The Payment of Bonus Act, 1965 makes bonus a statutory entitlement, not a discretionary gift. It has an eligibility threshold, a calculation ceiling, and a floor and cap on the percentage.
Payment of Bonus Act 1965 — eligible if monthly salary ≤ ₹21,000. Min 8.33% — max 20% of (Basic+DA), capped at ₹7,000 ceiling.
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Check eligibility — the employee must earn at or below the wage threshold and have worked at least 30 days in the accounting year.
Apply the calculation ceiling. Where wages exceed the ceiling, bonus is computed on the ceiling rather than actual wages.
Apply the percentage — a minimum of 8.33% and a maximum of 20% of the bonus-eligible wages.
An employee on ₹18,000 a month with wages capped at the statutory calculation ceiling for bonus purposes receives 8.33% of the ceiling-based annual figure as the statutory minimum, rising to 20% where the employer's allocable surplus allows.
Yes. The 8.33% minimum is payable regardless of profitability — that is the point of a statutory minimum.
No. Ex gratia is over and above the statutory entitlement; it cannot be used to substitute for it.
Yes, it is salary income and taxable in the year of receipt.
Garuda HR looks after payroll, attendance, leave and statutory compliance for Indian teams — the same arithmetic, run for you every month, with a full audit trail. We would be glad to show you around.