It’s the last week of October. Your MD walks in and asks, “Diwali bonus kab release kar rahe hain?” — and in the same breath, your compliance tracker is flashing a reminder that statutory bonus for FY 2025-26 is due by November 30. Two very different numbers, two very different rules, and if you’re the one signing off on payroll, mixing them up is an easy way to end up short-paying eligible staff or overpaying people who were never covered under the Act in the first place.
That mix-up is more common than it should be. The statutory bonus calculator exists precisely to remove the guesswork — but the calculator is only as good as your understanding of who it applies to and what changed when the Payment of Bonus Act, 1965 got folded into the Code on Wages, 2019. Here’s the working knowledge you actually need this bonus season.
TL;DR — Statutory Bonus in 60 Seconds
- Statutory bonus applies to employees earning up to ₹21,000/month (Basic + DA) in establishments with 20 or more workers, who’ve worked at least 30 days in the accounting year.
- Bonus is calculated on a capped wage of ₹7,000/month (or the applicable minimum wage, whichever is higher) — not on actual salary.
- Minimum bonus is 8.33%, maximum is 20% of the annual calculation base.
- Payment is due within 8 months of the close of the accounting year — for FY 2025-26 (April–March), that’s November 30, 2026.
- The Payment of Bonus Act is now Chapter VIII of the Code on Wages, 2019 (in force since November 21, 2025), which added a new disqualification ground most HR teams haven’t updated their policy for.
What Is Statutory Bonus, Exactly?
Statutory bonus is a legally mandated annual payment to eligible employees, governed by the Payment of Bonus Act, 1965 — now absorbed into Chapter VIII of the Code on Wages, 2019. Unlike a performance bonus or a Diwali gift, it isn’t discretionary. If your establishment employs 20 or more people and an employee’s Basic+DA is within the eligibility ceiling, you owe them a bonus, full stop. The only questions are how much, and by when.
Run your own numbers through EZHRM’s free statutory bonus calculator before you finalise this year’s payout sheet — it applies the ₹7,000 calculation cap automatically so you’re not doing this on a spreadsheet formula that someone typed wrong in 2019 and nobody’s touched since.
The Payment of Bonus Act Now Lives Inside the Code on Wages — Here’s What Actually Changed
The four new labour codes came into force on November 21, 2025, and the central rules were notified in May 2026, under the Ministry of Labour and Employment. The Payment of Bonus Act, 1965 didn’t survive as a standalone law — its provisions now sit in Chapter VIII (Sections 26–41 broadly) of the Code on Wages, 2019. You can still read the original 1965 Act text on the Chief Labour Commissioner’s site for reference, though the Code now governs in practice.
The good news: the core numbers you’ve relied on for years are unchanged. Eligibility ceiling stays at ₹21,000/month, the calculation cap stays at ₹7,000/month, and the 8.33%–20% band is untouched. If you were expecting a big-bang change like the one that hit gratuity eligibility for fixed-term employees, this isn’t it.
What did change: the Code added a new ground for disqualification from bonus — conviction for sexual harassment, alongside the existing grounds of fraud, riotous or violent behaviour on company premises, and theft, misappropriation, or sabotage of company property. If your bonus policy document still only lists the old three grounds under Section 9 of the 1965 Act, it’s out of date. This is a five-minute fix with real compliance value, especially with POSH audits becoming stricter.
Who’s Actually Eligible — Don’t Assume It’s Everyone Under ₹21,000
Three conditions have to be true together, not just the salary one:
- Establishment size: Your factory or establishment must employ 20 or more persons on any day during the accounting year. Below that, the bonus chapter doesn’t apply at all — though you can still pay ex-gratia voluntarily.
- Salary ceiling: Basic + DA must not exceed ₹21,000 per month. Anyone above this is simply not covered — no bonus obligation, statutory or otherwise.
- Minimum service: The employee must have worked at least 30 days in the accounting year (April to March). New joinees who cross that threshold are pro-rata eligible.
A trap HR teams fall into every single year: they run the eligibility check on gross CTC instead of Basic+DA, and end up either over-including senior staff who are actually outside the ceiling, or under-including junior staff whose Basic+DA is being miscalculated after a mid-year hike. Pull the number straight from your CTC salary calculator breakup, not from memory.
The Bonus Formula, With the Cap Everyone Forgets
This is where most manual calculations go wrong. The formula looks simple on paper:
Calculation Base = min(Basic+DA, max(₹7,000, applicable minimum wage))
Annual Bonus = Calculation Base × 12 × Bonus% ÷ 100
The part people miss: even if an employee’s actual Basic+DA is ₹18,000, you don’t calculate bonus on ₹18,000. You cap it at ₹7,000 (or the state’s applicable minimum wage for that role, if that figure is higher than ₹7,000 — which it often is in states like Delhi, Maharashtra, and Karnataka). That capped figure, not the real salary, is what gets multiplied by the bonus percentage.
| Employee | Basic+DA/Month | Calculation Base | Bonus % | Annual Bonus |
|---|---|---|---|---|
| Shop floor worker | ₹9,500 | ₹7,000 | 8.33% (minimum) | ₹6,997 |
| Office clerk | ₹14,000 | ₹7,000 | 10% | ₹8,400 |
| Junior accountant | ₹18,000 | ₹7,000 | 20% (maximum) | ₹16,800 |
| Sales rep (6 months worked) | ₹12,000 | ₹7,000 | 8.33% | ₹3,499 |
Notice all four have the same calculation base despite wildly different salaries — that’s the ceiling doing its job. If your payroll sheet shows bonus figures that scale with actual salary above ₹7,000, something’s wrong with your formula. Cross-check every batch against the bonus calculator before you release payments.
Statutory Bonus vs Diwali Ex-Gratia vs Performance Bonus
This is the confusion that started this whole article. All three show up as “bonus” on a payslip, but they’re governed completely differently.
| Type | Legally mandatory? | Governed by | Typical timing |
|---|---|---|---|
| Statutory bonus | Yes, if eligible | Code on Wages, 2019 (Ch. VIII) | Within 8 months of FY close (by Nov 30) |
| Diwali / festival ex-gratia | No — discretionary | Company policy | Usually before Diwali |
| Performance bonus | No — contractual/discretionary | Employment contract or appraisal cycle | Annual/quarterly appraisal cycle |
Some employers pay an “ex-gratia” to employees above the ₹21,000 ceiling around Diwali and quietly treat it as covering their statutory bonus obligation too, for employees who are actually eligible. That’s a compliance gap waiting to surface in an inspection — the two need to be tracked and, ideally, labelled separately in your payslips.
What HR Managers Get Wrong
- Calculating on actual salary instead of the capped base. The single most common payroll error on this front — it either overpays significantly or, more dangerously, underpays and creates a liability.
- Forgetting the minimum wage comparison. ₹7,000 is a floor, not a fixed number — if your state’s applicable minimum wage for that category of employee is higher, you must use that figure instead.
- Missing the Nov 30 deadline because it feels far away in August. It isn’t. Payroll teams that wait until October to reconcile eligible headcount routinely run into last-minute data gaps.
- Not filing Form D. The annual return under the Payment of Bonus Rules is still required; several SMEs pay the bonus correctly and then forget the paperwork.
- Treating bonus as taxable-optional. It isn’t — statutory bonus is fully taxable as salary income and must be reflected in Form 16 and TDS computation for the relevant month.
- Not updating the disqualification clause. As covered above, conviction for sexual harassment is now an explicit disqualification ground under the Code on Wages — most HR policy documents haven’t caught up.
If your team is still managing this on spreadsheets across multiple departments, this is exactly the kind of statutory calculation that benefits from being handled inside your payroll software rather than recomputed by hand every accounting year — one wrong cell reference and you’ve either shorted a factory floor of workers or overpaid a whole department. It’s the same reasoning that applies to gratuity and overtime calculations — statutory formulas with hard ceilings that manual payroll sheets quietly get wrong every accounting year.
Frequently Asked Questions
Is statutory bonus mandatory even for a 5-person startup?
No. The bonus chapter under the Code on Wages applies only to factories and establishments employing 20 or more persons on any day during the accounting year. Smaller establishments have no statutory obligation, though many still pay a discretionary bonus.
Can an employer pay less than 8.33% bonus in a loss-making year?
No. 8.33% is the statutory minimum regardless of the company’s profitability — it must be paid even if the business made a loss that year. The set-on and set-off mechanism under the Code allows adjustment of allocable surplus across years, but the minimum bonus itself is non-negotiable.
Does statutory bonus apply to employees earning ₹25,000 basic salary?
No. The eligibility ceiling is ₹21,000/month Basic+DA. Employees above this are outside the Act’s coverage entirely — any bonus paid to them is a voluntary, ex-gratia payment governed by company policy, not the Code on Wages.
What’s the deadline to pay statutory bonus for FY 2025-26?
Bonus must be paid within 8 months from the close of the accounting year. For the April 2025–March 2026 accounting year, that deadline is November 30, 2026.
Is bonus calculated on gross salary or Basic+DA?
Only on Basic+DA, capped at ₹7,000/month or the applicable minimum wage, whichever is higher. Allowances, HRA, and other CTC components are excluded from the calculation entirely.
Can an employee be denied bonus for poor performance?
No. Statutory bonus isn’t performance-linked — it’s a wage-linked legal entitlement. It can only be withheld on the specific disqualification grounds under the Code: fraud, riotous/violent conduct, theft or sabotage of company property, or conviction for sexual harassment.
Getting statutory bonus right isn’t complicated once you know where the ceilings sit — but it’s exactly the kind of calculation that’s easy to get wrong at scale, especially with the accounting year, Diwali ex-gratia, and the Nov 30 deadline all competing for attention in the same quarter. Run your numbers through EZHRM’s free statutory bonus calculator before this year’s payout goes out — it’s free, and it saves you the spreadsheet formula error nobody catches until an inspector does. For more compliance guides like this one, browse the EZHRM blog or explore the full set of free HR calculators.