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For businessesRates reviewed September 2026

Statutory Bonus Calculator under the Code on Wages, 2019

A statutory bonus calculator works out the annual bonus an employer must pay under Chapter IV of the Code on Wages, 2019, which replaced the Payment of Bonus Act, 1965 when the four Labour Codes came into force on 21 November 2025. Every employee drawing wages up to ₹21,000 a month who has put in at least thirty days of work in the accounting year is entitled to a minimum bonus of 8.33% of the wages earned, or ₹100 if that is higher, whether or not the employer has an allocable surplus.

Two ceilings do the work. The eligibility ceiling of ₹21,000 a month decides who receives a bonus at all. The calculation ceiling then fixes the wage on which the bonus is computed at ₹7,000 a month or the minimum wage fixed for the employment, whichever is higher, wherever actual wages exceed ₹7,000. The Ministry of Labour and Employment notified both figures on 25 August 2026, by S.O. 4711(E) and S.O. 4710(E), with retrospective effect from 21 November 2025, so the thresholds carried over from the old Act without a change.

What did change is the base. Wages under the Code mean basic pay, dearness allowance and retaining allowance, and where the excluded components such as house rent allowance, conveyance and overtime exceed half of total remuneration, the excess is added back into wages. An employee whose basic and DA come to ₹12,000 in a ₹42,000 package therefore has statutory wages of ₹21,000 and sits inside the eligibility ceiling, which was not the position before the Codes.

Where the establishment has an allocable surplus large enough, the bonus rises above the minimum in proportion to wages, up to 20% of the wages earned in the year. Chapter IV applies to an establishment that employed twenty or more persons on any day in the accounting year, and the bonus has to be credited to the employee's bank account within eight months of the close of that year, which for FY 2026-27 means by 30 November 2027.

Statutory Bonus Calculator

Basic pay, dearness allowance and retaining allowance, which are wages under the Code on Wages.

₹

HRA, conveyance, special allowance, overtime and the like. Anything above 50% of total remuneration is added back into wages.

₹

Enter 0.5 for a fortnight. At least thirty days of work in the year is needed, and paid leave, lay-off and maternity leave count.

months

The minimum wage fixed for the employment and skill category. Leave at 0 if there is none and the ₹7,000 ceiling applies on its own.

₹
Establishment has an allocable surplus

Without a surplus only the 8.33% minimum is payable.

Between the 8.33% minimum and the 20% maximum, as decided from the allocable surplus.

%

Bonus payable

₹14,400

12% of ₹1,20,000, due by 30 November 2027

Statutory wages (monthly)Basic and DA; allowances stay within 50% of remuneration so nothing is added back
₹15,000
Eligibility against the ₹21,000 ceiling₹15,000 against ₹21,000 a month
Eligible
Thirty days of work in the year12 months worked
Met
Wage base after the calculation ceiling (monthly)₹7,000 or the ₹10,000 minimum wage, whichever is higher
₹10,000
Wages for the year on that base₹10,000 x 12 months
₹1,20,000
Minimum statutory bonus at 8.33%Payable whether or not there is an allocable surplus
₹10,000
Maximum statutory bonus at 20%
₹24,000
Rate appliedAs declared from the allocable surplus
12%
Bonus payable
₹14,400
Due date for paymentWithin eight months of the close of accounting year 2026-27
30 November 2027
  • The minimum wage of ₹10,000 is higher than ₹7,000, so it is the base under S.O. 4710(E), and the bonus is larger than the ₹7,000 figure most people remember.
  • Chapter IV of the Code on Wages applies to an establishment that employed twenty or more persons on any day in the accounting year. Bonus is taxed as salary in the year it is received.

The formula

Bonus = Wage base for the year x Rate, where the wage base is actual wages up to ₹7,000 a month and otherwise ₹7,000 or the minimum wage (whichever is higher), and the rate is between 8.33% and 20%

Wages
Basic pay, dearness allowance and retaining allowance under section 2(y) of the Code on Wages, with any excluded allowances above 50% of total remuneration added back.
Eligibility ceiling
₹21,000 a month, notified by S.O. 4711(E) dated 25 August 2026 under section 26(1) with effect from 21 November 2025. Wages above it mean no statutory bonus.
Calculation ceiling
Where wages exceed ₹7,000 a month, the bonus is computed as if wages were ₹7,000 or the minimum wage fixed for the employment, whichever is higher, under section 26(2) and S.O. 4710(E).
Minimum bonus
8.33% of the wages earned in the accounting year or ₹100, whichever is higher, payable whether or not the employer has an allocable surplus.
Maximum bonus
20% of the wages earned in the accounting year, the cap under section 26(3) where the allocable surplus exceeds the minimum bonus.
Allocable surplus
The share of the available surplus, computed from gross profits after the deductions in the Code, that has to be distributed as bonus, after the set on and set off carried forward from earlier years.

The rate between the minimum and the maximum depends on the establishment's allocable surplus for the year, so this calculator takes the declared percentage as an input rather than computing the surplus from the accounts.

How to calculate it

  1. 1

    Fix the statutory wages

    Take basic pay, dearness allowance and retaining allowance. Add up every other component of the package, and if those components exceed half of total remuneration, add the excess back into wages. This is the figure tested against both ceilings.

  2. 2

    Test eligibility

    Wages must not exceed ₹21,000 a month and the employee must have put in at least thirty days of work in the accounting year. Days on paid leave, lay-off, maternity leave and absence due to an employment injury count as days worked.

  3. 3

    Apply the calculation ceiling

    Where wages exceed ₹7,000 a month, replace them with ₹7,000 or the minimum wage fixed for the employment, whichever is higher. Where wages are ₹7,000 or less, the actual wages are the base.

  4. 4

    Work out the wages earned in the year

    Multiply the monthly base by the months actually worked. An employee who joined or left during the year earns bonus on the wages of that period only, which is the proportionate reduction in section 27.

  5. 5

    Settle the rate

    With no allocable surplus the rate is the 8.33% minimum. Where the surplus exceeds the minimum bonus, the bonus rises in proportion to wages up to 20%, with excess surplus set on and shortfalls set off over the following four years.

  6. 6

    Pay within eight months

    Credit the bonus to the employee's bank account within eight months of the close of the accounting year, so by 30 November for a year ending 31 March. The appropriate Government can extend that period, but never beyond two years in total.

Statutory bonus parameters under the Code on Wages, FY 2026-27

Statutory bonus parameters under the Code on Wages, FY 2026-27
ItemPosition
Chapter IV applies toEstablishments with twenty or more persons on any day in the accounting year
Eligibility ceilingWages up to ₹21,000 a month, S.O. 4711(E) dated 25 August 2026, effective 21 November 2025
Calculation ceiling₹7,000 a month or the minimum wage for the employment, whichever is higher, S.O. 4710(E)
Qualifying workAt least thirty days of work in the accounting year
Minimum bonus8.33% of wages earned in the year, or ₹100 if higher
Maximum bonus20% of wages earned in the year
Accounting year1 April to 31 March
Due dateWithin eight months of the close of the accounting year, so 30 November 2027 for FY 2026-27
Set on and set offExcess allocable surplus, up to 20% of wages, and any shortfall are carried forward for four accounting years

Worked example

Basic plus DA
₹15,000 a month
Other allowances
Nil
Months worked in the accounting year
12
Minimum wage for the employment
₹10,000 a month
Allocable surplus
Yes, bonus declared at 12%
Accounting year
2026-27
  • Statutory wages = ₹15,000, with nothing added back because there are no allowances
  • ₹15,000 does not exceed ₹21,000, so the employee is eligible, and twelve months of work clears the thirty day test
  • Wages exceed ₹7,000, so the base is ₹7,000 or the ₹10,000 minimum wage, whichever is higher = ₹10,000 a month
  • Wages for the year on that base = ₹10,000 x 12 = ₹1,20,000
  • Minimum bonus = 8.33% of ₹1,20,000 = ₹10,000, maximum = 20% = ₹24,000, and at the declared 12% the bonus is ₹14,400

Bonus payable = ₹14,400 for the accounting year 2026-27, against a statutory minimum of ₹10,000 and a maximum of ₹24,000, due in the employee's bank account by 30 November 2027.

Frequently asked questions

Every employee of an establishment covered by Chapter IV of the Code on Wages whose wages do not exceed ₹21,000 a month and who has put in at least thirty days of work in the accounting year. The ₹21,000 figure was notified by S.O. 4711(E) dated 25 August 2026 with effect from 21 November 2025. An employee dismissed for fraud, riotous or violent behaviour, theft, misappropriation or sabotage, or a conviction for sexual harassment is disqualified.
Where an eligible employee's wages exceed ₹7,000 a month, the bonus is calculated as if the wages were ₹7,000 or the minimum wage fixed for the employment, whichever is higher, under section 26(2) of the Code and S.O. 4710(E) dated 25 August 2026. Since most notified minimum wages now exceed ₹7,000, the minimum wage is usually the operative base, and an employee on ₹15,000 with a ₹10,000 minimum wage earns bonus on ₹10,000.
The minimum is 8.33% of the wages earned in the accounting year, or ₹100 if that is higher, and it is payable whether or not the employer has an allocable surplus. Where the allocable surplus exceeds the minimum bonus, the employer must pay a higher bonus in proportion to wages, capped at 20% of the wages earned. Any demand for a production or productivity bonus on top has to keep the total within that 20%.
The Payment of Bonus Act, 1965 was repealed and its provisions moved into Chapter IV of the Code on Wages, 2019 from 21 November 2025. The ₹21,000 eligibility ceiling, the ₹7,000 or minimum wage calculation ceiling, 8.33% and 20%, the thirty day rule and the eight month payment window all carried over. The substantive change is the statutory definition of wages, which adds back excluded allowances above 50% of total remuneration and so brings more employees inside the ceiling.
Within eight months of the close of the accounting year, credited to the employee's bank account under section 39 of the Code. The accounting year runs from 1 April, so the bonus for FY 2026-27 is due by 30 November 2027. The appropriate Government can extend the period on an employer's application, but the total extension cannot exceed two years, and where a bonus dispute is pending the employer must still pay 8.33% within the eight months.
Yes, provided you put in at least thirty days of work in the accounting year. The bonus is then computed on the wages you actually earned during the year, which is the proportionate reduction in section 27 of the Code. Days on paid leave, lay-off under an agreement or standing orders, maternity leave with wages and absence due to temporary disablement from an employment injury all count as days worked.
Yes. Bonus is taxed as salary in the year you receive it, and your employer deducts tax at source on it along with the rest of your pay. Statutory bonus is, however, excluded from the definition of wages for provident fund, gratuity and bonus itself under the Codes, so it does not increase those contributions, although it is counted among the excluded components when the 50% test is applied.

Sources

Rates and rules on this page come from the following. This is a working aid, not professional advice: confirm anything material with your Chartered Accountant before you act on it.

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