An employee engaged in an industrial establishment draws wages of Rs. 20,500 per month. What is the amount of bonus to be paid to him if it is paid at the rate of 10% by the employer for an accounting year under the Payment of Bonus Act, 1965?

Answer: Option B

Under the Payment of Bonus Act, 1965, there is a salary ceiling of Rs. 7,000 per month (or the minimum wage, whichever is higher) for calculating bonus, even if the actual salary is higher.

In this case:

Employee's actual salary: Rs. 20,500 per month (which exceeds the ceiling)

Salary considered for bonus calculation: Rs. 7,000 per month (as per the Act)

Bonus rate: 10%

Bonus = 10% of (Rs. 7,000 × 12 months)

Bonus = 10% of Rs. 84,000 = Rs. 8,400

Therefore, even though the employee earns Rs. 20,500 per month, the bonus is calculated on Rs. 7,000 per month, resulting in a bonus amount of Rs. 8,400 only.