Bonus

In short

• Pay a minimum annual bonus of eight and one-third per cent of wages earned, or one hundred rupees if that is more, to every eligible employee, whether or not there is an allocable surplus s. 26(1).
• An employee is eligible if their wages do not exceed the ceiling notified by the appropriate Government and they worked at least thirty days in the accounting year s. 26(1).
• The Central Government has notified that ceiling as ₹21,000 a month, in force from 21 November 2025 S.O. 4711(E).
• Where the allocable surplus is larger, bonus rises in proportion to wages, up to a maximum of twenty per cent of wages s. 26(3).
• Pay bonus into the employee’s bank account within eight months of the close of the accounting year s. 39(1).

Does this apply to you?

• The bonus Chapter applies to establishments in which twenty or more persons are employed, or were employed on any day of the accounting year s. 41(2).
• It does not apply to, among others, the Life Insurance Corporation and the Reserve Bank of India, Government departments and local authorities, universities and other educational institutions, non-profit hospitals and social welfare institutions, and the Indian Red Cross Society s. 41(1).

What the law requires

How much

• The minimum is eight and one-third per cent of wages earned or one hundred rupees, whichever is higher s. 26(1).
• If an employee’s wages exceed the calculation ceiling notified by the appropriate Government, calculate bonus as if their wages were that ceiling or the minimum wage, whichever is higher s. 26(2).
• The Central Government has notified the calculation ceiling as ₹7,000 a month, or the minimum wage fixed by the Central Government if that is higher, in force from 21 November 2025 S.O. 4710(E).

Example An employee earns ₹15,000 a month for 12 months, and the minimum wage that applies is ₹12,000 a month. Wages exceed ₹7,000, so bonus is worked out on ₹12,000 × 12 = ₹1,44,000. At the minimum rate of 8⅓% the bonus is ₹12,000. Use the bonus calculator for your own figures.

• If the allocable surplus exceeds the minimum bonus, pay bonus in proportion to wages up to twenty per cent s. 26(3).
• A productivity or production bonus beyond the minimum may be agreed, but total bonus may not exceed twenty per cent of wages s. 26(5).
• The allocable surplus is sixty per cent of the available surplus for a banking company and sixty-seven per cent for other establishments s. 31(1).

Part-year workers

• If an employee did not work all the working days of the year, reduce the minimum bonus proportionately where it is higher than eight and one third per cent of the wages for the days worked s. 27.
• Days of lay-off, leave with wages, temporary disablement from a work accident, and maternity leave with wages count as days worked s. 28.

New establishments

• In the first five accounting years following the year in which the employer begins selling goods or rendering services from a new establishment, bonus is payable only for a year in which the employer derives profit from it s. 26(6).

Set on, set off and adjustments

• Allocable surplus above the maximum bonus is carried forward (set on), up to twenty per cent of the total wages of the employees, and a shortfall below the minimum bonus is carried forward (set off); either is carried up to and including the fourth accounting year s. 36(1)–(2).
• A customary bonus (such as puja bonus) or part of the bonus paid in advance during the year may be deducted from the bonus due s. 37.
• If an employee is found guilty of misconduct causing financial loss, the loss may be deducted from that year’s bonus only s. 38.

Disqualification

• An employee dismissed for fraud, riotous or violent behaviour on the premises, theft, misappropriation or sabotage of property, or conviction for sexual harassment is not entitled to bonus s. 29.

Numbers at a glance

What	Figure	Where
Minimum bonus	eight and one-third per cent or ₹100, whichever is higher	s. 26(1)
Maximum bonus	twenty per cent of wages	s. 26(3)
Days worked to qualify	at least thirty	s. 26(1)
Establishment size	twenty or more persons	s. 41(2)
Payment deadline	eight months from the end of the accounting year	s. 39(1)
Longest extension	two years in total	s. 39(1), proviso
Eligibility ceiling (Central)	wages of ₹21,000 a month or less	S.O. 4711(E)
Calculation ceiling (Central)	₹7,000 a month, or the minimum wage if higher	S.O. 4710(E)

Records and deadlines

• Pay by credit to the employee’s bank account s. 39(1).
• If you need more time, apply to the appropriate Government or the authority it specifies; it may extend the eight months, but never beyond two years in total s. 39(1), proviso.
• If a bonus dispute is pending, pay within one month of the award becoming enforceable or the settlement coming into operation; if the dispute is about payment at a higher rate, still pay eight and one-third per cent of wages earned within eight months of the close of the accounting year s. 39(2), proviso.

Not covered here

• Ceilings notified by a State Government, where the State is the appropriate Government s. 26(1)–(2). The figures above are the Central notifications.
• How gross profit, available surplus and direct tax are computed for bonus s. 32, and State rules.

In short

• If you are eligible, you get a bonus of at least eight and one-third per cent of the wages you earned in the year, or one hundred rupees, whichever is more s. 26(1).
• You are eligible if your wages are within the limit set by the Government and you worked at least thirty days in the accounting year s. 26(1). The Central Government’s limit is ₹21,000 a month S.O. 4711(E).
• In a good year your bonus can be up to twenty per cent of your wages s. 26(3).
• It must be paid into your bank account within eight months of the end of the accounting year s. 39(1).

Does this apply to you?

• Yes, if your workplace employs twenty or more people, or did on any day of the accounting year s. 41(2).
• Not if you work for, among others, the Life Insurance Corporation, the Reserve Bank of India, a Government department or local authority, a university or other educational institution, or a non-profit hospital s. 41(1).

What the law requires

• The minimum bonus is payable even if your employer made no profit that year s. 26(1).
• If your wages are above the calculation limit set by the Government, your bonus is worked out on that limit or on the minimum wage, whichever is higher s. 26(2). The Central Government’s limit is ₹7,000 a month S.O. 4710(E).

Example You earn ₹15,000 a month for 12 months and your minimum wage is ₹12,000 a month. Your bonus is worked out on ₹12,000 × 12 = ₹1,44,000, so at 8⅓% it is ₹12,000. Try the bonus calculator.

• If you did not work all the working days, the minimum bonus can be reduced in proportion s. 27.
• Days on lay-off, paid leave, maternity leave with wages, or off work after an accident at work count as days you worked s. 28.
• Any festival bonus, such as puja bonus, or advance bonus already paid that year can be subtracted from the amount due s. 37.
• You lose the bonus only if you are dismissed for fraud, violent or riotous behaviour at work, theft, misappropriation or sabotage, or are convicted of sexual harassment s. 29.

Numbers at a glance

What	Figure	Where
Least you can get	eight and one-third per cent of your wages, or ₹100	s. 26(1)
Most you can get	twenty per cent of your wages	s. 26(3)
Days you must work	thirty	s. 26(1)
Paid within	eight months of the year ending	s. 39(1)
Wage limit to qualify (Central)	₹21,000 a month	S.O. 4711(E)

What to do if it isn’t followed

• You, a registered trade union you belong to, or an Inspector-cum-Facilitator can file a claim with the authority under the Code on Wages within three years; a later claim can be heard if there is sufficient cause for the delay s. 45(4), (6).
• The authority can order the bonus to be paid plus compensation of up to ten times the amount of the claim s. 45(2).

Not covered here

• Limits set by a State Government, if your employer comes under the State s. 26(1)–(2). The figures above are the Central Government’s.
• How your employer’s profits and surplus are worked out.