Bonus Calculator – Statutory & Performance Bonus

The Payment of Bonus Act, 1965 mandates that eligible employees in India receive an annual bonus ranging from 8.33% (minimum) to 20% (maximum) of their salary. This is a statutory right, not a discretionary benefit — employers are legally required to pay it.

What is Statutory Bonus?

Statutory bonus is a mandatory annual payment to employees governed by the Payment of Bonus Act, 1965 (as amended in 2015). The Act applies to every factory and establishment with 20 or more employees on any day during the accounting year. Key points:

• It is not a performance bonus — it is a legal entitlement irrespective of individual performance
• The minimum bonus (8.33%) must be paid even if the employer has no profits or incurs losses
• Maximum bonus (20%) is linked to the employer's allocable surplus (available profits)
• Bonus must be paid within 8 months of the close of the accounting year

Who is Eligible for Statutory Bonus?

Criterion	Requirement	Details
Salary Ceiling	Basic + DA ≤ ₹21,000/month	Employees earning above ₹21,000 (Basic + DA) are excluded from the Act
Minimum Working Days	At least 30 days in the FY	Even if resigned or terminated, bonus is payable if 30+ days worked
Establishment Size	20+ employees	Applies to factories and establishments with 20+ employees on any day during the year
Employee Type	All types eligible	Manual, clerical, supervisory, and technical staff — except managerial positions
Age	Must have completed 15 years	Disqualified if below 15 years of age

Statutory Bonus Calculation Formula

The calculation has a critical nuance — there is a salary cap for computation:

Bonus = Calculation Salary × Bonus % × (Days Worked ÷ Total Working Days in Year)

The Calculation Salary is determined as follows:

Employee's Basic + DA	Calculation Salary Used	Why
Up to ₹7,000/month	Actual Basic + DA	Below the statutory cap
₹7,001 – ₹21,000/month	₹7,000/month (or Minimum Wage, whichever is higher)	Salary is capped at ₹7,000 for calculation
Above ₹21,000/month	NOT eligible for statutory bonus	Excluded under the Act

Note: In scheduled employments, if the minimum wage exceeds ₹7,000, the minimum wage is used as the calculation base instead of ₹7,000.

Worked Examples — Bonus at Different Salary Levels

Scenario	Basic + DA	Calculation Salary	Bonus @ 8.33%	Bonus @ 20%
Low salary employee	₹5,000/month	₹5,000 (actual)	₹4,998/year	₹12,000/year
Mid-range employee	₹15,000/month	₹7,000 (capped)	₹6,997/year	₹16,800/year
Near ceiling employee	₹21,000/month	₹7,000 (capped)	₹6,997/year	₹16,800/year
Above ceiling (₹25K)	₹25,000/month	Not eligible	₹0	₹0

Key insight: An employee earning ₹15,000 and one earning ₹21,000 receive the same statutory bonus amount because the calculation base is capped at ₹7,000. The bonus difference only matters below ₹7,000.

Minimum vs Maximum Bonus

Type	Percentage	When Applicable	Annual Amount (on ₹7,000 cap)
Minimum Bonus	8.33%	Mandatory — regardless of profit or loss	₹6,997/year (₹583/month)
Maximum Bonus	20%	When allocable surplus is sufficient	₹16,800/year (₹1,400/month)

The actual bonus percentage depends on the employer's allocable surplus — the available profit after specified deductions. If surplus exists beyond 8.33%, employers can pay up to 20%.

Compliance Requirements for Employers

• Payment deadline: Bonus must be paid within 8 months of the accounting year's close (i.e., by Nov 30 for March-ending FY)
• Records to maintain: Form A (computation of gross profits), Form B (computation of available surplus), Form C (bonus paid), Form D (deduction register)
• Penalty for non-compliance: Imprisonment up to 6 months, fine up to ₹1,000, or both
• Set-off and carry forward: If bonus paid exceeds allocable surplus, employer can set off excess against future years (up to 4 years)
• Adjustment against ex-gratia: Any customary or interim bonus (Diwali bonus, festival bonus) already paid can be adjusted against statutory bonus liability

Who is Excluded from Statutory Bonus?

• Employees earning above ₹21,000/month (Basic + DA)
• Apprentices under the Apprentices Act, 1961
• Employees of LIC, RBI, UIDAI, hospitals, educational institutions, chambers of commerce, and other bodies listed under Section 32
• Employees dismissed for fraud, misconduct, theft, or sabotage (bonus forfeited)
• Employees of new establishments — exempted for the first 5 years (for first 6 years if establishment starts with losses)

Tax Treatment of Bonus

Statutory bonus is fully taxable as "Income from Salary" under the Income Tax Act. It is taxed at your applicable slab rate. Key points:

• Employer deducts TDS on bonus along with salary
• Bonus is shown in Form 16 and your salary slip
• For the employer, bonus paid is a deductible business expense under Section 36(1)(ii)
• If bonus is received as arrears for multiple years, you can claim relief under Section 89(1)