Labour Code Advisor

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].

View Act Footnotes

Note: In the legacy archives, footnotes are grouped by original PDF page numbers rather than by section.

Page 3

  • 1. The Act has been extended to Goa, Daman and Diu by Reg. 12 of 1962, s. 3 and the Schedule to Dadra and Nagar Haveli byReg. 6 of 1963, s. 2 and the First Schedule to Pondicherry by Reg. 7 of 1963, s. 3 and the First Schedule and to Lakshadweepby Reg. 8 of 1965, s. 3 and the Schedule.
  • 2. Subs. by Act 38 of 1982, s. 2 for “persons employed in industry” (w.e.f. 15-10-1982).
  • 3. Subs. by the A.O. 1950, for sub-section (2).
  • 4. The words “except the State of Jammu and Kashmir” omitted by Act 51 of 1970, s. 2 and the Schedule (w.e.f. 1-9-1971).
  • 5. 28th March 1937, see Gazette of India, 1937, Pt. I, pg. 626.
  • 6. Subs. by Act 38 of 1982, s. 3, for “factory and to persons” (w.e.f. 15-10-1982).
  • 7. Ins. by s. 3, ibid. (w.e.f. 15-10-1982).
  • 8. Subs. by Act 41 of 2005, s. 3, for “the State Government” (w.e.f. 9-11-2005).
  • 9. Subs. by Act 68 of 1957, s. 2, for “the Act” (w.e.f. 1-4-1958.)10. Subs. by Act 38 of 1982, s. 3, for “any industrial establishment or in any class or group of industrial establishments”(w.e.f. 15-10-1982).11. Subs. by Act 41 of 2005, s. 3, for “the Central Government or a State Government” (w.e.f. 9-11-2005).12. Subs. by Act 38 of 1982, s. 3, for the proviso (w.e.f. 15-10-1982).13. Subs. by Act 41 of 2005, s. 2, for sub-section (6) (w.e.f. 9-11-2005).14. Subs. by S.O. 2806 (E), dated 28-8-2017, for “eighteen thousand rupees”, see Gazette of India, Extraordinary, Part II, s. 3(ii).15. Ins. by s. 4, ibid. (w.e.f. 9-11-2005).

Page 4

  • 1. Subs. by Act 53 of 1964, s. 3, for clause (i) (w.e.f. 1-2-1965).
  • 2. Clauses (i), (ia) and (ib) renumbered as clauses (ia), (ib) and (ic) thereof by Act 41 of 2005, s. 4 (w.e.f. 9-11-2005).
  • 3. Subs. by Act 38 of 1982, s. 4, for „ “industrial establishment” means‟ (w.e.f. 15-10-1982).
  • 4. Subs. by Act 53 of 1964, s. 3, for sub-clause (a) (w.e.f. 1-2-1965).
  • 5. Subs. by Act 68 of 1957, s. 3, for item (c) (w.e.f. 1-4-1958.)
  • 6. Ins. by s. 3, ibid. (w.e.f. 1-4-1958.)
  • 7. Ins. by Act 38 of 1982, s. 4 (w.e.f. 15-10-1982).
  • 8. Subs. by Act 41 of 2005, s. 3, for “the Central Government or a State Government” (w.e.f. 9-11-2005).
  • 9. Ins. by Act 53 of 1964, s. 3 (w.e.f. 1-2-1965).10. Subs. by s. 3, ibid., for clause (iii) (w.e.f. 1-2-1965).11. Subs. by Act 41 of 2005, s. 4, for clause (v) (w.e.f. 9-11-2005).

Page 5

  • 1. Subs. by Act 68 of 1957, s. 3, for clause (vi) (w.e.f. 1-4-1958.)
  • 2. Subs. by Act 41 of 2005, s. 3, for “the State Government” (w.e.f. 9-11-2005).
  • 3. Subs. by s. 5, ibid.,for section 3 (w.e.f. 9-11-2005).

Page 6

  • 1. Subs. by Act 38 of 1982, s. 6, for “industrial establishment” (w.e.f. 15-10-1982).
  • 2. Added by Act 53 of 1964, s. 5 (w.e.f. 1-2-1965).
  • 3. Subs. by Act 41 of 2005, s. 3, for “the State Government” (w.e.f. 9-11-2005).
  • 4. Ins. by Act 53 of 1964, s. 5 (w.e.f. 1-2-1965).
  • 5. Subs. by Act 41 of 2005, s. 3, for “the Central Government or a State Government” (w.e.f. 9-11-2005).
  • 6. Subs. by Act 53 of 1964, s. 5, for “All payments” (w.e.f. 1-2-1965).

Page 7

  • 1. Subs. by Act 1 of 2017, s. 2, for section 6 (w.e.f. 28-12-2016).
  • 2. Subs. by Act 41 of 2005, s. 6, for “sub-section (2) of section 47 of the Indian Railways Act, 1890 (9 of 1890)” (w.e.f. 9-11-2005).
  • 3. Explanation renumbered as Explanation I thereof by Act 68 of 1957, s. 5 (w.e.f. 1-4-1958).
  • 4. Ins. by s. 5, ibid. (w.e.f. 1-4-1958).
  • 5. Subs. by Act 41 of 2005, s. 3, for “the State Government” (w.e.f. 9-11-2005).
  • 6. Subs. by Act 68 of 1957, s. 5, for clause (d) (w.e.f. 1-4-1958).
  • 7. The words “Governor-General in Council or” omitted by the A.O. 1937.
  • 8. Ins. by Act 53 of 1964, s. 6 (w.e.f. 1-2-1965).
  • 9. Subs. by Act 56 of 1974, s. 3 and the Second Schedule, for “this sub-clause” (w.e.f. 20-12-1974).

Page 8

  • 1. Subs. by Act 53 of 1964, s. 6, for clause (f) (w.e.f. 1-2-1965).
  • 2. Subs. by Act 41 of 2005, s. 3, for “the State Government” (w.e.f. 9-11-2005).
  • 3. Subs. by s. 6, ibid., for “in section 58A of the Indian Income-tax Act, 1922” (w.e.f. 9-11-2005).
  • 4. The word “and” omitted by Ordinance 3 of 1940, s. 2.
  • 5. Ins. by Act 42 of 1971, s. 6 (w.e.f. 4-12-1971).
  • 6. Ins. by Act 53 of 1964, s. 6 (w.e.f. 1-2-1965).
  • 7. Added by Ordinance 3 of 1940, s. 2
  • 8. Subs. by Act 68 of 1957, s. 5, for clause (k) (w.e.f. 1-4-1958).
  • 9. Ins. by Act 38 of 1982, s. 7 (w.e.f. 15-10-1982).

Page 9

  • 1. Ins. by Act 53 of 1964, s. 6 (w.e.f. 1-2-1965).
  • 2. Ins. by Act 29 of 1976, s. 4 (w.e.f. 12-11-1975).
  • 3. Ins. by Act 19 of 1977, s. 2 (w.e.f. 30-6-1977).
  • 4. Ins. by Act 53 of 1964, s. 6 (w.e.f. 1-2-1965).
  • 5. Subs. by Act 41 of 2005, s. 6, for “the Indian Railways Act, 1890” (w.e.f. 9-11-2005).

Page 11

  • 1. Subs. byAct 41 of 2005, s. 3, for “the State Government” (w.e.f. 9-11-2005).
  • 2. Subs. by Act 38 of 1982, s. 8, for “half-an-anna in the rupee” (w.e.f. 15-10-1982).
  • 3. Subs. by Act 41 of 2005, s. 7, for “sixty days” (w.e.f. 9-11-2005).
  • 4. Subs. by Act 38 of 1982, s. 8, for “industrial establishment” (w.e.f. 15-10-1982).
  • 5. Subs. by Act 41 of 2005, s. 3, for “the State Government” (w.e.f. 9-11-2005).
  • 6. Added by Act 22 of 1937, s. 2 (w.e.f. 14-4-1937).

Page 12

  • 1. Subs. by Act 53 of 1964, s. 7, for sub-section (1) (w.e.f. 1-2-1965).
  • 2. The words “the Governor-General in Council or” omitted by the A.O. 1937.
  • 3. Subs. by Act 41 of 2005, s. 3, for “the State Government” (w.e.f. 9-11-2005).
  • 4. Ins. by Act 53 of 1964, s. 8 (w.e.f. 1-2-1965).
  • 5. Ins. by s. 9, ibid. (w.e.f. 1-2-1965).
  • 6. Ins. by Ordinance 3 of 1940, s. 3.

Page 13

  • 1. Ins. by Act 53 of 1964, s. 10 (w.e.f. 1-2-1965).
  • 2. Subs. by Act 68 of 1957, s. 6, for “sub-section (1) of section 10 of the Factories Act, 1934” (w.e.f. 1-4-1958).
  • 3. Subs. by Act 41 of 2005, s. 3, for “the State Government” (w.e.f. 9-11-2005)
  • 4. Subs. by Act 38 of 1982, s. 9, for “industrial establishments” (w.e.f. 15-10-1982).
  • 5. Subs. by Act 53 of 1964, s. 11, for sub-section (4) (w.e.f. 1-2-1965).
  • 6. Subs. by Act 38 of 1982, s. 9, for “industrial establishment” (w.e.f. 15-10-1982).
  • 7. Subs. by s. 9, ibid., for “Code of Criminal Procedure, 1898” (w.e.f. 15-10-1982).
  • 8. Subs. by s. 9, ibid.,for “section 98” (w.e.f. 15-10-1982).

Page 14

  • 1. Ins. by Act 53 of 1964, s. 12 (w.e.f. 1-2-1965).
  • 2. Subs. by Act 41 of 2005, s. 8, for sub-section (1) (w.e.f. 9-11-2005).
  • 3. Subs. by Act 53 of 1964, s. 13, for “six months” (w.e.f. 1-2-1965).
  • 4. Subs. by Act 41 of 2005, s. 8, for sub-section (3) (w.e.f. 9-11-2005).

Page 15

  • 1. Subs. by Act 53 of 1964, s. 13, for sub-section (4) (w.e.f. 1-2-1965).
  • 2. Subs. by Act 41 of 2005, s. 8, for “not exceeding fifty rupees” (w.e.f. 9-11-2005).
  • 3.Subs. by s. 3, ibid., for “the State Government” (w.e.f. 9-11-2005).

Page 16

  • 1. Ins. by Act 53 of 1964, s. 14 (w.e.f. 1-2-1965).
  • 2. Subs. by s. 14, ibid., for “the maximum compensation that may be awarded under sub-section (3) of section 15 shall be tenrupees per head” (w.e.f. 1-2-1965).
  • 3. Subs. by Act 68 of 1957, s. 7, for “An appeal against a direction made under sub-section (3) or sub-section (4) of section 15”(w.e.f. 1-4-1958).
  • 4. Subs. by s. 7,ibid., for “the direction” (w.e.f. 1-4-1958).
  • 5. The words “or in Rangoon” omitted by the A.O. 1937.

Page 17

  • 1. Ins. by Act 53 of 1964, s. 15 (w.e.f. 1-2-1965).
  • 2. Subs. by s.15, ibid., for clause (b) (w.e.f. 1-2-1965).
  • 3. Subs. by Act 20 of 1937, s. 2 and the First Schedule, for “sub-section (5) (w.e.f. 14-4-1937).
  • 4. Subs. by Act 68 of 1957, s. 7, for sub-section (2) (w.e.f. 1-4-1958).
  • 5. Ins. by Act 53 of 1964, s. 15 (w.e.f. 1-2-1965).
  • 6. Ins. by Act 68 of 1957, s. 8 (w.e.f. 1-4-1958).
  • 7. Subs. by Act 53 of 1964, s. 16, for “any official of a registered trade union authorised in writing to act on his behalf"”(w.e.f. 1-2-1965).

Page 18

  • 1. Subs. by Act 38 of 1982, s. 10, for “Chapter XXVI of the Code of Criminal Procedure, 1973” (w.e.f. 15-10-1982).
  • 2. Subs. by Act 53 of 1964, s. 18, for “section 5 and sections 7 to 13” (w.e.f. 1-2-1965).
  • 3. Subs. by Act 41 of 2005, s. 9, for “with fine which shall not be less than two hundred rupees but which may extend to onethousand rupees” (w.e.f. 9-11-2005).
  • 4. Subs. by Act 53 of 1964, s.18, for “section 6” (w.e.f. 1-2-1965).
  • 5. Subs. by Act 41 of 2005, s. 9, for “with fine which may extend to five hundred rupees” (w.e.f. 9-11-2005).
  • 6. Ins. by Act 41 of 2005, s. 9 (w.e.f. 9-11-2005).
  • 7. Ins. by Act 53 of 1964, s.18 (w.e.f. 1-2-1965).

Page 19

  • 1. Subs. by Act 38 of 1982, s. 11, for “industrial establishment” (w.e.f. 15-10-1982).
  • 2. Subs. by Act 41 of 2005, s. 9, for “with fine which shall not be less than two hundred rupees but which may extend to onethousand rupees” (w.e.f. 9-11-2005).
  • 3. Subs. by s. 9, ibid., for “with fine which shall not be less than five hundred rupees but which may extend to three thousandrupees” (w.e.f. 9-11-2005).
  • 4. Subs. by s. 9, ibid.,for “one hundred rupees” (w.e.f. 9-11-2005).
  • 5. Ins. by Act 53 of 1964, s.19 (w.e.f. 1-2-1965).

Page 20

  • 1. Ins. by Act 53 of 1964, s. 20(w.e.f. 1-2-1965).
  • 2. Subs. by Act 41 of 2005, s. 10, for section 24 (w.e.f. 9-11-2005).

Page 21

  • 1. Subs. by Act 38 of 1982, s. 12, for “employed in a factory” (w.e.f. 15-10-1982).
  • 2. Subs. by s. 12, ibid., for “displayed in such factory” (w.e.f. 15-10-1982).
  • 3. Subs. by s. 12, ibid.,for “in the factory” (w.e.f. 15-10-1982).
  • 4. Ins. by s. 13, ibid. (w.e.f. 15-10-1982).
  • 5. Subs. by Act 41 of 2005, s. 3, for “the State Government” (w.e.f. 9-11-2005).
  • 6. The words “subject to the control of the Governor-General in Council,” omitted by the A.O. 1937.
  • 7. Subs. by Act 53 of 1964, s. 22, for “and prescribed the form thereof” (w.e.f. 1-2-1965).

Page 22

  • 1. Ins. by Act 53 of 1964, s. 22 (w.e.f. 1-2-1965).
  • 2. The word “and” omitted by Act 53 of 1964, s. 22 (w.e.f. 1-2-1965).
  • 3. The word “and” omitted by Act 38 of 1982, s. 14 (w.e.f. 15-10-1982).
  • 4. Ins. by s. 14, ibid. (w.e.f. 15-10-1982).
  • 5. Subs. by Act 41 of 2005, s. 3, for “the State Government” (w.e.f. 9-11-2005).
  • 6. Subs. by s. 11, ibid.,for “which may extend to two hundred rupees” (w.e.f. 9-11-2005).
  • 7. Subs. by Act 38 of 1982, s. 14, for “two successive sessions” (w.e.f. 15-10-1982).
  • 8. Subs. by s. 14, ibid.,for “in which it is so laid or the session immediately following” (w.e.f. 15-10-1982).
  • 9. Ins. by Act 41 of 2005, s. 11 (w.e.f. 9-11-2005).
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