause shall be inserted, namely.— “(p) deductions for repayment to the State Government of the amount of financial and granted under the Kerala Financial And (to the Discharged or Dismissed Labour) Rules, 1958” [Vide Kerala Act 34 of 1969, sec. 2.] (w.e.f. 8-10-1969). Karnataka Amendment of section 7.—In section 7 of the principal Act in sub-section (2), after clause (p), the following clauses shall be added namely:— “(q) deductions to recover from a person re-employed after the termination of his former employment any amount paid to him from a provident fund or as a gratuity on such termination: Provided that such recovery shall not exceed 20 per cent of total earnings. Re-employment in this context means employment under the same employer; (r) deduction specially authorised by the State Government for purposes beneficial to the employed person”. [Vide Karnataka Act 2 of 1977, s. 3]. Karnataka Amendment of section 7.—In section 7 of the Payment of Wages Act, 1936 (Central Act 4 of 1936) (hereinafter referred to as the principal Act), clause (r) shall be omitted. [Vide Karnataka Act 2 of 1982, s. 2].