About this calculator
The statutory bonus calculator works out the annual bonus an Indian employee is owed under the Payment of Bonus Act 1965, given their monthly basic plus dearness allowance, the bonus rate, and the months worked. It applies the Act's 7,000 rupee calculation cap and the 8.33 percent to 20 percent rate band automatically.
The Payment of Bonus Act is a central labour law that obliges covered employers to share a slice of profits with lower-paid staff every year. It applies to factories and to any establishment with 20 or more employees. The headline rules are simple to state: you must earn 21,000 rupees a month or less in basic plus DA to be eligible, you must have worked at least 30 days in the year, and the bonus runs from a guaranteed minimum of 8.33 percent of eligible wages up to a maximum of 20 percent. The calculation, however, is done on a capped wage of 7,000 rupees per month (or the state minimum wage if higher), not your full salary, which is the detail most people miss.
How it works
The bonus is the bonus rate applied to your eligible monthly wage, multiplied by the months worked. The eligible wage is capped, so high earners do not get a proportionally larger bonus.
eligible wage = min(basic + DA, 7,000) // 7,000 monthly cap annual bonus = eligible wage x (rate / 100) x months worked rate = between 8.33% (minimum) and 20% (maximum) 8.33% = one month's wages (1/12 of the year)
- Eligibility ceiling = basic + DA of 21,000 rupees per month or less; above it, no statutory entitlement.
- Calculation cap = 7,000 rupees per month, or the notified minimum wage for the work if that is higher.
- Minimum bonus = 8.33 percent, payable even in a loss-making year.
- Maximum bonus = 20 percent, reached when allocable surplus allows under the set-on / set-off rules.
Worked example
An employee earns 18,000 rupees a month in basic plus DA, qualifies for the year, and the employer pays the statutory minimum of 8.33 percent for all 12 months.
- Check eligibility: 18,000 is at or below the 21,000 ceiling, so the employee is covered.
- Apply the cap: eligible wage = min(18,000, 7,000) = 7,000 rupees per month.
- Apply the rate: 7,000 x 8.33 percent = 583.10 rupees per month.
- Multiply by months: 583.10 x 12 = 6,997 rupees for the year.
- At the maximum instead: 7,000 x 20 percent x 12 = 16,800 rupees, the most this employee could receive.
Key thresholds at a glance
The three numbers that drive every statutory bonus calculation, plus the payment deadline.
| Parameter | Value | What it controls |
|---|---|---|
| Eligibility wage ceiling | 21,000 rupees / month | Who is covered by the Act |
| Calculation wage cap | 7,000 rupees / month (or min wage) | The wage the bonus is computed on |
| Minimum bonus | 8.33 percent | Floor, payable even in a loss |
| Maximum bonus | 20 percent | Ceiling on the rate |
| Minimum service | 30 working days | Qualifying period in the year |
| Payment deadline | Within 8 months of year-end | Usually by 30 November |
Common pitfalls
- Calculating on full salary. The single most common error is applying the rate to actual basic instead of the 7,000 cap, which hugely overstates the bonus for higher earners.
- Confusing the two ceilings. 21,000 decides eligibility; 7,000 decides the calculation base. They are different numbers for different jobs.
- Assuming bonus needs profit. The 8.33 percent minimum is mandatory even if the business made a loss; it is not optional or profit-contingent.
- Ignoring the minimum-wage floor. If the state-notified minimum wage exceeds 7,000, the bonus is computed on that higher figure, not on 7,000.
- Forgetting pro-rata for part-year staff. Someone who worked 6 qualifying months gets roughly half the annual bonus, not the full amount.
- Treating the bonus as tax-free. It is fully taxable salary income with TDS, unlike gratuity which has its own exemption.
Related tools
Frequently asked questions
Who is eligible for a statutory bonus in India?
Under the Payment of Bonus Act 1965, an employee is eligible if they earn basic plus dearness allowance of 21,000 rupees per month or less and have worked at least 30 days in the accounting year. The Act applies to factories and to establishments employing 20 or more persons. Employees above the 21,000 wage ceiling are not covered, though many employers pay them an ex-gratia bonus as a matter of policy rather than legal obligation.
What are the minimum and maximum statutory bonus rates?
The Act sets a minimum bonus of 8.33 percent of annual eligible wages and a maximum of 20 percent. 8.33 percent equals one month's wages and is payable even if the business made no profit or was in loss. The rate rises toward 20 percent based on the available surplus the employer allocates, calculated through the set-on and set-off mechanism the Act prescribes.
How is the 7,000 rupee calculation cap applied?
Although eligibility uses the 21,000 wage ceiling, the bonus itself is calculated on the lower of your actual basic plus DA or 7,000 rupees per month, or the state-notified minimum wage for the role if that is higher. So an employee earning 18,000 basic has their bonus computed on 7,000 (or the minimum wage), not on the full 18,000. This caps the employer's per-employee liability.
When must the statutory bonus be paid?
The bonus must be paid within 8 months of the close of the accounting year, which for most Indian employers ending 31 March means by 30 November. It is paid in cash. New employees who joined part-way through the year receive a pro-rata bonus based on the number of months worked, provided they completed the minimum 30 working days.
Is the statutory bonus taxable?
Yes. A statutory or ex-gratia bonus is treated as part of salary income and is fully taxable in the year it is received, added to your other income and taxed at your applicable slab rate. The employer typically deducts TDS on it. There is no separate exemption for the Payment of Bonus Act bonus, unlike gratuity or leave encashment which have their own caps.
Sources
- Government of India (1965) The Payment of Bonus Act, 1965 - the governing statute, including the 8.33 to 20 percent band.
- Payment of Bonus (Amendment) Act, 2015 - raised the eligibility ceiling to 21,000 and the calculation cap to 7,000 rupees.
- Ministry of Labour and Employment, Government of India - administration and compliance guidance for the Act.