Payment of Bonus Act explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Payment of Bonus Act, 1965 requires eligible establishments to pay an annual bonus to employees. Here is how bonus is calculated.
Eligibility
- Employees drawing wages up to ₹21,000 per month
- Who have worked at least 30 days in the year
- In establishments with 20 or more employees
Calculation
- Minimum bonus: 8.33% of wages; maximum: 20% of wages
- Bonus is calculated on wages capped at ₹7,000 per month (or the minimum wage, if higher)
- Payable within 8 months of the end of the accounting year
Example
For a capped wage of ₹7,000/month, the minimum bonus is about ₹7,000 × 12 × 8.33% ≈ ₹7,000 per year.
Frequently Asked Questions
Who is eligible for bonus?
Employees earning up to ₹21,000/month who worked at least 30 days in the year.
What is the minimum and maximum bonus?
8.33% (minimum) to 20% (maximum) of wages.
On what wage is bonus calculated?
On wages capped at ₹7,000/month or the minimum wage, whichever is higher.
When must bonus be paid?
Within 8 months of the end of the accounting year.
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Talk to an expert →Key Facts About Payment of Bonus Act
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
Who is eligible for bonus?
Employees earning up to ₹21,000/month who worked at least 30 days in the year.
What is the minimum and maximum bonus?
8.33% (minimum) to 20% (maximum) of wages.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
Payment of Bonus Act: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.
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Why This Matters
Staying compliant with Indian regulations protects your business from penalties, interest and unnecessary legal trouble. It is always wise to maintain proper records and documentation so that any future scrutiny can be handled smoothly. Rules and thresholds in labour laws are revised periodically, so it helps to review your obligations at the start of each financial year. Professional guidance from a qualified CA, CS or advocate ensures that filings are accurate and submitted well before the due date.
Small businesses and startups especially benefit from setting up a simple compliance calendar to track recurring deadlines. Government portals now allow most applications and filings to be completed online, reducing paperwork and turnaround time. Keeping your PAN, registration certificates and board resolutions organised makes every subsequent filing faster. When in doubt, it is better to seek clarification early rather than risk a notice or a late-filing penalty later.
A clear understanding of the applicable law helps you make confident, well-informed business decisions. TaxClue's experts regularly assist businesses across India with end-to-end labour laws support at transparent, affordable pricing. Timely compliance also improves your credibility with banks, investors and government authorities. Reviewing your obligations with a professional at least once a year keeps your business audit-ready and stress-free.
Staying compliant with Indian regulations protects your business from penalties, interest and unnecessary legal trouble. It is always wise to maintain proper records and documentation so that any future scrutiny can be handled smoothly. Rules and thresholds in labour laws are revised periodically, so it helps to review your obligations at the start of each financial year. Professional guidance from a qualified CA, CS or advocate ensures that filings are accurate and submitted well before the due date.
Small businesses and startups especially benefit from setting up a simple compliance calendar to track recurring deadlines. Government portals now allow most applications and filings to be completed online, reducing paperwork and turnaround time. Keeping your PAN, registration certificates and board resolutions organised makes every subsequent filing faster. When in doubt, it is better to seek clarification early rather than risk a notice or a late-filing penalty later.