Section 7:
Deductions which may be made from wages.
(1) Notwithstanding the provisions of 1[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.
2[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.
3[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 4[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;
5[(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 4[appropriate Government] by
notification in the Official Gazette;]
(e) deductions for such amenities and services supplied by the employer as the 6*** 4[appropriate
Government] 7[or any officer specified by it in this behalf] may, by general or special order,
authorise;
Explanation--The word "services" in 8[this clause] does not include the supply of tools and raw
materials required for the purposes of employment;]
9[(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 10[appropriate Government], and the interest due in respect
thereof;
(fff) deductions for recovery of loans granted for house-building or other purposes approved by
10[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 11[in clause (38) of section 2 of the Income-tax Act, 1961 (43 of 1961)], or any provident fund
approved in this behalf by 10[appropriate Government], during the continuance of such approval; 12***
13[(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
10[appropriate Government];]
(j) deductions for payments to co-operative societies approved by 10[appropriate Government] 14[or
any officer specified by it in this behalf] or to a scheme of insurance maintained by the Indian Post
Office; 15[and]
15[16[(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 10[appropriate Government] or for being deposited in any Post Office
Savings Bank in furtherance of any savings scheme of any such Government.]]
17[(kk) deductions made, with the written authorisation of the employed person, for the payment 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 10[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);]
18[(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;]
19[(p) deductions, made with the written authorisation of the employed person, for contribution to
the Prime Ministers National Relief Fund or to such other Fund as the Central Government may, by
notification in the Official Gazette, specify;]
20[(q) deductions for contributions to any insurance scheme framed by the Central Government for
the benefit of its employees.]
21[(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 per cent. of such wages, and
(ii) in any other case, fifty per cent. of such wages:
Provided that where the total deductions authorised under sub-section (2) exceed seventy-five per
cent. or, as the case may be, fifty per cent. 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 22[the Railways Act, 1989 (24 of 1989)].]
STATE AMENDMENTS
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].Maharashtra--
Amendment of section 7 of Act IV of 1936.--In section 7 of the Payment of Wages Act, 1936, in subsection (2), in clause (d), after the word "employer" the following shall be added, namely:--
"or the State Government, or the Bombay Housing Board constituted under the Bombay Housing
Board act, 1948, or such other agency as the State Government may, by notification in the Official
Gazette, direct".
[Vide Bombay Act XXXVII of 1956, s. 2].
Amendment of section 7 of Act IV of 1936.--In section 7 of the principal Act, in sub-section (2), in
clause (k), the words "for being deposited in any Post Office Saving bank" shall be deleted.
[Vide Maharashtra Act XIII of 1961. s. 5].
Amendment of section 7 of Act IV of 1936.--In section 7 of the Payment of Wages Act, 1936 (IV of
1936), in sub-section (2),--
(a) in clause (j), the word "and" at the end shall be deleted;
(b) after clause (k), the following new clause shall be added, namely:--
"(l) deduction made, with the consent of the person employed, for contribution towards any
public charitable purpose which the State Government may by notification in the Official Gazette
specify in that behalf."
[Vide Maharashtra Act XLII of 1961, s. 2].
Notes:
1. 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).
2. Explanation renumbered as Explanation I thereof by Act 68 of 1957, s. 5 (w.e.f. 1-4-1958).
3. Ins. by s. 5, ibid. (w.e.f. 1-4-1958).
4. Subs. by Act 41 of 2005, s. 3, for "the State Government" (w.e.f. 9-11-2005).
5. Subs. by Act 68 of 1957, s. 5, for clause (d) (w.e.f. 1-4-1958).
6. The words "Governor-General in Council or" omitted by the A.O. 1937.
7. Ins. by Act 53 of 1964, s. 6 (w.e.f. 1-2-1965).
8. Subs. by Act 56 of 1974, s. 3 and the Second Schedule, for "this sub-clause" (w.e.f. 20-12-1974).
9. Subs. by Act 53 of 1964, s. 6, for clause (f) (w.e.f. 1-2-1965).
10. Subs. by Act 41 of 2005, s. 3, for "the State Government" (w.e.f. 9-11-2005).
11. Subs. by s. 6, ibid., for "in section 58A of the Indian Income-tax Act, 1922" (w.e.f. 9-11-2005).
12. The word "and" omitted by Ordinance 3 of 1940, s. 2.
13. Ins. by Act 42 of 1971, s. 6 (w.e.f. 4-12-1971).
14. Ins. by Act 53 of 1964, s. 6 (w.e.f. 1-2-1965).
15. Added by Ordinance 3 of 1940, s. 2
16. Subs. by Act 68 of 1957, s. 5, for clause (k) (w.e.f. 1-4-1958).
17. Ins. by Act 38 of 1982, s. 7 (w.e.f. 15-10-1982).
18. Ins. by Act 53 of 1964, s. 6 (w.e.f. 1-2-1965).
19. Ins. by Act 29 of 1976, s. 4 (w.e.f. 12-11-1975).
20. Ins. by Act 19 of 1977, s. 2 (w.e.f. 30-6-1977).
21. Ins. by Act 53 of 1964, s. 6 (w.e.f. 1-2-1965).
22. Subs. by Act 41 of 2005, s. 6, for "the Indian Railways Act, 1890" (w.e.f. 9-11-2005).