Statutory bonus in India
The Payment of Bonus Act, 1965 obliges every factory and every establishment with 20 or more employees to pay an annual bonus to eligible employees out of profits or, where there are none, a minimum bonus. The 2015 amendment raised the eligibility limit to employees drawing salary or wages (basic + DA) up to ₹21,000 per month, and the calculation ceiling to ₹7,000 per month or the minimum wage for the scheduled employment, whichever is higher.
How bonus is calculated
- Eligibility: Basic + DA ≤ ₹21,000 and at least 30 working days in the accounting year.
- Calculation base: actual Basic + DA, but capped at ₹7,000 (or the minimum wage if higher).
- Rate: minimum 8.33% of the annual base; maximum 20%, depending on the allocable surplus.
- Pro-rata: employees who worked part of the year get bonus for the months worked.
Worked example
An employee with Basic + DA ₹15,000 who worked the full year: base is capped at ₹7,000 × 12 = ₹84,000; minimum bonus = 8.33% × 84,000 = ₹6,997.20 (commonly rounded to ₹7,000). At the maximum 20% rate the bonus would be ₹16,800. An employee earning ₹25,000 Basic + DA is outside the Act — any bonus paid is ex-gratia under company policy; tick "Compute on actual wage" to work that out.
Timelines and exemptions
Bonus must be paid within eight months of the close of the accounting year (by 30 November for an April–March year), typically before Diwali. A newly set-up establishment is exempt for the first five accounting years unless it earns profit in any of those years. Bonus can be forfeited for dismissal due to fraud, violent conduct or theft. The amount is taxable as salary in the year of receipt.
Documentation
Maintain Register A (allocable surplus), Register B (set-on/set-off) and Register C (bonus paid) under the Payment of Bonus Rules, and file the annual return in Form D within 30 days of payment.
Frequently Asked Questions
Who is eligible for statutory bonus?
Any employee drawing Basic + DA of ₹21,000 or less per month who has worked at least 30 days in the accounting year, in a factory or an establishment with 20 or more employees.
Why is bonus computed on ₹7,000 when salary is higher?
Section 12 of the Act caps the computation base at ₹7,000 per month or the scheduled minimum wage, whichever is higher. Employers may voluntarily pay on actual salary.
What is the minimum and maximum bonus?
Minimum 8.33% of the annual base (or ₹100, whichever is higher); maximum 20%, decided by the allocable surplus of the establishment.
Can bonus be paid monthly with salary?
Many employers show a monthly "statutory bonus" line of 8.33% of basic. This is permitted as long as the annual amount meets the Act and it is not counted as wages for the next year's bonus.
Disclaimer: This tool is for general information and estimation only. Tax rates and rules change — verify with official sources or a professional before acting. Read full disclaimer.