The Payment of Bonus Act, 1965 makes bonus mandatory for eligible employees, but the wage ceilings that decide who qualifies and how much they get are small enough that most white-collar salaried employees in India never actually receive a statutory bonus. This calculator applies the exact formula for employees who are covered.
Who is eligible for statutory bonus
Two separate thresholds decide this, and they trip people up constantly:
- Eligibility ceiling: ₹21,000/month Basic + DA. If your Basic + DA exceeds ₹21,000/month, you’re not covered by the Act at all. Any “bonus” your employer pays you is discretionary (called ex-gratia), not a statutory entitlement, and can be withheld or reduced at the company’s discretion.
- Establishment must employ 20+ persons (or have been notified as covered by the appropriate government), and the employee must have worked at least 30 working days in the accounting year.
This ceiling was last revised in 2015 (raised from ₹10,000 to ₹21,000 via the Payment of Bonus (Amendment) Act, 2015, applied retrospectively from 1 April 2014). It hasn’t moved since, so a large and growing share of the salaried workforce has drifted above it as salaries have risen.
The wage ceiling that actually caps your bonus
Even if you’re eligible (Basic + DA ≤ ₹21,000), the bonus itself is not calculated on your actual Basic + DA. It’s calculated on a capped wage of ₹7,000/month, or the state’s notified minimum wage for that employment, whichever is higher. So someone earning ₹20,000 Basic and someone earning ₹8,000 Basic (both eligible) could receive an identical bonus, since both get capped to the same ₹7,000 wage base (assuming minimum wage doesn’t exceed ₹7,000 in that state/category).
The formula
Annual bonus = min(Basic+DA, ₹7,000 or higher minimum wage) × bonus rate × 12
The bonus rate is set by the employer each year based on “allocable surplus” (a profit-linked calculation under the Act’s Schedules), bounded by law:
- Minimum: 8.33% of the capped wage, payable even if the company makes no profit or runs a loss (this is the statutory floor)
- Maximum: 20% of the capped wage, payable if allocable surplus is high enough
Most companies pay somewhere between these two, disclosed in the appointment letter or bonus policy, not something employees can negotiate individually.
Worked example: ₹18,000 Basic, 20% rate, full year
- Bonus wage used: min(₹18,000, ₹7,000) = ₹7,000
- Annual bonus: ₹7,000 × 20% × 12 = ₹16,800
- If the employee joined mid-year and worked only 8 months: ₹16,800 × (8/12) = ₹11,200
Compare this to someone on ₹9,000 Basic at the same company and same 20% rate: their bonus is also ₹16,800, identical, because both are capped at the same ₹7,000 wage base.
When bonus is due
Statutory bonus must be paid within 8 months of the close of the accounting year (usually the financial year, April-March, unless the company follows a different accounting year). Employers can be penalized for late payment, and unpaid statutory bonus can be recovered as a debt through the Payment of Bonus Act’s recovery provisions.
Frequently asked questions
I earn ₹35,000/month Basic. Am I entitled to any bonus?
Not under the Payment of Bonus Act, since you’re above the ₹21,000 eligibility ceiling. Whatever bonus your company pays (performance bonus, annual bonus, festival bonus) is entirely discretionary and governed by your appointment letter or company policy, not this Act. Most mid-to-senior salaried employees in India fall into this bucket.
Does “Basic + DA” include HRA or other allowances?
No, same restriction as gratuity and leave encashment, only Basic and Dearness Allowance count. Private-sector employees with zero DA use Basic alone.
Can my employer pay less than 8.33%?
No, 8.33% of the capped wage is the statutory minimum, payable regardless of whether the company is profitable, provided the employee is eligible. This is the one part of the Act with zero employer discretion.
Is statutory bonus taxable?
Yes, fully taxable as salary income in the year received, added to your gross salary and taxed at your slab rate, no special exemption like gratuity or leave encashment.
Does the ₹21,000 ceiling apply to gross salary or just Basic+DA?
Just Basic + DA, not gross salary or CTC. This is a common confusion, someone with a ₹40,000 gross salary but only ₹19,000 Basic + DA is still eligible under the Act, since the eligibility test looks only at Basic + DA, not the full salary structure.
What if I resign before the bonus is paid out?
You’re still entitled to a pro-rated statutory bonus for the months actually worked in that accounting year, provided you meet the 30-working-days minimum. Employers sometimes try to withhold it citing “must be on rolls at payout,” this isn’t valid under the Act for bonus already earned for months worked.
Sources
- Payment of Bonus Act, 1965 (Government of India)
- Payment of Bonus (Amendment) Act, 2015 (₹21,000 eligibility ceiling, effective retrospectively from 1 April 2014)
- Ministry of Labour and Employment: Bonus Act rules and wage ceiling notifications