Quick Answer
Statutory bonus is paid to employees earning up to ₹21,000 a month who worked at least 30 days in the year. It is calculated on monthly wages capped at ₹7,000 or the minimum wage, whichever is higher, at 8.33% to 20% a year.
Formula: capped monthly wage × 12 × bonus %. For a ₹14,000 wage at the 8.33% minimum, the bonus is ₹6,997.20. The deadline is within eight months of the year end (30 November for a March year end).
Someone asks: “How much bonus are we paying this year?” Someone else pulls up a spreadsheet. A third person isn’t sure whether to calculate on actual salary or some capped amount. And a fourth person quietly asks whether the company can skip it this year because profits were low. The answer to that last question is no. Statutory bonus is not optional. It is not a Diwali gift or a performance reward at the employer’s discretion.
It is a legal obligation under the Payment of Bonus Act, 1965 – and getting it wrong, or missing the deadline, invites penalties, labour inspector visits, and very unhappy employees. Let me walk you through everything you need to know – who qualifies, how to calculate it correctly, and what most companies get wrong.
Who Has to Pay Statutory Bonus in India?
The Payment of Bonus Act applies to every factory with 10 or more workers, and every other establishment with 20 or more employees on any day during the accounting year.
Once you cross that threshold, the obligation continues – even if your headcount later drops below the limit. And in several states including Karnataka, Kerala, Andhra Pradesh, Gujarat, and Haryana, the Act has been extended to establishments with 10 or more employees. Worth checking your state’s specific rules.
Who is Eligible to Receive Bonus?
An employee is eligible for statutory bonus if their monthly Basic Salary plus DA does not exceed ₹21,000, and they have worked for at least 30 working days in the accounting year. This eligibility ceiling catches a lot of small companies off guard. It applies to Basic + DA – not gross salary. So an employee drawing ₹25,000 gross but ₹19,000 basic + DA is eligible.
Employees on paid leave, maternity leave, or lay-off are counted as having worked during those days. So you can’t exclude someone from bonus eligibility just because they were on approved leave. What about employees who leave mid-year? If they worked 30+ days before leaving, they are eligible for pro-rata bonus – which should be settled as part of Full and Final Settlement. This is a step many HR teams miss.
Statutory Bonus Under the Code on Wages (2026)
The four Labour Codes have been in force since 21 November 2025. The bonus provisions are in the Code on Wages, 2019. Two Ministry of Labour and Employment notifications dated 25 August 2026 (S.O. 4710(E) and 4711(E)) set the rules for who is eligible and how the amount is calculated:
- Eligibility: employees earning up to ₹21,000 a month.
- Calculation ceiling: ₹7,000 a month or the minimum wage, whichever is higher.
- Deadline: bonus is payable within eight months of the end of the accounting year. For a year ending 31 March 2026, that is 30 November 2026.
If your employees earn more than ₹21,000, they are not eligible for statutory bonus, though you can still pay a discretionary one.
Statutory Bonus Calculation Formula
The eligibility ceiling is ₹21,000 per month. But the calculation ceiling is different – it is ₹7,000 per month or the applicable state minimum wage, whichever is higher.
So an employee earning ₹18,000 basic + DA is eligible – but their bonus is not calculated on ₹18,000. It is calculated on ₹7,000 (or state minimum wage if higher). This is the rule that trips up most payroll teams.
The formula:
Statutory Bonus = Capped Monthly Salary × 12 × Bonus Percentage
- Where Capped Monthly Salary = lower of (actual Basic + DA) or ₹7,000 (or state minimum wage, whichever is higher)
- And Bonus Percentage = between 8.33% (minimum) and 20% (maximum)
- Most SMEs with moderate profits end up paying the minimum 8.33%.
Doing this for every employee, every year?
Statutory bonus is built into Runtime Payroll. Start free and test it on your own employee data.
Start FreeThree examples to make this concrete:
Example 1 – Employee earning below ₹7,000 basic + DA
Ramu’s Basic + DA = ₹6,000/month. State minimum wage = ₹5,500.
Since his actual salary (₹6,000) is below the ₹7,000 cap, calculate on actual amount.
Bonus = ₹6,000 × 12 × 8.33% = ₹5,997.60
Example 2 – Employee earning above ₹7,000 but below ₹21,000
Priya’s Basic + DA = ₹14,000/month. State minimum wage = ₹6,500.
Since ₹14,000 exceeds the cap, and minimum wage (₹6,500) is lower than ₹7,000, cap at ₹7,000.
Bonus = ₹7,000 × 12 × 8.33% = ₹6,997.20
Example 3 – State minimum wage higher than ₹7,000
Amit’s Basic + DA = ₹18,000/month. State minimum wage = ₹9,500.
Since minimum wage (₹9,500) is higher than ₹7,000, calculate on ₹9,500.
Bonus = ₹9,500 × 12 × 8.33% = ₹9,496.20
This last example is why you cannot use a single national formula for all employees across different states. The state minimum wage variable changes the number significantly.
Is Bonus Taxable?
Yes – and this surprises some employees who assume bonus might be tax-free like certain other benefits. Statutory bonus is treated as salary income and taxed at the employee’s applicable slab rate. It needs to show up in their Form 130 and must be factored into your TDS calculations for the year it’s paid. One thing that often confuses HR teams – bonus does not attract PF or ESI. It sits outside the wage definition for those Acts, so no additional statutory deductions on the bonus amount.
How Runtime HRMS Handles Statutory Bonus
The most painful part of statutory bonus for HR teams is not the calculation itself – it’s tracking who is eligible, which state minimum wage applies, how many days each person worked, and whether anyone left mid-year and needs pro-rata.
We built Runtime HRMS to handle exactly this. Feed in your employee data – Basic + DA, state, days worked – and the system identifies eligible employees, applies the correct calculation ceiling for that state, and generates your bonus register ready for payment. If someone exits before bonus season, their pro-rata amount flows into the Full and Final Settlement automatically. Nothing slips through.
Calculating bonus in Excel every year?
See how Runtime Payroll handles statutory bonus, and have the amounts ready before the deadline.
Sign Up TodayCommon Mistakes
- Using gross pay instead of Basic + DA as the base.
- Ignoring the ceiling. Capping at ₹7,000 when the minimum wage is higher is wrong too, as Example 3 shows.
- Skipping bonus after a low-profit year. The page’s intro already says it is not optional.
- Leaving out employees who left mid-year. If they worked at least 30 days, they get a pro-rata amount in the full and final settlement.
- Missing the eight-month deadline.
FAQs
Is bonus calculated on basic or gross salary?
On Basic + DA, within the ceiling.
What is the bonus ceiling limit in 2026?
₹7,000 a month or the minimum wage, whichever is higher.
Who is eligible for statutory bonus?
Employees earning up to ₹21,000 a month who have worked at least 30 days in the accounting year.
What is the minimum and maximum bonus?
8.33% minimum and 20% maximum of the capped wage.
When must statutory bonus be paid?
Within eight months of the year end, which is 30 November for a March year end.
Check with: CLC (Chief Labour Commissioner)