Calculate the minimum and maximum statutory bonus payable under the Payment of Bonus Act 1965. Covers eligibility, wage ceilings, and bonus computation.
Statutory Bonus in India — Key Rules
The Payment of Bonus Act 1965 mandates that every factory and establishment with 20 or more employees must pay an annual bonus to eligible employees.
Eligibility
Employees earning up to ₹21,000 per month in wages (basic + DA) are eligible. The employee must have worked for at least 30 working days in the accounting year.
If 8.33% results in less than ₹100, minimum bonus = ₹100
Key Points
Wage Ceiling for Calculation: Even if the employee earns more, the bonus is calculated on ₹7,000 per month or the minimum wage for the scheduled employment (whichever is higher), not the actual salary.
Minimum Bonus: 8.33% — irrespective of profit or loss, every eligible employee must receive this.
Maximum Bonus: 20% — payable when the employer's allocable surplus exceeds the minimum bonus amount.
Accounting Year: April 1 to March 31 for most companies. Bonus must be paid within 8 months from the end of the accounting year.
Set-On and Set-Off
If the allocable surplus exceeds 20% of the total wages, the excess is "set on" to the next year. If surplus is insufficient to pay even minimum bonus, the deficit is "set off" against future surpluses. This mechanism ensures fairness across profitable and lean years.
Frequently Asked Questions
Under the Payment of Bonus Act 1965, the minimum bonus is 8.33% of basic salary (calculated on wage ceiling of ₹7,000) or ₹100 per year (whichever is higher) for employees earning up to ₹21,000 per month.
Employees drawing wages up to ₹21,000 per month are eligible. For computation, the calculation ceiling is ₹7,000 per month — bonus is computed on whichever is lower: ₹7,000 or actual basic+DA (or minimum wage if higher than ₹7,000).
Yes, statutory bonus received from employer is fully taxable as salary income under the Income Tax Act. It is added to gross salary and taxed at applicable slab rates.
The bonus must be paid within 8 months from the close of the accounting year (i.e., by November 30 for April-March accounting year). If there is a dispute, payment must be made within a month of the award/settlement.