Statutory Bonus in India 2026: The 30 November Deadline and the Calculation Ceiling Most Employers Get Wrong

Every year around Dhanteras, a few lakh Indian business owners withdraw cash, put it into envelopes, and hand it to their staff. It is one of the better traditions in Indian working life. It is also, for most of those businesses, the moment a statutory obligation is discharged in a way that no longer counts.

The Payment of Bonus Act, 1965 does not exist any more. It was repealed on 21 November 2025 and its contents now sit in Chapter IV of the Code on Wages, 2019. On 25 August 2026 the Ministry of Labour and Employment finally notified the two figures that chapter had been waiting on: the eligibility ceiling of Rs 21,000 a month, and the calculation ceiling. Both were given retrospective effect from 21 November 2025.

Almost every report of that notification said the same thing, which is that the numbers are unchanged from the old Act, so nothing has changed. The numbers are indeed unchanged. What those numbers are applied to has changed in two separate places, and both of them move money. This guide covers the whole of it: who has to pay, the 30 November 2026 deadline, why the Rs 21,000 test is now run on a different figure than the one on your payslip, why the Rs 7,000 calculation ceiling is almost certainly the most expensive mistake in your payroll right now, how Diwali ex gratia interacts with the statutory obligation, when you may lawfully withhold it, and what the whole thing costs a business of 25 people.

The Four Dates That Matter

Bonus is the one statutory payment with a fixed annual deadline, and it is close.

Diwali falls on 8 November 2026, three weeks before the deadline. That is convenient and it is also the trap, because the payment most businesses make that week is not structured as a statutory bonus, is not recorded as one, and increasingly is not paid in a form that discharges one. More on that below.

One transitional question owners are asking, answered plainly. The accounting year 1 April 2025 to 31 March 2026 straddles commencement, because the Codes came into force four months into it. Which regime governs the bonus for that year? In practice the question does not bite on the figures, because Rs 21,000 and Rs 7,000 are the same two numbers the 1965 Act carried after its 2015 amendment, and the 25 August notifications were given retrospective effect to 21 November 2025 precisely to remove the gap. It does bite on the definition of wages those figures are tested against, which is the next section.

Who Has to Pay, and Who Receives It

Four conditions, and all four have to hold.

• The establishment employs 20 or more personson any day during the accounting year. Note “on any day”. A business that ran 22 people through a festive peak in October and settled back to 15 is inside Chapter IV for that entire year. Headcount is not measured at year end.
• The employee worked at least 30 days in that accounting year. Thirty days, not thirty working days of any particular kind, and not a month of continuous service.
• The employee’s wages do not exceed Rs 21,000 a month. This is the test that changed, and it is the next section.
• The employee is not disqualified under Section 29, which is narrower than most employers assume and is covered further down.

There is one relief worth knowing. A genuinely new establishment is not obliged to pay bonus for the first five accounting years following the year it starts operations, except in a year in which it actually derives profit. That is a real concession for a young business, and it is a concession from the obligation, not from the record keeping: you still need to be able to show which years those were.

Note also what the 8.33% floor means. It is payable whether or not you made a profit. Bonus above the floor is linked to allocable surplus, which is 67% of the available surplus for most establishments and 60% for banking companies, with set-on and set-off carrying surplus between years. The floor itself is not contingent on anything. A loss-making establishment of 20 people still owes the minimum bonus.

The Rs 21,000 Test Is Now Run on a Different Number

Here is the thing nobody is reporting. The eligibility ceiling did not move. The number it is measured against did.

Under the 1965 Act you tested Basic plus DA against Rs 21,000. Under Section 26(1) of the Code you test wages against Rs 21,000, and wages means wages as Section 2(y) defines them. That definition excludes HRA, conveyance, overtime, commission and the rest, but then caps those excluded allowances at half of total remuneration and adds back anything beyond the half. For the overwhelming majority of Indian salary structures, where allowances run to 55% or 60% of the package, the arithmetic collapses to a simple rule: statutory wages are exactly half of total pay.

Which means the Rs 21,000 line now sits at Rs 42,000 of total monthly remuneration. Run it:

Look at the bottom row. An employee on Rs 45,000 a month with a payslip Basic of Rs 18,000 passed the old Basic-plus-DA test comfortably and drew a statutory bonus every year. On the plain reading of Section 26(1) read with Section 2(y), that same employee is now outside the entitlement altogether.

This is the opposite of what everybody has been told about the 50% wage rule. The rule is universally described as increasing employer cost, and on PF, gratuity and leave encashment it does exactly that, because it inflates a base. On bonus it inflates a base that is also a ceiling, and inflating a ceiling test pushes people out.

Two honest caveats, because this is a reading and not a settled position. We are not aware of any authority, clarification or departmental circular addressing whether the Section 26(1) ceiling is tested on Section 2(y) wages including the add-back. The plain text says it is, since the Code defines wages once and uses the defined term throughout. But it produces a result that takes a benefit away from an employee, and tribunals are not generous to readings of beneficial legislation that do that. Where an employee sits near the line, the defensible course is the same one that is right on gratuity and on leave: pay it. An underpayment attracts a claim, interest and an inspector. An overpayment attracts neither. We worked the add-back through in full, with two complete before-and-after restructures, in the guide to the new salary structure under the Labour Codes.

The Rs 7,000 Ceiling Is the Most Expensive Line Here

If you read one section of this article, read this one. It is where the money is, and it is the part almost every guide to bonus gets wrong by omission.

Once an employee is eligible, the bonus is not computed on their actual wages. It is computed on a capped figure. Everybody knows the cap is Rs 7,000. Very few payrolls apply the rest of the sentence, which has been in the law since the 2015 amendment and is carried forward by the 25 August 2026 notification:

In 2015, when the ceiling was doubled from Rs 3,500 to Rs 7,000, the second limb was close to theoretical in much of the country. In 2026 it is the operative one everywhere. There is no state in India where the monthly minimum wage for unskilled work is below Rs 7,000, and most are at two to three times it. So a payroll computing a flat 8.33% of Rs 7,000 is, on the face of it, paying roughly half to a third of what is due.

Here is the same employee, three ways:

The gap between the first row and the second is Rs 6,997 per eligible employee per year, repeating, for a business that has been computing bonus the way bonus has always been computed in its accounts department.

Now the genuinely unresolved part, and we are not going to pretend it away. The 1965 Act said the minimum wage “for the scheduled employment as fixed by the appropriate Government”. For an ordinary SME the appropriate government is the state, so you looked up your own state’s schedule. The 25 August 2026 calculation notification is reported as referring to the minimum wage fixed by the Central Government. Central Area A unskilled is Rs 827 a day with effect from 1 April 2026, which annualises to something close to Rs 21,500 a month, and that is the third row of the table. Read literally and applied universally, that reading roughly triples the bonus bill of every covered business in the country, which is a large enough consequence that it deserves scepticism rather than repetition.

The practical instruction, until something settles which minimum wage is meant. Find the minimum wage that actually applies to your employees, in your state, for their category of work and skill level. Use that as the base if it is above Rs 7,000, which it will be. Write down which rate you used and why, and keep the notification you took it from. If your establishment is one where the Central Government is the appropriate government, use the central rate. The failure mode this protects you against is not a sophisticated one. It is an inspector asking why a payroll of 40 people all received exactly Rs 6,997.

One more mechanical point that catches people. The 8.33% applies to the wages earned in the accounting year, on the capped base, not to twelve months as a matter of course. Someone who worked five months earns roughly five months of it. And there is an absolute floor of Rs 100, which matters only for very short service.

Diwali Bonus Is Not Statutory Bonus, Until You Make It One

These are two different payments that happen to arrive in the same fortnight, and conflating them is the most common way an employer who has genuinely paid generously still ends up in default.

A festival payment can be set off against the statutory obligation, but only if it does the work of one. Broadly that means it has to be paid in respect of the same accounting year, and it has to be at least as much as the statutory entitlement for that employee. Pay someone a Rs 5,000 Diwali envelope when their statutory entitlement computed on the correct base is Rs 13,994, and you have not paid 36% of the bonus. You have paid an ex gratia sum and still owe Rs 13,994.

The cash row is the one to act on this month. Section 39 requires the bonus to be paid by crediting it to the employee’s bank account. Not by cash, not by cheque handed over at a function. If your festive payment is meant to discharge the statutory obligation, it has to go through the bank, be identifiable as bonus, and be recorded. If you also want to hand over an envelope on the day, nothing stops you. It is simply a separate, additional, voluntary thing, and it should be labelled that way in your own records so that next year nobody has to reconstruct which was which.

When You Can Lawfully Withhold Bonus

Section 29 disqualifies an employee from bonus where they have been dismissed from service for any of four things: fraud, riotous or violent behaviour on the premises, theft, misappropriation or sabotage of the establishment’s property, or conviction for sexual harassment. The first three carried over from Section 9 of the 1965 Act. The fourth is new to the Code.

Read the two conditions in that sentence carefully, because employers routinely fail both:

• The trigger is dismissal. Misconduct that you dealt with by a warning, a suspension, a transfer or a negotiated resignation does not engage Section 29 at all. The employee keeps the bonus.
• The sexual harassment limb requires a conviction. Not a complaint, not an internal committee finding, not a suspicion. A conviction, by a court.

Separately from disqualification, where an employee has caused financial loss to the establishment by their misconduct in an accounting year, the Code allows that loss to be deducted from the bonus payable for that year. That is a deduction against a quantified loss, not a general power to dock bonus for poor performance. Bonus is not a performance instrument. It is a statutory share.

And one thing that catches people every year: an employee who has left is still owed the bonus for the year they worked. Resignation is not disqualification. If they leave in January 2026, they are owed bonus for FY 2025-26, paid by 30 November 2026 or, more sensibly, folded into the exit settlement, which itself now runs on a two working day clock. We covered that clock in the guide to full and final settlement under Section 17(2).

What This Costs a 25-Person Business

Take a business the size this actually bites. 25 people on the books, so Chapter IV applies. Twenty of them have Section 2(y) wages at or under Rs 21,000 a month, so they are eligible. The minimum wage governing their category in their state is Rs 14,000 a month. The business has been running a Diwali envelope of about Rs 5,000 a head and treating that as the bonus.

• What is actually owed, at the floor. 8.33% of Rs 14,000 for twelve months is Rs 13,994 per employee. Across twenty eligible people that is Rs 2.80 lakh for the year.
• What the Rs 7,000 base would have produced. Rs 6,997 each, Rs 1.40 lakh in total. A payroll computing on the flat ceiling is short by Rs 1.40 lakh a year, every year, and the shortfall is invisible because the calculation looks correct.
• What the envelopes discharged. Rs 5,000 each in cash is Rs 1.00 lakh of genuine generosity that does not discharge a statutory obligation paid otherwise than by bank credit, and in any case falls short of Rs 13,994 per head.
• The eligibility effect at the top.Of the five people above the line, any whose total pay sits between Rs 42,000 and roughly Rs 50,000 were inside the old Basic-plus-DA test and are outside the new one. That is the one movement in this whole article that goes in the employer’s favour, and it is also the least certain.

So the honest headline for a business of this shape is roughly Rs 2.8 lakh a year against a belief that it was paying Rs 1 lakh. That is not a rounding error and it is not a penalty. It is the ordinary cost of the obligation, computed on the base the law names rather than the base the accounts department has always used.

The Record You Will Be Asked For

Look back at every test in this article and notice what each one actually needs. Coverage needs a daily headcount across a whole year, because the threshold is “on any day”. Eligibility needs a count of days worked per person. The Rs 21,000 test needs Section 2(y) wages, which is a payroll computation and not a payslip line. The calculation base needs the minimum wage for each employee’s category. The payment needs a bank credit, and under the Central Rules the amount has to appear in a register and an annual return.

None of those is a judgement call. They are all the same question, which is what the record says. An employer whose headcount lives in memory and whose attendance lives in a notebook cannot answer the first two at all, and those are the two that decide whether the other four are even reached.

This is the specific gap Shiftelio was built for, so treat what follows as an interested party describing its own product. The mechanics are worth understanding whatever you eventually buy:

• Headcount on any given day is a query, not a memory.Because every check-in is a dated record, the “did we touch 20 people on any day this year” question has an answer, which is the question that decides whether Chapter IV applies to you at all.
• Days worked per person is a number. Every in and out is a live selfie with GPS geo-fencing, so the 30-day eligibility test is answerable per person per accounting year from evidence rather than reconstruction.
• Statutory wages are derived, not remembered.Payroll totals the excluded components, applies the 50% test and the add-back, so the figure the Rs 21,000 ceiling is tested against does not silently drift when somebody’s special allowance is topped up mid-year.
• Bonus is paid the way Section 39 requires. Through payroll into a bank account, identified as bonus, on a date, rather than as an envelope nobody can evidence.
• The register is a by-product. Who was eligible, on what base, at what percentage, paid when. Generated with the payroll run rather than assembled the week an inspector asks. We went through every register and form an SME now has to keep in the guide to statutory registers and wage slips.

All of it sits in the flat annual price, with no per-employee fee. If you want to work out the Section 2(y) wages figure for one person right now, which is the number both the Rs 21,000 test and your PF base depend on, our free PF and ESI calculator does the add-back arithmetic and shows the statutory wage it lands on. No signup, no email.

Frequently Asked Questions

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

No. It was repealed on 21 November 2025, along with the Minimum Wages Act, the Payment of Wages Act and the Equal Remuneration Act, and its substance now sits in Chapter IV of the Code on Wages, 2019. If your consultant, your payroll software or your policy document still cites the 1965 Act, that is a reliable sign that nothing has been reviewed since 2025. The obligation did not disappear with the Act. It moved.

What is the last date to pay bonus for FY 2025-26?

30 November 2026. Section 39 gives eight months from the close of the accounting year, and for an April to March year that closed on 31 March 2026. The appropriate government can extend that period for sufficient reason, up to a total of two years, but that is an application you make and are granted, not a grace period you assume.

Do I have to pay bonus if my business made a loss?

Yes, the minimum. The 8.33% floor is payable irrespective of profit or loss. Only the amount above the floor, up to the 20% maximum, is linked to allocable surplus. The single common exception is a genuinely new establishment in its first five accounting years, which pays only in years it derives profit.

Can I still pay the Diwali bonus in cash?

You can pay an ex gratia festival gift however you like. You cannot discharge the statutory bonus that way. Section 39 requires it to be paid by crediting the employee’s bank account. If the envelope is meant to be the bonus, it needs to go through the bank instead and be recorded as bonus.

Does an employee who resigned in the middle of the year get bonus?

Yes, provided they worked at least 30 days in that accounting year and were not dismissed on a Section 29 ground. It is computed on the wages they earned during the year, so a part-year employee gets a part-year bonus. In practice it is cleaner to settle it as part of their exit rather than tracking down a former employee in November.

My employee earns Rs 30,000 a month. Are they eligible?

Almost certainly yes, and this surprises people. The test is on Section 2(y) wages, not on gross pay. For a typical structure where allowances exceed half the package, statutory wages come out at about half of total pay, so Rs 30,000 total is around Rs 15,000 of wages, comfortably inside the Rs 21,000 ceiling. The eligibility line in total-pay terms sits near Rs 42,000 a month, not Rs 21,000.

Do I really have to compute on the minimum wage instead of Rs 7,000?

Where the applicable minimum wage exceeds Rs 7,000, which in 2026 is essentially everywhere, that is what the text says. The formula is the higher of the two, and it has read that way since 2015. Which minimum wage is meant, the one fixed by your state or the one fixed by the Central Government, is genuinely unsettled following the 25 August 2026 notification. Use the rate that actually governs your employees, document the choice, and keep the notification you took it from.

We have 18 employees. Does any of this apply?

Chapter IV applies where 20 or more persons are employed on any day during the accounting year, so check the whole year rather than today’s number. Contract and seasonal staff engaged during a peak count toward that. If you genuinely stayed below 20 all year, the statutory obligation does not reach you, and any festival payment you make is purely voluntary. Keep the headcount record anyway, because “we were under 20” is a claim you have to be able to prove.

The Bottom Line

The two numbers in the headlines did not change. Rs 21,000 to be eligible, Rs 7,000 as the calculation ceiling, 8.33% at the floor and 20% at the top. Every article about the 25 August notification will tell you that, and every one of them is right.

What changed sits underneath those numbers. The eligibility ceiling is now tested against Section 2(y) wages rather than payslip Basic, which quietly moves the line to about Rs 42,000 of total pay and pushes a band of senior staff out of an entitlement they used to have. The calculation ceiling was never really Rs 7,000, it was the higher of Rs 7,000 and the minimum wage, and in 2026 the second limb wins everywhere, which means a great many payrolls are computing roughly half of what they owe. And the payment itself now has to go through a bank account, which is a small sentence that ends a very old custom.

The work between now and 30 November is not difficult and it is not really about bonus. Establish whether you crossed 20 people on any day of the year. Count days worked per person. Compute statutory wages properly. Look up the minimum wage that governs each category. Pay by bank credit and write it down. Do those five things and the bonus round is a predictable line item you can budget for in September. Skip them and it is a number somebody else calculates for you, later, with interest attached.

Sources

• Ministry of Labour and Employment, the four Labour Codes
• India Code, the bare text of the Code on Wages, 2019 and the rules made under it
• PRS Legislative Research, the Code on Wages, 2019 as passed, including Chapter IV
• Office of the Chief Labour Commissioner (Central), minimum wage rates and variable dearness allowance orders
• Press Information Bureau, revision of central minimum wage rates by skill category and area

This guide is general information for Indian employers, not legal advice. The reading of Section 26(1) against the Section 2(y) definition of wages, and the question of which minimum wage the calculation ceiling refers to, are both stated here as readings and are not settled by any authority we are aware of. Where your state has notified its own rules under the Codes, those govern your establishment. Every worked figure is illustrative.