Every October the same questions arrive: is bonus compulsory, who qualifies, and does it have to be before Diwali? Here is the law as it stands under the Code on Wages, with the arithmetic.
Statutory bonus in India is now governed by Chapter IV of the Code on Wages, 2019, which absorbed the Payment of Bonus Act, 1965 when the codes came into force on 21 November 2025. The scheme is largely the one employers know: it applies to establishments with 20 or more persons on any day in the accounting year; an employee who earned up to ₹21,000 a month and worked at least 30 days qualifies; the minimum bonus is 8.33% of wages (or ₹100 if higher) whether or not the business made a profit, and the maximum is 20%; and for calculation, wages above ₹7,000 or the scheduled minimum wage — whichever is higher — are treated as that ceiling figure. The legal deadline is eight months after the accounting year ends, so bonus for 2025-26 is due by 30 November 2026. Diwali (8 November this year) is custom, not law — except where a state has ordered earlier payment. Facts checked 14 October 2026.
Count persons employed, not just payroll employees — contract workers engaged through a contractor count towards the contractor's establishment, but direct casual and part-time workers count towards yours. If the count touched 20 on any day in the accounting year, Chapter IV applies for that year and continues to apply afterwards. A newly set-up establishment has a limited exemption period in its early years unless it earns a profit; check that rule before relying on it.
If you are below 20 and pay a "Diwali bonus" anyway, that is a contractual or ex-gratia payment — welcome, but not governed by these rules. Say which it is in writing, because a payment made for three consecutive years starts to look like a term of employment.
Bonus = bonus rate × bonus wages for the year, where monthly bonus wages = actual wages, or the ceiling (₹7,000 or the minimum wage, whichever is higher) if actual wages exceed it.
| Example 1 | Wages ₹12,000 a month, minimum wage in the state ₹14,500, full year, minimum rate. Bonus wages = ₹12,000 (below the ceiling). Bonus = 8.33% × ₹12,000 × 12 = ₹11,995. |
|---|---|
| Example 2 | Wages ₹20,000 a month, minimum wage ₹14,500, full year, minimum rate. Bonus wages capped at ₹14,500. Bonus = 8.33% × ₹14,500 × 12 = ₹14,494. |
| Example 3 | Wages ₹18,000 a month, joined 1 November, left 31 March (5 months, 110 days worked). Bonus wages capped at ₹14,500. Bonus = 8.33% × ₹14,500 × 5 = ₹6,039, payable in F&F. |
Days of loss of pay reduce wages earned and therefore the bonus; paid leave, maternity leave and lay-off days count as worked. A puja or festival advance already paid can be adjusted against the bonus, if that was agreed in writing.
Within eight months of the close of the accounting year — 30 November 2026 for April 2025 to March 2026. Pay by bank transfer and show it on the payslip or a separate bonus slip; cash with no record is the version that fails an inspection. Maintain the registers the rules require (allocable surplus, set-on and set-off, and the bonus register of amounts due and paid). For most small businesses paying the minimum, the first two are trivial and the third is the one an inspector asks for.
Some states direct earlier payment for particular establishments — Delhi, for instance, has required contractors with 20 or more workers to pay before Deepawali. Check your state labour department's notices each October.
Put the 30 November date on your compliance calendar next to the September ECR and the October professional tax return.
| Law | Chapter IV, Code on Wages, 2019 (in force 21 November 2025; replaced the Payment of Bonus Act, 1965) |
|---|---|
| Applies to | Establishments with 20 or more persons on any day in the accounting year |
| Eligibility | Wages up to ₹21,000 a month; at least 30 working days in the year |
| Calculation ceiling | ₹7,000 a month or the scheduled minimum wage, whichever is higher |
| Minimum bonus | 8.33% of bonus wages, or ₹100, whichever is higher — payable regardless of profit |
| Maximum bonus | 20% of bonus wages |
| Deadline | Within 8 months of year-end: 30 November 2026 for FY 2025-26 |
| Diwali | Custom, not a legal deadline, unless your state has directed earlier payment |
If the establishment employed 20 or more persons on any day in the accounting year, yes: every eligible employee must receive at least 8.33% of their bonus wages for the year, whether or not the business made a profit. Below 20 persons the statutory scheme does not apply, and any bonus is contractual or voluntary.
An employee whose wages (basic plus dearness allowance) are up to ₹21,000 a month and who worked at least 30 days in the accounting year. Employees who left during the year are eligible for the period they worked. Dismissal for fraud, violent conduct, or theft or sabotage disqualifies.
Multiply 8.33% by the employee's bonus wages for the year. Bonus wages are actual monthly wages, or ₹7,000 or the minimum wage for the scheduled employment — whichever of those two is higher — if actual wages exceed that ceiling. On ₹14,500 ceiling wages for a full year the minimum bonus is ₹14,494.
Not by central law. The legal deadline is within eight months of the end of the accounting year, which is 30 November 2026 for 2025-26. Paying around Diwali is a widespread custom, and some states have issued directions for earlier payment in specific cases, so check your state's notices.
Yes, for the period worked in the accounting year, provided they completed at least 30 working days. It is settled in the full and final settlement if the year has closed, otherwise with the general bonus payment.
Yes, if the advance was given against the bonus and the adjustment was agreed in writing. Record the advance and the adjustment on the payslip so both appear in the bonus register.
Merik gives you the two inputs the bonus calculation needs and the record it has to leave. Wages earned per month, including loss-of-pay deductions, come from payroll already run on the attendance Merik recorded, so days worked and wages earned for the year are a report. Joiners and leavers carry their dates on the employee record, which answers the 30-day test and the leaver's pro-rata share.
Merik does not compute the statutory bonus or the allocable surplus. When you have the figure, it goes on the payslip as an incentive line — or, for an advance, as an other-deductions adjustment later — and the payslip is generated, stored and emailed. That is the register entry an inspector asks for. See the payroll module.
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