Employee Bonus Calculator - Free Bonus Act Calculator India
Calculate accurate annual bonus as per Payment of Bonus Act 1965. Check eligibility, compute minimum/maximum bonus, calculate pro-rata bonus for partial year employment, and determine tax implications instantly. Compliant with Indian labor laws for companies with 20+ employees.
Employee Details
Basic salary + DA (if applicable)
Minimum 30 days required for bonus eligibility
Minimum 8.33%, Maximum 20%
Enter employee details to calculate bonus
Complete Guide to Employee Bonus Calculator & Payment of Bonus Act 1965
Bonus Act Guidelines
Eligibility Criteria
- • Minimum 30 working days in the accounting year
- • Applicable to establishments with 20+ employees
- • Salary/wage not exceeding ₹21,000 per month
- • Must be in employment at the time of payment
Bonus Calculation
- • Minimum: 8.33% of salary or ₹100 (whichever is higher)
- • Maximum: 20% of salary in accounting year
- • Pro-rata calculation for partial year employment
- • Based on basic salary + dearness allowance
Payment Timeline
- • Must be paid within 8 months of accounting year end
- • Usually paid before Diwali/Durga Puja festivals
- • Penalty for delay: 1% per day of delayed amount
- • Can be paid in installments with employee consent
Tax Implications
- • Bonus up to ₹10,000 is tax-free
- • Amount above ₹10,000 taxed as per IT slab
- • TDS applicable if bonus exceeds threshold
- • Forms part of CTC for tax calculation
Complete Guide to Employee Bonus Calculator & Payment of Bonus Act 1965
What is Payment of Bonus Act 1965?
The Payment of Bonus Act, 1965 is a landmark Indian labor legislation that mandates profit-sharing with employees through annual bonus payments. Applicable to establishments with 20 or more employees earning up to ₹21,000 per month, the Act ensures workers receive a fair share of company profits. Our bonus calculator implements all provisions of this Act including minimum bonus (8.33%), maximum bonus (20%), eligibility criteria (30 working days), and pro-rata calculations for partial year employment.
Bonus Calculation Formula & Methods
Standard Bonus Formula
Bonus = (Salary + DA) × Bonus % × (Days Worked / Total Working Days)
Example: Salary = ₹25,000, DA = ₹5,000, Bonus Rate = 8.33%, Worked 220/240 days
Bonus = ₹30,000 × 8.33% × (220/240) = ₹2,290
Minimum Bonus Calculation
Higher of: (Salary + DA) × 8.33% OR ₹100
Even if company makes losses, eligible employees must receive minimum 8.33% bonus or ₹100, whichever is higher. This statutory minimum cannot be reduced under any circumstances.
Maximum Bonus Limit
Maximum: (Salary + DA) × 20%
Regardless of profits, bonus cannot exceed 20% of eligible salary. For ₹30,000 monthly salary, maximum annual bonus = ₹72,000 (₹30,000 × 12 × 20%).
Eligibility Criteria for Employee Bonus
Who is Eligible?
- ✓Worked minimum 30 days in accounting year
- ✓Drawing salary/wage up to ₹21,000 per month
- ✓Employed in establishments with 20+ workers
- ✓Includes permanent, temporary, contractual employees
- ✓Part-time workers eligible on pro-rata basis
- ✓Must be in employment at time of bonus payment
Who is Not Eligible?
- ✗Employees earning above ₹21,000/month
- ✗Worked less than 30 days in accounting year
- ✗Dismissed for fraud, theft, or violence
- ✗Establishments with less than 20 employees (unless profit exceeds certain threshold)
- ✗Public sector employees covered under separate schemes
- ✗Apprentices during apprenticeship period
Tax Implications on Employee Bonus
| Bonus Amount | Tax Treatment | TDS Applicability | Example |
|---|---|---|---|
| Up to ₹10,000 | Fully Exempt | No TDS | ₹8,000 bonus = Zero tax |
| Above ₹10,000 | Taxable as Salary | Yes, as per slab | ₹50,000 bonus = ₹15,000 tax (@30%) |
| Production Bonus | Fully Taxable | Yes | Not covered under Bonus Act exemption |
| Performance Bonus | Fully Taxable | Yes | Part of CTC, no exemption |
💡 Tax Saving Tip: Bonus above ₹10,000 is added to annual income and taxed as per your income tax slab (5%, 20%, or 30%). Consider requesting bonus split across financial years to optimize tax liability.
Bonus Payment Timeline & Penalties
Payment Timeline
- Accounting Year: Usually April 1 to March 31
- Payment Deadline: Within 8 months from close of accounting year
- For FY 2023-24: Bonus must be paid by November 30, 2024
- Festival Season: Usually paid before Diwali/Durga Puja (September-October)
- Installments: Allowed with employee written consent
- New Joiners: Pro-rata bonus if joined mid-year
Penalties for Non-Compliance
- Delayed Payment: Simple interest @ 1% per day on delayed amount
- Non-Payment: Criminal prosecution + imprisonment up to 6 months
- False Records: Fine up to ₹5,000 + potential imprisonment
- Obstruction: Penalty for preventing inspection by authorities
- Repeated Offence: Imprisonment up to 1 year + higher fines
- Employee Rights: Can file complaint with labor commissioner
Bonus Calculation Examples (India 2024)
Example 1: Standard Full Year Employee
Employee Details: Monthly Salary = ₹20,000, DA = ₹4,000, Bonus Rate = 10%
Working Days: Worked 240/240 days (full year)
Calculation:
Total Earnings = ₹24,000/month
Bonus = ₹24,000 × 10% × (240/240) = ₹2,400/month
Annual Bonus = ₹2,400 × 12 = ₹28,800
Tax (30% bracket) = ₹28,800 - ₹10,000 = ₹18,800 × 30% = ₹5,640
Net Bonus Received = ₹23,160
Example 2: Mid-Year Joiner (Pro-rata Calculation)
Employee Details: Monthly Salary = ₹18,000, Joined on October 1, 2023
Working Days: Worked 120/240 days (6 months)
Calculation:
Minimum Bonus Rate = 8.33%
Bonus = ₹18,000 × 8.33% × (120/240) = ₹749.70/month
6-Month Pro-rata Bonus = ₹749.70 × 6 = ₹4,498
Since less than ₹10,000, fully tax-exempt
Net Bonus Received = ₹4,498 (Tax-free)
Example 3: Maximum Bonus Limit Case
Employee Details: Monthly Salary = ₹21,000 (maximum limit), High Profits
Company Bonus Rate: 25% (but maximum allowed is 20%)
Calculation:
Calculated Bonus = ₹21,000 × 25% = ₹5,250/month
Maximum Allowed = ₹21,000 × 20% = ₹4,200/month
Annual Capped Bonus = ₹4,200 × 12 = ₹50,400
Tax (30% bracket) = (₹50,400 - ₹10,000) × 30% = ₹12,120
Net Bonus Received = ₹38,280
Frequently Asked Questions About Employee Bonus
What is the minimum and maximum bonus percentage in India?
As per Payment of Bonus Act 1965, minimum bonus is 8.33% of salary + DA or ₹100 (whichever is higher). Maximum bonus is capped at 20% of annual eligible salary. For example, if monthly salary is ₹20,000, minimum annual bonus = ₹20,000 × 12 × 8.33% = ₹19,992 and maximum = ₹20,000 × 12 × 20% = ₹48,000.
Is bonus mandatory for all companies in India?
Bonus is mandatory only for establishments with 20 or more employees in any day during the accounting year. Once applicable, it remains mandatory even if employees reduce below 20 later. Employees earning up to ₹21,000/month are eligible. Companies can pay higher bonus voluntarily (ex-gratia), but statutory bonus has minimum/maximum limits. Startups and small businesses with under 20 employees are not legally required to pay bonus.
How is bonus calculated for employees who worked part of the year?
Pro-rata bonus is calculated based on actual days worked. Formula: (Salary × Bonus % × Days Worked) / Total Working Days. If you worked 180 out of 240 days, you get 75% of full bonus. However, minimum 30 working days is mandatory for eligibility. Mid-year joiners, resignees, and employees on long leave receive proportionate bonus. Example: ₹25,000 salary, 8.33% rate, 150/240 days worked = ₹25,000 × 8.33% × (150/240) = ₹1,302.71 per month.
Is bonus taxable? How much tax do I pay on bonus?
Bonus up to ₹10,000 is tax-exempt. Amount above ₹10,000 is fully taxable as salary income at your applicable tax slab (5%, 20%, or 30%). TDS is deducted by employer. Example: ₹50,000 bonus in 30% bracket = (₹50,000 - ₹10,000) × 30% = ₹12,000 tax. Bonus is added to Form 16 and included in total annual income. New tax regime doesn't provide bonus exemption - full amount taxable.
When should bonus be paid? What if company delays payment?
Bonus must be paid within 8 months from the end of accounting year (usually March 31). For FY 2023-24, deadline is November 30, 2024. Most companies pay during festival season (Diwali/Durga Puja). If delayed, company must pay simple interest @ 1% per day on delayed amount. Employees can file complaint with Assistant Labour Commissioner. Persistent non-payment can lead to criminal prosecution and imprisonment of employer up to 6 months.
Can company pay zero bonus if it incurs losses?
No. Even if company makes losses, it must pay minimum bonus of 8.33% or ₹100 (whichever is higher) to eligible employees. This is statutory minimum and cannot be avoided. However, if company SET OFF (carried forward) losses are substantial and it is genuinely in financial distress, it can approach Labour Commissioner for exemption, but this is rarely granted. Companies making profits must pay bonus based on allocable surplus calculation, subject to 8.33%-20% limits.
What is the difference between statutory bonus and performance bonus?
Statutory bonus is mandatory payment under Bonus Act 1965, calculated as % of salary (8.33%-20%), paid annually based on company profits/losses. It is a legal entitlement. Performance bonus is discretionary payment by employer based on individual/company performance, has no minimum/maximum limits, not covered under Bonus Act, and fully taxable with no ₹10,000 exemption. Many IT/MNC companies give performance bonus in addition to (or instead of) statutory bonus.
Are contractual/temporary employees eligible for bonus?
Yes! Contractual, temporary, part-time, and fixed-term employees are eligible for bonus if they meet eligibility criteria: worked minimum 30 days and earning up to ₹21,000/month. Employment nature (permanent/temporary) doesn't matter. Even daily wage workers and piece-rate workers are eligible. However, apprentices during apprenticeship period and employees dismissed for fraud/theft/violence are not eligible. Employees on payroll of contractors may need to claim bonus from principal employer.
How is bonus different from incentive, commission, or variable pay?
Bonus is annual statutory payment linked to company profits, governed by Bonus Act, with fixed minimum/maximum. Incentive is performance-linked payment (monthly/quarterly), discretionary, no legal mandate. Commission is % of sales/revenue, usually for sales roles, fully taxable, no Act coverage. Variable pay is part of CTC, performance-based, promised in appointment letter, contractual obligation. Only statutory bonus has ₹10,000 tax exemption - all others fully taxable. Bonus is company-profit based, others are individual-performance based.
Can I negotiate higher bonus with my employer?
You can negotiate ex-gratia bonus (beyond statutory minimum), but not the statutory bonus which is governed by Bonus Act. If company pays higher than 8.33%, you can negotiate to maintain that level, but company cannot reduce below 8.33%. In profit-making companies, bonus should be calculated based on allocable surplus - you can question if it is artificially kept at minimum. Join trade unions or employee associations for collective bargaining power. Senior employees (>₹21,000/month) can negotiate performance bonuses as part of CTC.