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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