A fine is allowed only for acts and omissions approved in advance and displayed on a notice (section 19). The total fine in a wage period cannot exceed 3% of wages, cannot be imposed on anyone under 15, cannot be recovered in instalments or after 90 days, and realisations must be spent on purposes beneficial to the workers. Deductions for damage or loss cannot exceed the actual loss (section 21). Give seven days to show cause and intimate the fine within 15 days (rules 16 to 18). Record both in Form IV columns 24, 25, 31 to 33.
Register of fines and deductions (format)
REGISTER OF FINES AND DEDUCTIONS FOR DAMAGE OR LOSS
(record also in Form IV, columns 24, 25, 31, 32 and 33)
Establishment: [NAME] Year: [2026]
Approved list of acts and omissions displayed on: [DATE] (approval ref. [NUMBER])
PART A: FINES (section 19)
Sl. Emp. Name Act/omission Show cause Reply Wages for Fine 3% cap Date of Date of
No. code and date issued on received the period imposed check intimation realisation
1 E-021 Sunita Devi Smoking in 06/10/2026 09/10 18,200 400 546 OK 12/10 06/11/2026
store, 05/10
PART B: DEDUCTIONS FOR DAMAGE OR LOSS (section 21)
Sl. Emp. Name Damage/loss and date Value of Show cause Explanation Amount Date of
No. code loss issued on (summary) deducted deduction
1 E-014 Ravi Kumar Dropped carton, 02/10 1,200 03/10/2026 Admitted 1,200 06/11/2026
PART C: FINE FUND
Opening balance [ ] | Fines realised [400] | Spent on (purpose approved) [ ] | Closing balance [ ]
Signature of employer / authorised person: ________How to fill it
- Before imposing any fine, list the acts and omissions, obtain approval (under the Central Rules, from the Deputy Chief Labour Commissioner (Central), rule 14) and display the notice in Hindi, English and the local language (rule 15).
- Serve a show cause notice. The employee has seven days to reply (rule 16(1)).
- If the charge is established, or no reply comes, impose the fine and inform the employee within 15 days (rule 16(3)).
- Check the 3% cap against wages for that wage period. In the example, 3% of ₹18,200 is ₹546, so a ₹400 fine is within the cap.
- Recover it in one deduction within 90 days and enter it in Form IV.
Damage, absence and the 50% ceiling
- Damage or loss: only for goods expressly entrusted to the employee or loss caused by neglect or default, never more than the loss, and only after an opportunity to explain (section 21; rule 18).
- Absence: a deduction for absence must be proportionate to the period absent (section 20). Rule 17 requires a seven-day intimation before a deduction under the proviso.
- 50% ceiling: all deductions together (fines, damage, advances, PF, ESI, tax and so on) cannot exceed half of the wages in the period (section 18(3)).
The forms named here are those of the Central Rules, which apply where the Central Government is the appropriate government (for example central PSUs, banks, railways, mines, major ports and their contractors). For most shops, offices and factories the State Government is the appropriate government: follow your State's rules under the Labour Codes. Where a State has not yet notified final rules, section 69(2) of the Code on Wages keeps things done under the repealed Acts in force so far as they are not contrary to the Code, so many employers continue the earlier State formats. The Central formats contain every field the Codes ask for, which makes them a safe single layout.
Keep it clean in payroll
FundRaksha HR lets you add a fine or damage deduction with its reason and date, warns when the 3% or 50% limit is crossed and shows it on the payslip. For warnings before any fine, use the warning letter format.
Sources
Last reviewed: 2026-10-21. Information for Indian businesses; not legal advice.