What is Bonus?
In Indian payroll, bonus generally refers to the statutory annual bonus payable under the Payment of Bonus Act 1965 — distinct from discretionary performance bonuses an employer may also pay.
Last updated: June 2026Statutory bonus (Payment of Bonus Act 1965)
Applies to establishments with 20 or more employees. Any employee earning up to ₹21,000 per month (basic + DA) is eligible after 30 days of service in an accounting year.
- Minimum bonus: 8.33% of eligible wages.
- Maximum bonus: 20% of eligible wages, payable from allocable surplus.
- Wage ceiling: bonus is computed on a notional wage of ₹7,000/month or the minimum wage of that scheduled employment, whichever is higher.
- Payment window: within 8 months from the close of the accounting year.
Performance bonus and ex-gratia
Performance bonus is discretionary and not governed by the Act. Many employers also pay ex-gratia — voluntary one-off amounts outside statutory bonus, often to retain employees above the ₹21,000 threshold.
Tax treatment
All bonuses (statutory and discretionary) are taxable as salary income in the year of payment and TDS applies. Bonus paid for prior years is taxed in the year of actual receipt unless declared earlier.
Bonus in Texlaculture HRMS
Texlaculture auto-flags bonus-eligible employees, calculates statutory bonus using current wage ceilings, accrues monthly, and ties payout into payroll with TDS handled automatically.
Compute and disburse statutory bonus
Texlaculture handles bonus calculation, accrual and payout per the Payment of Bonus Act.
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