Statutory Bonus in India: Eligibility and Calculation
Who gets statutory bonus under the Code on Wages, the 8.33% and 20% limits, the ₹21,000 and ₹7,000 figures notified in 2026, a worked example and the due date.
Short answer: under the Code on Wages, 2019, an establishment with 20 or more people must pay every employee earning up to ₹21,000 a month who worked at least 30 days in the year a bonus of at least 8.33% of wages (or ₹100, whichever is higher), and up to 20% when profits allow. For anyone earning above ₹7,000, the bonus is worked out as if their wage were ₹7,000 or the applicable minimum wage, whichever is higher. It must be paid within eight months of the end of the accounting year — by 30 November for an April–March year.
Where the rules come from now
The Payment of Bonus Act, 1965 was replaced by Chapter IV of the Code on Wages when the labour codes came into force on 21 November 2025. The Code does not print rupee figures; it leaves them to be notified. On 25 August 2026 the Ministry of Labour and Employment notified the central figures, with effect from 21 November 2025:
- S.O. 4711(E), under section 26(1): employees drawing wages up to ₹21,000 a month are eligible.
- S.O. 4710(E), under section 26(2): for eligible employees whose wages are above ₹7,000 a month, bonus is calculated on ₹7,000 or the minimum wage fixed by the Central Government, whichever is higher.
These are the central government's figures. States are the "appropriate government" for most private establishments and can notify their own, so confirm with your CA which figure applies to you.
Who is eligible
- The establishment employed 20 or more persons on any day of the accounting year (section 41(2)). One day at 20 is enough.
- The employee's wages are not more than ₹21,000 a month.
- The employee worked at least 30 days in the accounting year.
An employee can be disqualified for specific misconduct listed in the Code, such as fraud or theft. A new establishment generally has to pay bonus in its first five years only for years in which it makes a profit; the Code sets out how that works.
How much: the minimum and the maximum
| Rule | What it means |
|---|---|
| Minimum bonus | 8.33% of wages earned in the year, or ₹100, whichever is higher. Payable even if there is no allocable surplus. |
| Maximum bonus | 20% of wages earned. Applies when the allocable surplus (a share of the year's profit, worked out under the Code) is large enough. |
| Between the two | Bonus in proportion to wages, according to the allocable surplus. |
| Calculation base | For wages above ₹7,000 a month: ₹7,000 or the applicable minimum wage, whichever is higher. |
"Wages" here follows the Code's definition: basic, DA and retaining allowance, with excluded allowances added back to the extent they exceed half of total pay.
A worked example
A design studio with 24 people follows an April–March year. Assume the minimum wage that applies to these roles is ₹12,000 a month; the real figure depends on your state, zone and skill category, so look it up for your case.
| Employee | Monthly wages (₹) | Months worked | Eligible? | Bonus base (₹) | Minimum 8.33% (₹) | Maximum 20% (₹) |
|---|---|---|---|---|---|---|
| Priya | 18,000 | 12 | Yes | 12,000 × 12 = 1,44,000 | 11,995 | 28,800 |
| Sameer | 15,000 | 7 | Yes | 12,000 × 7 = 84,000 | 6,997 | 16,800 |
| Kavya | 26,000 | 12 | No, above ₹21,000 | — | — | — |
Priya earns ₹18,000, but because that is above ₹7,000, her bonus is worked out on ₹12,000 — the higher of ₹7,000 and the assumed minimum wage. Sameer joined mid-year, so his base counts only the months he worked. Kavya earns more than ₹21,000, so she has no statutory right to bonus, though the company can still pay her a performance bonus by choice.
Many employers simply pay 8.33% every year and treat anything more as a performance bonus. That meets the minimum. Whether you owe more than the minimum depends on the allocable surplus, which your CA works out from the accounts.
When to pay
Section 39 of the Code requires bonus to be paid within eight months of the close of the accounting year. For a year ending 31 March, that is 30 November. The government can extend this on the employer's application for sufficient reasons, up to a total of two years. If there is a dispute about a higher rate, the minimum 8.33% must still be paid within the eight months.
Many companies pay before Diwali, which is fine; paying in instalments across the year as a "monthly bonus" is also common, but keep the year's total visible so you can show the minimum was met.
Statutory bonus is not performance bonus
The statutory bonus is a right for eligible employees, whether or not they performed well. A performance bonus, festival gift or incentive is a business choice. Keep them on separate lines in payroll. If you fold the statutory minimum into a "Diwali bonus" and then cut that bonus in a bad year, you may fall below the minimum without noticing. Some employers count part of a festival or customary bonus towards the statutory bonus; whether yours can be counted is a question for your CA, not an assumption to make in payroll.
Mistakes we see most often
- Using basic pay alone as "wages" when excluded allowances exceed half of total pay.
- Forgetting people who left during the year. An employee who worked 30 days or more is owed bonus for that period, even after exit; include it in their final settlement.
- Applying the ₹21,000 test once a year when salaries changed mid-year. Check wages for the period they applied.
- No working on file for anything above 8.33%.
Records to keep
- A bonus register showing each employee's wages, days worked, base and bonus paid.
- The allocable surplus working, if you paid more than the minimum.
- Proof of payment, ideally by bank transfer.
Where Grovia fits
Grovia's monthly payroll entry has a bonus line that appears on the payslip, alongside basic, HRA, allowances and deductions. Grovia does not calculate statutory bonus, check eligibility or work out the allocable surplus; you enter the amount you have calculated. Our guides on how salary is calculated and payroll for small businesses cover the rest of the monthly cycle.
Figures checked on 1 November 2026. Tax and labour rules change, and several states are still finalising their rules under the labour codes; confirm the current position with your CA before you act on it.
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Frequently Asked Questions
Who is eligible for statutory bonus in India?
Employees of an establishment with 20 or more people who earn up to ₹21,000 a month (the central figure notified in August 2026) and worked at least 30 days in the accounting year.
What is the minimum and maximum statutory bonus?
The minimum is 8.33% of wages or ₹100, whichever is higher. The maximum is 20% of wages.
Is bonus calculated on actual salary?
Not for wages above ₹7,000 a month. For them, bonus is calculated as if the wage were ₹7,000 or the applicable minimum wage, whichever is higher.
What is the last date to pay statutory bonus?
Within eight months of the end of the accounting year, which is 30 November for an April to March year.
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