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India’s new labour codes consolidate 29 complex central laws into four streamlined codes. With effect from 21 November 2025, statutory bonus is governed by the Code on Wages, replacing the erstwhile Payment of Bonus Act, 1965. Eligibility and computation remain anchored to threshold-based coverage under the current ceiling, unless new rules are notified.
Who qualifies, who is excluded, and how the threshold can evolve under the new wage architecture.
Calculation ceiling, minimum and maximum bonus range, and the principle of strict eligibility.
How exclusions work in the 50% test and how monthly bonus behaves within the “exclusion bucket”.
Statutory bonus is payable to employees whose monthly “basic salary including DA or wage” does not exceed ₹21,000 per month as per the current ceiling. The Code clarifies that statutory bonus shall be paid to every employee drawing wages not exceeding such amount per mensem, as determined by notification by the appropriate Government.
Currently, an employee with monthly basic salary including DA of ₹21,000 or less is eligible, provided they have worked for at least 30 days in the accounting year. The minimum payout is 8.33% of wages or ₹100, whichever is higher.
New rules are under preparation and may be announced later, as reiterated by the Union labour secretary Vandana Gurnani.
An employee whose basic salary including DA or wage exceeds ₹21,000 per month is not eligible for the mandatory statutory bonus under the existing code. There is a possibility that eligibility may be interpreted differently if the threshold is linked to Part A of wages under the 50% rule, but this would depend on future rules and notifications.
For eligible employees, bonus calculation is subject to a ceiling. The bonus is calculated either on the employee’s actual salary or the statutory ceiling (currently ₹7,000 per month or Government’s fixed minimum wage for the lowest grade of employee, whichever is higher).
The eligibility for statutory bonus is strictly capped at a monthly basic salary or wage of ₹21,000. An employee earning ₹21,001 or more per month is generally not entitled to the mandatory minimum statutory bonus of 8.33% under the Code, although they may receive a company-discretionary or performance-linked bonus.
The new mandate requires that the first half of an employee’s remuneration must consist of at least 50% of the total monthly gross.
Many components are initially excluded. If the total exclusions exceed 50% of total remuneration, the excess amount is added back to wages for statutory calculations.
Statutory bonus is among the exclusions. If it is paid monthly, each instalment can remain an exclusion for the wage definition, while still being counted in the exclusion bucket for the 50% test.
Statutory Bonus, Value of house accommodation or light, water and other amenities, House Rent Allowance, Employer PF or pension, Conveyance, Special allowance or LTA, Award or settlement, Overtime, Commission, Gratuity, Retrenchment settlement.
In this example, 50% of total remuneration equals 25000. The base wages (Basic) is 18000 and the remaining half totals 32000. Since the exclusion side exceeds 50% of gross, the difference of 7000 is added back to wages so that wages become 18000 plus 7000 equals 25000.
Substantively, statutory bonus remains an exclusion for wage definition, but any additional performance or retention bonus beyond statutory obligation, or amounts loosely called incentive but paid as a regular allowance, may be treated as wages and can fall inside the wage bucket.
On the question of daily wage workers not being eligible for bonus, the stated position is that every employee who has worked at least 30 days in an accounting year is entitled to a bonus. The exact approach under the new rules will depend on the rules and notifications that may follow.
Earlier provisions outlined specific situations where employers were exempted from paying bonuses, such as fewer than 20 employees, employees earning above ₹21,000 per month, certain categories like apprentices or specific institution-based exemptions, and certain policy or misconduct-related exclusions.
Consider an employee earning a monthly basic salary of 5000 and a dearness allowance of 1500, receiving a 10% bonus.
Consider an employee earning basic salary of 10000 and a dearness allowance of 4000 per month receiving a 15% bonus. Since Basic plus DA exceeds the 7000 ceiling used for computation, assume 7000 for calculation.
Additional bonus or incentive over and above statutory obligation, or amounts loosely called incentive but paid as a regular allowance, should be treated carefully:
If it is a one-time discretionary payment on termination or year-end, it may fall under exclusion treatment depending on the structure. If it is a regular monthly or quarterly allowance, treat it as wages unless specifically notified otherwise. If it is not excluded, it is counted in gross remuneration and can fall inside the wage bucket for the 50% test.
Compliance-safe approach: clearly bifurcate statutory bonus from performance or retention bonus in CTC structure and payslips.
Discretionary payments made on termination of employment (resignation, retirement, dismissal) are typically treated differently:
Treatment: excluded from wages under Section 2(y)(k) and not counted in the exclusion bucket for the 50% test because it is a one-time full and final item, not part of regular wage period remuneration.
Examples include retention bonus paid on exit, goodwill payment on retirement, or settlement amount in lieu of notice period if structured as ex-gratia.
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