💰 Payment of Bonus Act, 1965 • FY 2026-27 Compliance
Bonus Calculator India — Payment of Bonus Act Rules
Calculate statutory annual bonus payouts in seconds. Automatically evaluates the ₹21,000 wage ceiling, applies the ₹7,000 statutory calculation cap, and computes rates from 8.33% to 20% under Indian labor laws.
Statutory & Ex-Gratia
Eligible under Section 2(13) of the Payment of Bonus Act, 1965 (Monthly salary ₹ 15,000 is within the ₹ 21,000 ceiling).
Formula: ₹ 7,000 × 12 months × 8.33%
Estimated payout at different allocable surplus rates for this employee
1. Actual Wage ≤ ₹ 7,000: If the employee's monthly Basic + DA is equal to or less than ₹ 7,000, the bonus is calculated on their actual salary.
2. Actual Wage between ₹ 7,000 and ₹ 21,000: Under Section 12, the bonus is capped and calculated as if their monthly salary were ₹ 7,000 (or the state minimum wage, whichever is higher).
3. Actual Wage > ₹ 21,000: The employee is outside statutory coverage under Section 2(13). The employer may grant a discretionary ex-gratia or performance bonus.
Mandatory compliance records, registers, and inspectorate filings under the Payment of Bonus Rules, 1975
Calculates gross profits, statutory deductions (depreciation, direct taxes, development rebates), and computes net allocable surplus available for bonus distribution.
Maintains a rolling 4-year statutory ledger tracking surplus set-on (when allocable surplus exceeds 20%) or set-off (when surplus is insufficient to meet 8.33%).
Official statutory register recording each eligible employee's designated wage, days worked, gross bonus payable, festival advance deductions, and net disbursed amount.
The statutory annual compliance return summarizing total bonus distributed, number of beneficiaries, and allocable surplus percentages.
How Is Statutory Bonus Calculated in India?
Statutory bonus is calculated using the formula: Bonus = Calculation Wage Base × Months Worked in Year × Bonus Rate (%). Employees earning up to ₹21,000 per month (Basic + DA) who have worked for at least 30 days in the financial year are eligible. Under Section 12, the calculation wage is capped at ₹7,000 per month (or the state minimum wage, whichever is higher). The statutory bonus percentage ranges from a mandatory minimum of 8.33% (approx. one month's basic) up to a maximum of 20% based on the employer's allocable surplus. Payment must be disbursed within 8 months of the financial year close (by 30th November).
1. Payment of Bonus Act, 1965: Core Rules & Applicability
In India, the payment of bonus is governed primarily by the Payment of Bonus Act, 1965 (now codified under Chapter IV of the Code on Wages, 2019). The legislation mandates that establishments share a portion of their profits with employees in the form of an annual statutory bonus.
The Act applies to:
- Every factory defined under the Factories Act, 1948.
- Every company, firm, or establishment employing 20 or more persons on any day during an accounting year (some state amendments apply this to 10 or more employees).
- Once an establishment becomes covered under the Act, it continues to be governed by the Act even if the headcount drops below 20 subsequently.
2. Understanding the ₹ 21,000 Ceiling vs the ₹ 7,000 Calculation Cap
One of the most common points of confusion in Indian payroll is the difference between the Eligibility Wage Ceiling and the Calculation Wage Cap:
Eligibility Wage Ceiling: ₹ 21,000
Determines who qualifies for statutory bonus. Any employee whose monthly salary or wage (Basic + DA) is ₹ 21,000 or lower is legally entitled to statutory bonus. Those earning above ₹ 21,000 are outside statutory coverage (ex-gratia applies).
Calculation Wage Cap: ₹ 7,000
Determines how much wage is used in the math. Even if an employee earns ₹ 18,000/month, Section 12 mandates calculating the bonus as if their wage were ₹ 7,000 (or the scheduled employment minimum wage, whichever is higher).
3. Minimum Bonus (8.33%) vs Maximum Bonus (20.00%)
| Category | Statutory Rate | At ₹ 7,000 Cap (Full Year) | Condition & Legal Provision |
|---|---|---|---|
| Minimum Bonus | 8.33% | ₹ 6,997 (≈ ₹ 7,000) | Section 10: Mandatory floor. Payable even if the employer has no allocable surplus or incurs a net financial loss. |
| Maximum Bonus | 20.00% | ₹ 16,800 | Section 11: Upper statutory ceiling. Payable only when allocable surplus permits after accounting for prior set-ons. |
4. Statutory Registers and Filings: Forms A, B, C, & D
Under the Payment of Bonus Rules, 1975, every covered establishment must prepare and maintain the following official compliance registers:
- Form A (Computation of Allocable Surplus): Shows gross profits, depreciation, direct taxes, development rebates, and the net allocable surplus available under Section 2(4).
- Form B (Set-On and Set-Off of Allocable Surplus): Records surpluses exceeding 20% carried forward as 'set-on' or deficit years recorded as 'set-off' for up to 4 consecutive accounting years.
- Form C (Bonus Register): Records the names of employees, working days, gross wages, bonus payable, advance deductions (Puja/Diwali advance), and net amount paid.
- Form D (Annual Return of Bonus Paid): The statutory annual return that must be filed with the regional Labour Inspector within 30 days of the payment due date.
Frequently Asked Questions on Indian Statutory Bonus
The Payment of Bonus Act, 1965 is an Indian statutory labor legislation that provides for the payment of an annual bonus to employees in factories and establishments employing 20 or more persons (10 or more in certain states). The bonus is calculated based on profits or on the basis of production/productivity.
Under Section 2(13) and Section 8 of the Payment of Bonus Act, an employee is eligible if: (1) Their monthly salary/wage (Basic + DA) does not exceed ₹21,000 per month, and (2) They have worked in the establishment for not less than 30 working days in that financial year.
The formula is: Bonus = Calculation Wage Base × Months Worked in Year × Bonus Rate (%). The Calculation Wage Base is capped under Section 12 at ₹7,000 per month (or the state minimum wage for scheduled employment, whichever is higher). The bonus percentage rate ranges between a minimum of 8.33% and a maximum of 20%.
Section 12 of the Payment of Bonus Act explicitly stipulates that if an eligible employee's monthly wage exceeds ₹7,000 (or the applicable minimum wage), the bonus payable must be calculated as if their wage were ₹7,000 per month. Therefore, even if an employee earns ₹18,000, their statutory bonus is calculated on ₹7,000.
Yes. Under Section 10 of the Act, every employer is legally bound to pay a minimum statutory bonus of 8.33% of the eligible wage (or ₹100, whichever is higher), irrespective of whether the employer has an allocable surplus or incurs a financial loss in that accounting year.
Under Section 11 of the Act, the maximum statutory bonus is 20% of the eligible salary/wage earned during the accounting year. The rate between 8.33% and 20% depends on the company's available 'allocable surplus'.
Under Section 19 of the Act, all bonus payments must be disbursed in cash or bank transfer within 8 months from the close of the accounting year. For organizations following the April–March financial year, the statutory deadline is 30th November.
Employees earning more than ₹21,000 per month are outside the statutory coverage of the Payment of Bonus Act. However, employers can voluntarily offer an Ex-Gratia bonus, performance incentive, or festive Diwali bonus as part of their company compensation policy.
Under the Payment of Bonus Rules, 1975, employers must maintain: Form A (Computation of Allocable Surplus), Form B (Set-on and Set-off of Allocable Surplus), Form C (Register of Bonus Paid to Employees), and file Form D (Annual Return of Bonus Paid) with the regional Inspector within 30 days of the payment deadline.
Yes. Under Section 9 of the Act, an employee is disqualified from receiving bonus if dismissed from service for: (a) Fraud, (b) Riotous or violent behavior on premises, or (c) Theft, misappropriation, or sabotage of company property.
Yes. Statutory bonus and ex-gratia payments are treated as salary income under the Income Tax Act, 1961, and are subject to applicable TDS deductions at normal income tax slab rates.
The Code on Wages, 2019 consolidates the Payment of Bonus Act, 1965. It retains the 8.33% minimum and 20% maximum bonus rates and introduces an updated definition of 'wages' with a 50% allowance cap to ensure uniform computation.
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