HR & Payroll Tools
Statutory Bonus Calculator
Calculate statutory bonus under the Payment of Bonus Act 1965 — minimum 8.33%, maximum 20%.
This tool provides an estimate or a starting draft. Check the assumptions and current official requirements before relying on the result. It does not replace qualified financial, legal or medical advice.
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The Payment of Bonus Act, 1965 mandates annual bonus payment to eligible employees in establishments employing 20 or more persons. Eligibility: employees who have worked for at least 30 working days in the accounting year and whose salary/wages do not exceed ₹21,000/month. The minimum bonus is 8.33% of annual wages (equivalent to one month's salary), and the maximum is 20% of annual wages. Bonus is calculated on the salary actually drawn or ₹7,000/month (whichever is lower) as the calculation base — meaning even employees earning ₹50,000/month have their bonus computed on ₹7,000/month.
Allocable Surplus under the Act determines whether minimum or higher bonus applies. If allocable surplus exceeds minimum bonus, the employer must share the surplus (up to the maximum 20% limit). Allocable surplus = 60% of available surplus (67% for banking companies). Available surplus = gross profit as computed under the Act minus certain deductions. For most large profitable companies, the allocable surplus exceeds 20% of payable wages, resulting in maximum 20% bonus. For loss-making companies, they must still pay minimum 8.33% bonus, debiting a 'set-on' account.
The Bonus Act distinguishes between 'bonus' (statutory, 8.33-20%) and 'exgratia' or 'performance bonus' (contractual, above statutory). Statutory bonus must be paid within 8 months of the accounting year end (November 30 for April-March accounting year). It is taxable as income in the year received. Employees excluded from the Act: managerial and supervisory employees earning above ₹21,000/month, government employees, employees of RBI, LIC, NABARD, and certain other institutions.
How to use this utility
- Use the controls below—paste text, pick files, or adjust options as described on the tool.
- Click the main action button. Processing runs in your browser on this device.
- Download or copy the output. Check the processing note for any external services used by this operation.
Common use cases
- Calculating minimum statutory bonus payable to a factory worker earning ₹18,000/month under the Payment of Bonus Act
- Verifying whether a company employee earning ₹25,000/month is eligible for statutory bonus
- Computing maximum 20% bonus payout for all eligible employees in a profitable manufacturing unit
- Determining bonus payable for an employee who joined mid-year and worked only 45 days
- Checking the ₹7,000/month calculation base cap to understand why bonus does not scale with actual salary above ₹7,000
Tips for best results
- 1Verify your eligibility — salary above ₹21,000/month (CTC basis may differ from salary basis under the Act) excludes you from statutory bonus
- 2Bonus paid is exempt from TDS if total bonus in the year is below the TDS threshold — but it is always taxable as income and should be declared in ITR
- 3If your employer calls any payment 'exgratia' rather than 'bonus', verify it is not the statutory bonus being mislabeled — both are taxable but statutory bonus rights cannot be waived
- 4Part-year employees (joined mid-year) are eligible for proportional bonus if they worked at least 30 days in the accounting year
- 5Establishments with less than 20 employees are not covered under the Bonus Act — but employees may still have contractual bonus rights under their appointment letter
Frequently asked questions
- Is Konnect2Tools free?
- Yes. These in-browser tools are completely free to use with no account required for core functionality.
- Do my files leave my device?
- Browser document operations run locally, except where the operation uses an external service, such as AI summarisation. Read the processing note before using sensitive inputs.
- Is the Statutory Bonus Calculator tool safe to use?
- Local operations process document content on your device. External-service operations may send inputs as described in the processing note. Keep originals and inspect the output.
- What is the minimum statutory bonus percentage in India?
- Minimum statutory bonus under the Payment of Bonus Act, 1965 is 8.33% of the annual salary (calculated on actual salary or ₹7,000/month, whichever is lower). The maximum is 20%. Example: Employee earning ₹18,000/month → Calculation base = ₹7,000 (lower of actual ₹18,000 and ₹7,000). Annual bonus base = ₹7,000 × 12 = ₹84,000. Minimum bonus = 8.33% × ₹84,000 = ₹6,997. Maximum bonus = 20% × ₹84,000 = ₹16,800. Even for employees earning ₹80,000/month, statutory bonus would only be ₹6,997-₹16,800 per year because of the ₹7,000 cap.
- Is statutory bonus taxable in India?
- Yes — statutory bonus under the Payment of Bonus Act is fully taxable under the head 'Salaries' in the year it is received (cash basis). It is included in Form 16 by the employer. TDS applies on bonus if annual salary including bonus exceeds the taxable threshold. Bonus is not eligible for any special exemption under Section 10. Note: this is different from bonuses received from employer-linked insurance schemes (like LIC bonus on policies) which may have different tax treatment. Performance bonuses above statutory are also taxable as salary.
- Who is excluded from the Payment of Bonus Act?
- Excluded categories: (1) Employees of establishments employing < 20 persons (new establishments exempt for first 5 years or until profitable); (2) Employees whose salary exceeds ₹21,000/month; (3) Employees of the Reserve Bank of India, LIC, NABARD, seamen, employees covered under specific Acts (dock workers); (4) Government employees; (5) Educational institutions; (6) Hospitals not for profit. Supervisory and managerial employees earning above ₹21,000/month are excluded even in covered establishments. Many IT and service companies apply the Act selectively or pay exgratia as a substitute for statutory bonus.
- Can an employer refuse to pay statutory bonus if the company made a loss?
- No — even loss-making companies must pay the minimum 8.33% statutory bonus. The Act provides a 'Set On' mechanism: when an establishment incurs a loss, the minimum bonus is charged against the set-on account (funded from excess surplus in profitable years). If there is no set-on balance, the employer must still pay minimum bonus from current resources. Only startups in their first 5 years of operation, or establishments with no surplus and no set-on balance for 3 consecutive years, may be exempt from minimum bonus payment. Companies cannot contractually waive the statutory bonus obligation.
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