The Diwali bonus is not a gift for many workers — it is a statutory right. The Payment of Bonus Act, 1965 requires every factory and every establishment with 20 or more employees to pay an annual bonus of at least 8.33% and up to 20% of wages to employees earning up to ₹21,000 a month, computed on a wage ceiling of ₹7,000 or the minimum wage, whichever is higher. This calculator works out the bonus per employee for a full or part year, the minimum and maximum, and the total liability for your team, so you budget it before the accounts close.
The rules in brief
| Point | Rule |
|---|---|
| Coverage | Factories, and establishments with 20+ employees (once covered, always covered) |
| Eligible employee | Wages up to ₹21,000 a month; at least 30 working days in the year |
| Calculation ceiling | Bonus computed on ₹7,000 a month or the state minimum wage for the job, whichever is higher |
| Minimum bonus | 8.33% of the calculation wages (even in a loss year) |
| Maximum bonus | 20%, depending on "allocable surplus" — profits after the statutory formula |
| Payment deadline | Within 8 months of the close of the accounting year (by 30 November for a March year end) |
| Deductions | Customary or interim bonus already paid; misconduct-related loss with due process |
| Exemptions | New establishments for the first 5 years unless they earn profits; LIC, certain public bodies |
Start-ups are exempt only until they make a profit in any of the first five years. Employees dismissed for fraud or violence lose entitlement for that year.
How to use the calculator
- Enter the employee's monthly wages (basic + DA) and the state minimum wage for the category, if higher than ₹7,000.
- Enter days worked in the year — bonus is pro-rated for part years; below 30 days there is no entitlement.
- Choose the bonus percentage (8.33% minimum; up to 20% if your allocable surplus allows) or enter your declared rate.
- Read the bonus payable and, in team mode, the total for all eligible employees; export the list for payroll.
- Pay through payroll — bonus is taxable salary, subject to TDS — and record it on the wage slip.
Worked example
A packer earns ₹15,000 a month, worked the full year, minimum wage for the category is ₹11,500. Calculation wage = ₹11,500 (higher than ₹7,000). Minimum bonus = 8.33% × 11,500 × 12 = ₹11,495. At 20%, ₹27,600. An office assistant at ₹22,000 a month is outside the Act entirely — any bonus is contractual, not statutory.
Bonus, ex-gratia and "Diwali gift"
Many employers pay everyone something at Diwali; the statutory bonus is the floor for covered employees, and anything for those above ₹21,000 is ex-gratia at the company's discretion. Keep the two separate in policy and on payslips. Productivity-linked bonus schemes may replace the statutory bonus only with an agreement and only within the 8.33%–20% band. Employers must also file the annual return in Form D and maintain registers A, B and C.
Budgeting for it
- Provision monthly: 8.33% of calculation wages per eligible employee, so the November outflow is not a surprise.
- Bonus counts in the fully-loaded cost — see the employee cost calculator.
- Cash-flow planning for the festive quarter, including bonus, advances and stock, is in the Festive season 2026 checklist.
- Paying bonus by bank transfer with a slip avoids Section 40A(3) cash disallowance issues above ₹10,000 per person per day.
Related tools
- Team payroll calculator — pay salary and bonus together.
- Wage slip generator — show the bonus line.
- Employee cost calculator — bonus inside the loaded cost.
- In-hand salary calculator — TDS impact of a bonus month.
- Professional tax calculator — a bonus month can move the PT slab in some states.