The Additional Emoluments (Compulsory Deposit) Act of 1974 was enacted by the Parliament which came into force on July 6, 1974. The provisions of the Act applies to the employee of Central Government, State Government, local authority, Company, Government and Foreign Company, Corporations, partnership firms, financial establishments under the control of the Government and other establishments as provided under the Act. The basic intention behind the enactment is to provide a compulsory scheme for the deposit of additional allowances received by an employee working in the establishments specified by the Act.

The Act shall be enforced without considering the inconsistency with other legislations or other legal instruments other than the present legislation. The concerned authorities shall create an account for the deposit of Additional Wages and Additional Dearness Allowances and for this purpose authorities may be formed for the establishments and their employees separately. For this purpose a ledger account shall be opened for each employee in whose favor the amount is remitted and credit the amount to that ledger account.

The Act confers duty on the employer or any person related with the employer to deduct the added wages or dearness allowances from grants provided to the employee for such period provided in the Act. The amount that is credited to the account created by the authorities shall be accompanied by a simple interest which shall be at the rate of two and a half percent in addition to the bank interest. The interest payable on the account shall be calculated as per the procedure laid down under the scheme. In order to calculate the income tax of an employee who is guided by the provisions of the current enactment, the additional amount credited to the ledger account shall also be taken into consideration. The amount credited to the ledger account of the employee shall be repaid to the employee according to the terms provided by the Act. But the employee can keep hold of the deposit until his superannuation or till the date indicated by the Central Government.

 The Central Government is also empowered to prepare schemes for crediting funds to the deposit account under the Act. The scheme shall provide for the constitution of authorities for creating deposit accounts for additional wages and additional dearness allowance. Further, the scheme shall include the manner and time according to which the allowances shall be deducted and thereafter credited to the deposit account. The relevant documents to be provided to the employee and the issue of duplicate copy of the documents in case of loss shall also be determined under the Scheme. The Scheme shall also mention the accounts to be retained by the concerned authority for the funds credited to the ledger account. The conditions for the repayment of the deposit amount and the interest to be paid for such deposits shall be provided under the scheme framed by the Central government.

The persons who does not deduct the additional wages or dearness allowance of the employee or any one who makes any false representations shall be penalized according to the provisions of the Act. The authorities acting under the act shall be deemed as public servants within the meaning of Indian Penal Code. The Central Government is empowered under the Act to formulate rules for the proper implementation of the provisions of the Act. The present Act repealed the Additional Emoluments (Compulsory Deposit) Ordinance, 1974 by section 27 of the Act.

The Act is an imperative attempt on the part of the Government to provide compulsory savings to the employees throughout their course of employment. The scheme provides for the repayment of amount at the time of retirement or on demand under definite stipulations. In addition to pension, the employee shall collect a lump sum amount as retirement benefit which shall be utilized by the employee for his further sustenance. Hence, the Act is a welfare legislation enacted for the benefit of the employees which assures security for their employment.