Statutory bonus in India is easier to get right once you know the 8.33% floor
Statutory bonus in India now sits under the Code on Wages, 2019, and many global employers still budget for it as if the old Payment of Bonus Act applied. That gap costs money, because the minimum payout is owed even in a loss year. The fix is simple: know who qualifies, price the 8.33% floor into the offer, and diarise the payment date before the accounting year closes.
We run payroll for hundreds of employers in India, and the bonus question lands on our desk every autumn. This year it matters more, since the central government issued fresh bonus notifications on 25 August 2026.
What statutory bonus in India means after the labour codes
Statutory bonus is a yearly payment calculated on wages, and it is separate from any performance or festive bonus you choose to give. The Code on Wages replaced the Payment of Bonus Act, 1965 when the labour codes took effect on 21 November 2025, according to the commentary from Taxmann.
The core rules carried over. Section 26 sets a minimum of 8.33% of wages earned, or ₹100, whichever is higher, and a ceiling of 20%. The minimum applies whether or not the business made a profit.
If you’ve read our note on India’s new labour codes, this is one of the pieces that moves from theory to cash.
Who has to pay
The Code applies to any establishment where twenty or more people were employed on any day of the accounting year. One day at twenty is enough for that year.
That sounds like a big threshold. It isn’t, once you count contract staff, interns on payroll, and people hired through a vendor into your premises.
Who gets paid
An employee must have worked at least thirty days in the accounting year. They must also earn within the wage limit that the relevant government notifies.
Here’s the part that trips people up. Law firm Khaitan & Co and a Mondaq analysis both report that the August 2026 central notifications (S.O. 4710(E) and S.O. 4711(E)) set an eligibility limit of ₹21,000 a month and a calculation limit of ₹7,000 a month. Those notifications cover establishments in the central sphere, such as banks, telecom and air transport.
Most private technology and services employers fall under their state government instead. So confirm your own state’s figures before you rely on the central numbers.
How to calculate statutory bonus in India without overpaying
The calculation base is capped, which keeps the cost lower than most first time employers fear. When an eligible employee’s wages exceed the calculation limit, bonus is worked out on that limit or the applicable minimum wage, whichever is higher.
Consider a company with an employee on ₹18,000 a month, assuming the ₹7,000 calculation limit applies and the local minimum wage sits below it. The minimum bonus is 8.33% of ₹84,000 (twelve months at ₹7,000), which is roughly ₹7,000 for the year. The 20% ceiling would be ₹16,800. This is an illustration, not a quote, and a higher minimum wage lifts the base.
The 8.33% floor, the 20% ceiling and the surplus in between
Anything above the minimum depends on allocable surplus. Per Taxmann’s reading of section 31, that’s 67% of available surplus for most establishments and 60% for banking companies.
In a thin year you pay the floor and carry the shortfall forward. In a strong year, surplus above the ceiling can be carried forward too, for up to four following accounting years. Newly set up establishments get a gentler regime for their first five years, where bonus depends on profit.
A quick comparison of what changed in practice
| Question | Under the old Act | Under the Code on Wages |
|---|---|---|
| Governing law | Payment of Bonus Act, 1965 | Code on Wages, 2019, bonus chapter |
| Minimum bonus | 8.33% of wages or ₹100 | 8.33% of wages or ₹100, unchanged |
| Maximum bonus | 20% | 20% |
| Payment method | Cash was allowed | Credit to the employee’s bank account |
| Payment deadline | Eight months after year end | Eight months after year end |
| Headcount trigger | Ten or twenty, depending on the type of establishment | Twenty or more on any day in the year |
| Who sets the wage limit | Fixed in the Act | Notified by the central or state government |
The table reflects the commentary cited above. Treat it as a planning aid and check the Code’s text for your own filing.
When statutory bonus in India falls due, and what late payment risks
Payment is due within eight months of the close of the accounting year, by crediting the employee’s bank account. For the year that ended on 31 March 2026, that date is 30 November 2026.
That’s a little over seven weeks away. If you haven’t run the numbers yet, start this week.
Extensions are possible on application to the government, but the total extension can’t exceed two years. Don’t plan around one. Late payment invites disputes, back pay claims and awkward conversations with your best people.
Festive bonus is not the same thing
Many employers pay a Diwali or year end bonus and assume that settles the matter. It doesn’t, unless the amount at least meets the statutory minimum and you document it that way.
Your payslip labels matter here. A discretionary payment called “gift” can leave you owing the statutory amount on top.
Where statutory bonus meets the rest of your India payroll
Bonus doesn’t sit alone. It interacts with the wage definition, and the new wage definition changes how basic pay, provident fund and gratuity line up. Our piece on the 50% basic wage rule shows how a heavier basic component lifts several costs at once.
Fixed term staff also now accrue gratuity after one year, as we covered in our gratuity guide. And state specific rules vary, which our labour code rules by state post tracks closely. For the full list of employer obligations, see our statutory benefits in India guide.
Three mistakes we see most often
The first is treating bonus as a year end decision. It’s a liability that builds every month, so accrue it like provident fund.
The second is paying cash or through an expense claim. The Code expects a bank credit, and a clean audit trail protects you if an employee later disputes the amount.
The third is ignoring the people who left. An employee who worked thirty days and then resigned in June can still be owed a share for that year. Include leavers in your calculation, and settle it in their full and final payment.
A three step habit that keeps payroll clean
- Confirm your appropriate government and the wage limits it has notified.
- Accrue 8.33% of eligible wages monthly, so November never surprises finance.
- Label every discretionary payment clearly, and keep the statutory amount separate.
Meanwhile, if you don’t have an Indian entity, you still carry this obligation as the economic employer. An Employer of Record in India holds the registrations, runs the calculation and credits the bank accounts for you, from $49 per employee per month.
Your next step before 30 November
Pull your payroll for the year that ended 31 March 2026 this week. Count every person who worked thirty days, check their monthly wages against your state’s notified limit, and multiply the eligible base by 8.33%. That number is your minimum liability, and it’s due before the end of next month.