Payment of Bonus Act India — Eligibility, Calculation & Your Rights 2025
- Minimum 30 working days in a financial year required
- Applies to establishments with 20+ employees
- Calculated on basic + DA (capped at ₹7,000/month)
- Must be paid within 8 months of FY end
- Taxable as salary income
You've probably noticed "bonus" in your salary structure or CTC sheet. But do you know what statutory bonus is, whether you're eligible, and what the minimum amount should be?
India's Payment of Bonus Act, 1965 mandates that eligible employees must receive a minimum bonus every year — regardless of whether the company made profit.
Who is Eligible for Statutory Bonus?
You are eligible if:
- Your salary/wages don't exceed ₹21,000 per month
- You've worked for at least 30 working days in the financial year
- Your employer has 20 or more employees (or had 20+ in previous years)
Note: If salary exceeds ₹21,000/month, you're not entitled to statutory bonus under this Act. Bonus you receive is at the company's discretion.
Minimum and Maximum Bonus
| Type | Rate | Condition |
|---|---|---|
| Minimum Bonus | 8.33% of salary | Mandatory regardless of company profit |
| Maximum Bonus | 20% of salary | Company can give up to this if profitable |
"Every employer shall be bound to pay to every employee a minimum bonus of 8.33 percent of the salary or wage earned by the employee in the accounting year." — Payment of Bonus Act, Section 10
How is Bonus Calculated?
The salary cap for bonus calculation is ₹7,000 per month (or minimum wage, whichever is higher).
Formula:
Bonus = 8.33% × (₹7,000/month × 12 months) = ₹6,998 (minimum for full year)
If your actual salary is below ₹7,000:
Bonus is calculated on actual basic + DA received.
If your actual salary is above ₹7,000 but below ₹21,000:
Bonus calculation is capped at ₹7,000 — not on your actual salary.
Example:
| Employee | Basic+DA (monthly) | Calculation Base | Min Bonus (8.33%) |
|---|---|---|---|
| A | ₹5,000 | ₹5,000 (actual) | ₹5,000 × 12 × 8.33% = ₹4,998 |
| B | ₹9,000 | ₹7,000 (capped) | ₹7,000 × 12 × 8.33% = ₹6,998 |
| C | ₹20,000 | ₹7,000 (capped) | ₹6,998 |
| D | ₹22,000 | Not eligible | No statutory bonus |
When Must Bonus Be Paid?
- Within 8 months of the end of the accounting year (typically by November 30)
- If company has dispute/pending payment — application to authority can extend to 2 years max
- Many companies pay bonus before Diwali/Durga Puja (religious/festival bonus)
Tax on Bonus
Statutory bonus is fully taxable as part of your salary income. It's shown in your Form 16 under "Salary/Wages."
TDS should be deducted by employer on bonus payment. If you receive bonus and TDS wasn't deducted, it's your responsibility to declare it in ITR.
What If Company Doesn't Pay Bonus?
- Put it in writing — email HR requesting statutory bonus as per Payment of Bonus Act
- If not resolved — file complaint with Inspector under Payment of Bonus Act (at the Labour Department)
- Inspector can investigate employer's accounts and order payment
- Non-payment penalty: imprisonment up to 6 months + fine
Ex-Gratia vs Statutory Bonus — What's the Difference?
| Statutory Bonus | Ex-Gratia / Performance Bonus |
|---|---|
| Governed by Payment of Bonus Act | At company's discretion |
| Mandatory for eligible employees | No legal obligation |
| Minimum 8.33%, max 20% | Can be any amount |
| For employees with salary ≤₹21,000 | For all employees (if company chooses) |
In IT companies and large corporations, most employees earn above ₹21,000 — so they don't get statutory bonus. Their performance bonus or Diwali bonus is ex-gratia (discretionary).
Part-Year Employee — Bonus Calculation
If you joined mid-year:
- Bonus is calculated proportionally for days worked
- Minimum: 30 working days in the accounting year
- If worked for 6 months (180 days): Bonus = (6/12) × 8.33% of capped salary
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