Section 39 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.
Section 39 of the Code on Wages, 2019 sets the deadline for bonus. The employer must credit it to the employee's bank account within eight months from the close of the accounting year. The appropriate Government, or an authority it specifies, can extend the period on application for sufficient reasons, up to two years in total. A separate one-month limit applies where bonus is the subject of a dispute.
All bonus under the Code is paid by crediting the employee's bank account within eight months from the close of the accounting year (s.39(1)). On the employer's application and for sufficient reasons, the appropriate Government or specified authority may extend the period, but the total period extended cannot exceed two years. Where a dispute about bonus is pending, the bonus is paid within one month from the date the award becomes enforceable or the settlement comes into operation; but if the dispute is about a higher rate, the employer pays 8.33 per cent of wages earned within eight months of the close of the year (s.39(2)).
Sub-section (1): eight months, by bank credit
Two features distinguish this provision.
- Mode: crediting the bank account. All amounts payable as bonus are to be paid "by crediting it in the bank account of the employee". Cash payment of bonus does not meet the wording. Compare the general mode of wage payment in section 15.
- Time: eight months from the close of the accounting year. The clock starts on the last day of the accounting year, not on the date of the profit and loss account or the approval of accounts.
Hypothetical example. An establishment's accounting year closes on 31 March 2026. Eight months from that date run to 30 November 2026, so the bonus has to be credited by then. A company whose books are finalised only in September has less than three months left, so payroll should be ready in advance. The dates are invented only to show the counting.
The section does not state a penalty for missing the deadline. Offences and penalties are in the Code's penalty provisions; see our article on penalties when read with this section. Employers who want the bonus calendar set up before the accounting year closes can use our payroll compliance audit service.
Extension of time
The proviso to sub-section (1) says the appropriate Government or such authority as it may specify, on an application by the employer and for sufficient reasons, may by order extend the eight-month period to such further period or periods as it thinks fit, so, however, that the total period so extended shall not in any case exceed two years.
Points to note:
- The application must come from the employer, with reasons.
- The extension is by order. An employer cannot assume an extension from filing an application.
- The wording "the total period so extended shall not exceed two years" is ambiguous. It can be read as a limit on the extension alone (so that the outer limit is eight months plus two years) or as a limit on the total time from the close of the year. The text does not settle this; the safer reading, until the appropriate Government clarifies, is that the extension must be well within two years in all, and an order should state the final date.
- The text does not prescribe a form or a time within which to apply. Apply before the eight months expire.
Sub-section (2): when a bonus dispute is pending
"Notwithstanding anything contained in sub-section (1)", where there is a dispute regarding payment of bonus pending before any authority, the bonus is to be paid within one month from the date on which the award becomes enforceable or the settlement comes into operation in respect of that dispute.
| Situation | Time limit |
|---|---|
| No dispute | Within eight months from the close of the accounting year (s.39(1)) |
| Eight months extended on order | Within the extended period, total extension not above two years (proviso to s.39(1)) |
| Dispute pending about bonus | Within one month from the date the award becomes enforceable or the settlement comes into operation (s.39(2)) |
| Dispute for payment at the higher rate | Pay eight and one-third per cent of wages earned within eight months from the close of the year; the balance follows the award or settlement (proviso to s.39(2)) |
The proviso to sub-section (2) protects the employee's minimum while a claim for more is argued: the employer must pay 8.33 per cent of wages earned within the eight months even if the dispute is about a higher rate. For the dispute procedure, see sections 46 and 47 and the claims provisions in section 45.
A drafting note: the proviso says "8.33 per cent of the wages earned as per the provisions of this Code". The section does not say whether the Rs 100 floor of s.26(1) also applies in this case. Check section 26 and take advice on a low-wage employee.
What the Central Rules add
The Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026) apply only where the Central Government is the appropriate Government. Where the State Government is the appropriate Government, the State's own wage rules apply. In the Rules text read for this article, there is no rule that adds a time limit or a form for the extension application under s.39. Check the notification of the authority specified by the appropriate Government to receive extension applications. For bonus records, see the registers under Rules 51 and 52. For the old-law comparison, see our guide on the eight-month time limit for payment of bonus.
Need help with the bonus calendar?
Missing the eight-month limit usually happens when accounts close late or when bank details are incomplete. Our payroll compliance audit team can prepare a bonus calendar, check bank-credit readiness and draft the extension application where it is really needed.
Key takeaways
- Bonus is paid by crediting the employee's bank account within eight months from the close of the accounting year.
- The appropriate Government or a specified authority can extend the period on the employer's application for sufficient reasons, with the extension capped at two years in total.
- Where a bonus dispute is pending, payment is due within one month of the award or settlement.
- A dispute about a higher rate does not delay the 8.33 per cent, which is due within eight months.
- Section 39 states no penalty; penalties are elsewhere in the Code.
Read next
- Sections 32 and 33: computation of gross profits and available surplus
- Section 40: bonus in public sector establishments
- Section 17: time limit for payment of wages
- Time limit for payment of bonus: eight months under the old Act
Disclaimer: Based on the Code on Wages, 2019 (as enacted) and, where noted, the Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026), as on 1 October 2026. The Code is in force from 21 November 2025; State Governments make their own rules for establishments where the State is the appropriate Government, and wage rates are notified separately. Verify the current position before acting.