Statutory Bonus 2026: Formula, Eligibility, 30 Nov Deadline

Statutory bonus is the annual bonus every covered employer must pay under Chapter IV of the Code on Wages, 2019. The Payment of Bonus Act, 1965 was repealed on 21 November 2025, and the bonus for the accounting year 2025-26 has to reach eligible employees' bank accounts by 30 November 2026. The minimum is eight and one-third per cent of the wages used for the calculation, or ₹100 if that is higher. The maximum is twenty per cent.

If you only need the numbers, go to the minimum and maximum bonus formula and the worked examples. If the payment is late or nearly due, read when bonus must be paid and what to check before 30 November.

This is general guidance for employers, not legal advice. It follows the Code on Wages, 2019 (Act 29 of 2019), the Central commencement notification S.O. 5322(E) of 21 November 2025, the Code on Wages (Central) Rules, 2026, and the two Central notifications under section 26 dated 25 August 2026. Where the State Government is the appropriate Government, use that State's section 26 notifications. Law as on 3 November 2026.

What is statutory bonus under the Code on Wages, and what replaced the Payment of Bonus Act?

Statutory bonus is the annual bonus that Chapter IV of the Code on Wages, 2019 requires an employer to pay every eligible employee. Section 69 of the Code repeals the Payment of Bonus Act, 1965, and from 21 November 2025 bonus is governed by sections 26 to 41 of the Code.

The Central Government brought those sections into force on 21 November 2025 through S.O. 5322(E). The Code on Wages (Central) Rules, 2026 were notified on 8 May 2026 as G.S.R. 343(E) and took effect on publication. For the Central sphere they replace, among other things, the Payment of Bonus Rules, 1975.

The bonus you pay by 30 November 2026 for the accounting year 2025-26 (1 April 2025 to 31 March 2026) is paid under the Code. The two Central section 26 notifications, which fix the ₹21,000 eligibility ceiling and the ₹7,000 calculation ceiling, are deemed to have come into force on 21 November 2025, so they cover this bonus year for Central-sphere establishments. They repeat the figures the repealed Act already carried after its 2015 amendment, so the part of the year before 21 November 2025 is calculated on the same ceilings.

Section 69(2) keeps anything done under the repealed Act alive, including "any amount of wages provided in any provision" of it, to the extent it is not contrary to the Code. That saving lasts until a corresponding Code provision or a Central notification replaces it. Update any bonus policy, offer letter or payslip note that still cites the Payment of Bonus Act, 1965. Our statutory compliance calendar for 2026-27 puts the 30 November bonus date next to the monthly PF, ESI and TDS dates.

Who has to pay statutory bonus, and who is eligible?

Under section 41(2), Chapter IV applies to every establishment in which twenty or more persons are employed, or were employed on any day during the accounting year. Section 41(1) excludes LIC, the Reserve Bank of India, the Indian Red Cross Society, universities and other educational institutions, hospitals and social welfare institutions not run for profit, seamen, registered dock workers, and employees of establishments run by a Central or State Government department or a local authority. Section 40 brings a public sector establishment in only where at least twenty per cent of its gross income comes from goods or services sold in competition with the private sector.

An employee is eligible under section 26(1) when all three conditions hold:

• their wages do not exceed the monthly amount notified by the appropriate Government;
• they have put in at least thirty days' work in the accounting year; and
• they are an "employee" under section 2(k), a definition that leaves out apprentices engaged under the Apprentices Act, 1961.

For the Central sphere, S.O. 4711(E) of 25 August 2026 sets that monthly ceiling at ₹21,000, deemed effective from 21 November 2025. The Central Government is the appropriate Government for railways, mines, oil fields, major ports, air transport, telecommunications, banking and insurance companies, central public sector undertakings and their subsidiaries, corporations set up under a Central Act, and contractors working for those establishments. For most factories, shops and private offices the State Government is the appropriate Government, so the State's section 26 notification decides the ceiling. Check your State's notification for the ceiling that applies to you before you run the bonus.

"Wages" here means the Code definition in section 2(y): basic pay, dearness allowance and retaining allowance. If the excluded heads in clauses (a) to (i), such as HRA, conveyance, overtime and commission, add up to more than half of total remuneration, the excess is added back to wages. That base is wider than the basic-plus-DA column many payroll sheets still use, so check eligibility for FY 2025-26 against the Code definition and not against last year's basic. State minimum wage rates, which feed the calculation ceiling, are summarised on our minimum wages page.

What wage is used for bonus calculation?

Eligibility and calculation use two different ceilings. Eligibility asks whether monthly wages are within the notified limit (₹21,000 in the Central sphere). Calculation asks what wage the percentage is applied to.

Section 26(2), read with the Central notification S.O. 4710(E) of 25 August 2026, says that where an eligible employee's wage exceeds ₹7,000 a month, bonus under section 26(1) and (3) is calculated as if the wage were ₹7,000 a month or the minimum wage fixed by the Central Government, whichever is higher. This notification is also deemed in force from 21 November 2025. A State-sphere establishment uses the State's notification under section 26(2) and the minimum wage fixed by that State.

• Wage of ₹7,000 a month or less: use the actual wage.
• Wage above ₹7,000 a month but within the eligibility ceiling: use ₹7,000 or the applicable minimum wage, whichever is higher.
• Wage above the eligibility ceiling: the employee falls outside section 26(1). Any bonus you pay them is contractual or ex gratia rather than statutory bonus under the Code.

The annual figure the percentage runs on is the calculation wage for the months (or days) in which the employee earned wages during the accounting year. Eight and one-third per cent of twelve months' calculation wage is exactly one month of that wage, which is why the minimum bonus for a full-year employee usually equals one month's calculation wage.

How do you calculate the minimum and maximum bonus?

Section 26 sets a floor and a ceiling for each eligible employee:

• Minimum: eight and one-third per cent of the wages earned (on the calculation wage above), or ₹100, whichever is higher. It is payable whether or not the employer had any allocable surplus in the previous accounting year.
• Maximum: twenty per cent of those wages, where the allocable surplus for the year is large enough to pay more than the minimum.
• Production or productivity bonus: a demand above the minimum on production or productivity grounds is settled by agreement or settlement, and the total, including the statutory minimum, still cannot exceed twenty per cent.

Section 27 covers employees who did not work every working day of the year. If the minimum bonus (usually the ₹100 floor) comes to more than eight and one-third per cent of the wages for the days actually worked, it is reduced in proportion. Under section 28, days of lay-off, leave with wages, absence from temporary disablement caused by a workplace accident, and maternity leave with wages all count as days worked.

The working order is: find the calculation wage, multiply it by the months or days wages were earned, take eight and one-third per cent (or ₹100 if higher) as the floor, and stop at twenty per cent. Allocable surplus decides where between the two the payable rate falls.

What do the numbers look like for FY 2025-26?

The table uses the Central-sphere figures (eligibility ₹21,000; calculation wage ₹7,000 or the minimum wage, whichever is higher) and treats eight and one-third per cent as one-twelfth of the annual calculation wage. The minimum wage figures are assumptions for illustration. Put in your applicable rate before you lock the sheet.

Employee B is where most sheets go wrong. The usual shortcut applies 8.33% to ₹7,000 and pays ₹7,000, but when the applicable minimum wage is ₹8,500 the Code requires the higher figure, so the minimum bonus is ₹8,500. Employee D is outside statutory bonus, although the employer may still pay a contractual Diwali amount. Employee E joined mid-year: thirty days of work makes them eligible, and the percentage runs only on the six months of calculation wage earned in the year.

Once allocable surplus fixes the rate between 8⅓% and 20%, apply the same rate to every eligible employee. Engage payroll calculates statutory bonus on the eligible wage at the rate you set and keeps the bonus register inside the payroll run, so the payment file and the statutory sheet come from the same numbers.

What is allocable surplus, and how do set-on and set-off work?

Bonus above the minimum comes out of allocable surplus. Under section 31, allocable surplus is sixty per cent of available surplus for a banking company and sixty-seven per cent for every other establishment. Available surplus, under section 33, is the gross profit for the year (computed under section 32) less the prior charges in section 34: depreciation, direct tax and any further sums the Central Government prescribes.

Section 36 carries surplus and shortfall across years:

• If allocable surplus exceeds the maximum bonus payable for the year, the excess, up to twenty per cent of the total wages of employees in that year, is carried forward and set on for up to four following accounting years.
• If there is no available surplus, or allocable surplus falls short of the minimum bonus and the set-on balance cannot cover the gap, the shortfall is carried forward and set off for up to four following accounting years.
• Where amounts from several years are carried forward, the amount from the earliest year is used first.

Section 26(4) requires set-on and set-off under section 36 to be taken into account when computing allocable surplus for the current year. The Code leaves the detailed gross-profit computation to Central rules under section 32, with separate methods for banking companies and other employers. Most finance teams already hold this model from the old Act, and the structure of the calculation is unchanged.

When must statutory bonus be paid?

Section 39(1) requires every amount payable as bonus under the Code to be credited to the employee's bank account within eight months from the close of the accounting year. Because section 2(a) fixes the accounting year as the year beginning on 1 April, the year always closes on 31 March and the deadline is always 30 November. For FY 2025-26 that is 30 November 2026, a Monday.

The appropriate Government, or an authority it names, can extend the eight months on the employer's application for sufficient reasons. A pending dispute over a higher rate does not hold back the minimum: the eight and one-third per cent has to be paid within the ordinary eight months.

Since 30 November 2026 is a working weekday, the next-open-day rule in section 10 of the General Clauses Act, 1897 does not come into play. Set an earlier internal cut-off, such as the week of Diwali payouts, so the bank file is not left to the last day. The same date sits on our 2026-27 compliance calendar.

What happens if Diwali or puja bonus is already paid?

Section 37 lets the employer deduct a puja bonus or other customary bonus, or part of the statutory bonus paid in advance, from the statutory bonus payable for the same accounting year. The employee then receives only the balance.

A Diwali payment made in November 2025 or October 2026 as bonus for FY 2025-26 can therefore be set against the statutory amount due by 30 November 2026. Keep the payment proof for each employee so the deduction is easy to show if an Inspector-cum-Facilitator asks. Where the customary payment is larger than an employee's statutory amount, nothing is recovered from the employee; there is simply no statutory balance left to pay them.

Can bonus be reduced or refused for an employee?

Yes, but only on the grounds the Code itself names.

Section 29 disqualifies an employee from bonus under the Code if they are dismissed for fraud; riotous or violent behaviour on the premises of the establishment; theft, misappropriation or sabotage of the establishment's property; or conviction for sexual harassment. Dismissal on any other ground does not by itself take away bonus for the days already worked.

Section 38 lets the employer deduct, from that accounting year's bonus only, the financial loss caused by misconduct the employee has been found guilty of. The employee gets the balance, if any. The deduction cannot be carried into a later year's bonus.

The section 27 reduction is not a disciplinary cut. It only scales down the minimum bonus when the employee has not worked every working day. Ordinary loss of pay is already reflected because the percentage runs on wages earned. Leaving during the year does not cancel bonus already earned; settle it in the full and final, as our full and final settlement guide explains.

What are the rules for a new establishment?

Section 26(6) to (8) phase a new establishment into the full set-on and set-off regime, counting from the accounting year in which the employer first sells goods or renders services from it.

• First five accounting years after that year: bonus is payable only for a year in which the employer derives profit from the establishment, calculated for that year alone without section 36 set-on or set-off.
• Sixth and seventh accounting years: section 36 applies with the changes in section 26(7). The sixth year takes into account the excess or shortfall of the fifth and sixth years; the seventh takes in the fifth, sixth and seventh.
• Eighth accounting year onwards: section 36 applies as it does to any other establishment.

Profit here has a statutory meaning. Under Explanation 1 to section 26, the employer has not derived profit in a year unless it has provided for that year's depreciation under the Income-tax Act (or the agricultural income-tax law) and has fully set off arrears of depreciation and past losses of the establishment. Explanation 2 ignores sales made during a factory's trial run or a mine's or oil field's prospecting stage. Section 26(9) applies the same phased rules, so far as they fit, to new departments, undertakings or branches set up by an existing establishment.

What records, returns and penalties apply to bonus?

Section 50 requires every employer covered by the Code to keep a register of persons employed, muster roll, wages and other prescribed details, to display a notice with the abstract of the Code and wage details, and to issue wage slips. The Code on Wages (Central) Rules, 2026 set the Central-sphere forms, and State rules apply where the State is the appropriate Government. Keep the bonus computation and the set-on and set-off working with these records.

Section 54 sets the penalties:

• paying an employee less than the amount due under the Code: fine up to ₹50,000;
• a repeat of that offence within five years: imprisonment up to three months, fine up to ₹1,00,000, or both;
• any other contravention of the Code or its rules: fine up to ₹20,000, and for a repeat within five years, imprisonment up to one month, fine up to ₹40,000, or both;
• not maintaining records, or maintaining them improperly: fine up to ₹10,000.

For the ₹20,000 and ₹10,000 offences, section 54(3) requires the Inspector-cum-Facilitator to first give a written direction with a time limit to comply; prosecution follows only if the employer does not comply, or repeats a violation of the same nature within five years. The short-payment offence carries no such notice. Section 53 lets the appropriate Government appoint an officer to hold an enquiry and impose fines for short payment, other contraventions and record-keeping failures. Paying in full by 30 November costs less than defending a short payment.

What do employers ask most about statutory bonus?

Is the Payment of Bonus Act, 1965 still in force?

No. Section 69 of the Code on Wages, 2019 repeals it, and the repeal took effect on 21 November 2025, when S.O. 5322(E) brought Chapter IV into force.

Does the ₹21,000 ceiling apply to every private office in India?

No. S.O. 4711(E) binds only establishments where the Central Government is the appropriate Government. For the rest, the State's section 26 notification sets the ceiling. Check your State's notification before you apply ₹21,000 to a State-sphere establishment.

Is bonus calculated on ₹7,000 even when the minimum wage is higher?

No. Under S.O. 4710(E) (Central sphere) you use ₹7,000 or the minimum wage fixed by the Central Government, whichever is higher. Using ₹7,000 alone underpays the bonus whenever the minimum wage is above ₹7,000.

Must bonus be paid if the company made a loss?

Yes. Section 26(1) makes the minimum bonus payable whether or not there was allocable surplus in the previous accounting year. A loss limits how much above the minimum you pay. It does not remove the minimum itself. New establishments in their first five years are the exception, under section 26(6).

Can a Diwali bonus already paid be adjusted against statutory bonus?

Yes. Section 37 allows a puja or other customary bonus, or an advance part-payment of the statutory bonus, made for the same accounting year to be deducted.

Can a company with a calendar financial year pay bonus later than 30 November?

No. Section 2(a) defines the accounting year as the year beginning on 1 April, with no alternative, so the eight months under section 39(1) end on 30 November for every establishment. Only an extension from the appropriate Government moves the date.

Do apprentices get statutory bonus?

No. Section 2(k) leaves apprentices engaged under the Apprentices Act, 1961 out of the definition of employee.

Does a mid-year joiner get a full year's bonus?

No. The employee needs thirty days' work to qualify, and the percentage then applies to the calculation wage for the months actually worked in the accounting year.

What should you check before the 30 November deadline?

Work through this list in the first half of November so the bank file is ready well before 30 November 2026.

• Confirm whether your establishment is Central-sphere or State-sphere, and pull the matching section 26 notifications for the eligibility ceiling and the calculation ceiling.
• Rebuild the eligible list on Code wages under section 2(y) rather than last year's basic-only sheet, and remove apprentices and anyone covered by a section 41 exclusion.
• Set each eligible employee's calculation wage: actual wage up to ₹7,000, otherwise ₹7,000 or the applicable minimum wage, whichever is higher (or the figures in your State's notification).
• Compute eight and one-third per cent and twenty per cent on the annual calculation wage, then fix the payable rate from allocable surplus, set-on and set-off.
• Deduct any puja, Diwali or advance bonus already paid for FY 2025-26 under section 37.
• Apply section 29 disqualifications and section 38 loss deductions only where the dismissal or the finding of misconduct is on record.
• Credit the net amount to each employee's bank account, and file the bonus register, computation sheet and payment proof with the payroll records under section 50.

Most of this list is arithmetic on wages you already hold in payroll. Engage payroll computes statutory bonus in the same system that runs monthly salary, PF and TDS, and keeps the bonus register with that run. Plans are on the Engage pricing page. For how the monthly salary run is built, read how to calculate payroll in India; for the PF wage ceiling that sits beside bonus in year-end planning, see PF calculation 2026.

Related reading: payroll compliance checklist for India, statutory compliance calendar 2026-27, full and final settlement India, minimum wages, Form 16 for employers, the compliance hub and the bonus glossary entry.

Sources

• The Code on Wages, 2019 (Act No. 29 of 2019), Ministry of Labour and Employment PDF. Chapter IV (sections 26 to 41): eligibility, calculation, new establishments, disqualification, allocable surplus, set-on and set-off, customary bonus adjustment, misconduct deduction, time limit for payment, public sector and non-applicability; sections 2(a), 2(k) and 2(y); section 50 records; sections 53 and 54 penalties; section 69 repeal and savings.
• S.O. 5322(E), 21 November 2025 (Gazette CG-DL-E-21112025-267885). Appoints 21 November 2025 as the date on which sections 1 to 41 and the other listed provisions of the Code on Wages, 2019 come into force.
• Code on Wages (Central) Rules, 2026, G.S.R. 343(E), 8 May 2026. Central rules under section 67; supersede the Payment of Bonus Rules, 1975 for the Central sphere.
• S.O. 4711(E), 25 August 2026 (Gazette CG-DL-E-25082026-275747), Ministry of Labour and Employment. Central-sphere eligibility: employees drawing wages not exceeding ₹21,000 a month; deemed in force from 21 November 2025.
• S.O. 4710(E), 25 August 2026 (Gazette CG-DL-E-25082026-275741), Ministry of Labour and Employment. Central-sphere calculation ceiling: where wages exceed ₹7,000 a month, bonus is calculated as if the wage were ₹7,000 or the Central minimum wage, whichever is higher; deemed in force from 21 November 2025.
• Labour Codes page, Ministry of Labour and Employment. Index of the Code PDF, the Central Rules 2026 and the section 26 notifications.
• General Clauses Act, 1897, section 10. Next-open-day rule where the last day of a prescribed period falls on a day the office is closed; it does not apply to 30 November 2026, which is a Monday.