Calculate statutory bonus per the Act

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Eligibility, wage ceiling, and bonus amount per the Payment of Bonus Act 1965 — accurate to the rupee, for HR teams in India.

Act 1965 Compliant Live Calculation Visual Breakdown

Employee details

Bonus eligibility: Basic+DA up to ₹21,000/month. Bonus is calculated on capped basic of ₹7,000.

Monthly Basic + DA

Bonus rate (%)

Min: 8.33% (mandatory) · Max: 20% (high profit years)

Eligible months in FY

Annual statutory bonus

₹6,997

Statutory bonus for 12 months at 8.33% of capped basic

Monthly Basic+DA₹15,000

Eligible?Yes (basic ≤ ₹21K)

Calculation basis₹7,000 (capped at ₹7K)

Bonus rate8.33% of basis

Months eligible12 months

Monthly bonus₹583

How statutory bonus is calculated

Payment of Bonus Act 1965 mandates a minimum bonus to employees earning up to ₹21,000 Basic+DA per month. Calculation uses a capped basic of ₹7,000.

01
Check eligibility
Employees with monthly Basic+DA ≤ ₹21,000 are eligible. Workers above this threshold are not covered by the Act.
```
if basic <= 21000: eligible
```
02
Cap the basis
Bonus is calculated on basic salary capped at ₹7,000 (or state minimum wage, whichever is higher).
```
basis = min(basic, 7000)
```
03
Apply rate
Multiply basis × rate × eligible months. Rate ranges 8.33%-20% based on company profit.
```
bonus = basis × rate × months
```

FormulaBonus = min(Basic, ₹7,000) × Rate% × Eligible MonthsMinimum 8.33% is mandatory under the Act. Higher rates (up to 20%) for higher company profits.

Why we use this formula by default.
Indian payroll convention, statutory references, and the SaaS tooling that runs payroll all converge on this approach. Below are the authoritative sources we cross-checked.

Statute

Payment of Bonus Act, 1965

Primary statute defining minimum 8.33% and maximum 20% bonus.

Calculation Basis

Section 12 — ₹7,000 cap

Bonus is computed on capped basic of ₹7,000 (or state minimum wage).

Tax Reference

ClearTax Bonus Guide

Tax treatment of statutory bonus as part of taxable salary.

Payroll SaaS

RazorpayX Payroll

Annual bonus provisioning and payment logic.

Labour Code

Code on Wages, 2019

Consolidated wage framework that informs bonus calculation.

Consultancy

hinote.in

HR practice for annual statutory bonus disbursal.

FAQs about statutory bonus

Who is eligible for statutory bonus?

Employees earning Basic+DA up to ₹21,000/month who have worked at least 30 days in the financial year. Applies to establishments with 20+ employees (some states extend to 10+).

Why is the bonus calculated on ₹7,000 cap?

Section 12 of the Payment of Bonus Act caps the calculation basis at ₹7,000 or the state minimum wage, whichever is higher. Even if basic is ₹20,000, bonus is calculated on ₹7,000.

What is the minimum and maximum bonus?

Minimum: 8.33% (always payable if eligible). Maximum: 20% in years of high profit. Most companies pay between 8.33-15% based on financial performance.

When must bonus be paid?

Within 8 months from the end of the accounting/financial year. Most Indian companies pay statutory bonus in October-November alongside Diwali bonuses.

Is statutory bonus taxable?

Yes — fully taxable as salary income, added to your annual income and taxed at slab rates. TDS applies if total income exceeds taxable threshold.

How is bonus pro-rated for partial year?

Months worked × monthly bonus. Example: ₹7K × 8.33% × 6 months (joined July) = ₹3,498 for the partial FY.

Can a company skip bonus in a loss year?

Yes for the variable portion (above 8.33%). But the minimum 8.33% is mandatory regardless of profits — section 10 of the Act.

What if the employee left mid-year?

Bonus is payable for the months worked. Final settlement must include the statutory bonus along with leave encashment, gratuity, and salary dues.

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Calculate statutory bonus per the Act

Employee details

How statutory bonus is calculated

Check eligibility

Cap the basis

Apply rate

Payment of Bonus Act, 1965

Section 12 — ₹7,000 cap

ClearTax Bonus Guide

RazorpayX Payroll

Code on Wages, 2019

hinote.in

FAQs about statutory bonus

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