Logo
Financial Calculator

Bonus Calculator - Bonus Calculation Formula India 2026

Free online bonus calculator to calculate statutory bonus, performance bonus, and Diwali bonus with accurate tax implications. Updated for the Code on Wages, 2019, which replaced the Payment of Bonus Act from 21 November 2025.

Loading calculator...

Essential Bonus Tips for Indian Employees

Expert insights to understand and maximize your bonus entitlements

Know Your Bonus Rights

Statutory bonus applies if your monthly wages are ₹21,000 or less. It is at least 8.33% of your yearly bonus wage (₹7,000 a month, or your applicable minimum wage if higher), or ₹100, whichever is higher.

Check Your Diwali Bonus Adjustment

Under Section 37 of the Code on Wages, a Diwali or other customary bonus paid during the year can be deducted from your statutory bonus. Ask whether this year's Diwali bonus is extra or an advance on it.

Tax on Bonus Amounts

Every bonus, statutory, performance or Diwali, is taxed as salary at your slab rate. There is no tax-free bonus amount, and your employer deducts TDS when it pays.

Negotiate Performance Bonus

Apart from statutory bonus, negotiate for performance-based bonuses. These can significantly boost your annual income and career growth.

Types of Bonus in India - Complete Guide

Understanding different types of bonuses and their calculation methods

Statutory Bonus

Eligibility

• Salary up to ₹21,000/month
• At least 30 days worked in the year
• Proportionate if you worked part of the year

Calculation

8.33% of the bonus wage (₹7,000 or minimum wage) or ₹100, whichever is higher

Tax Benefit

Fully taxable as salary

Performance Bonus

Criteria

• Individual performance
• Team achievements
• Company targets

Range

Typically 5% to 30% of annual salary

Taxation

Fully taxable as salary income

Festival Bonus

Timing

• Diwali/Dussehra
• Regional festivals
• Year-end bonuses

Amount

Usually 1 month salary or fixed amount

Nature

Discretionary company policy

Statutory Bonus Calculation Example

Understanding how statutory bonus is calculated with real example

Example: Employee with ₹18,000 basic salary

Given Information:

Basic Salary:₹18,000/month
Working Days:250 days
Minimum Wage:₹7,000 or less
Bonus Rate:8.33%

Calculation:

Bonus Wage:₹7,000/month
Bonus Amount:₹7,000 × 12 × 8.33% = ₹6,997
Tax (if any):At your slab rate
Net Bonus:₹6,997 before tax

Bonus Calculation Formulas

Mathematical formulas for calculating different types of bonuses as per Indian regulations

Statutory Bonus Formula

Full Year Eligibility (≥240 days)

Bonus = Max[(Bonus Wage × 12 × 8.33%), ₹100]

• Bonus wage = ₹7,000 or minimum wage, whichever is higher
• Minimum bonus is ₹100
• Only for wages up to ₹21,000/month

Partial Year (<240 days)

Bonus = (Annual Bonus × Working Days) ÷ 240

Proportionate calculation based on actual working days

Tax Calculation

Tax = Bonus × Your Slab Rate%

No bonus-specific exemption

Performance Bonus Formula

Basic Formula

Bonus = Annual Salary × Bonus %

• Bonus % varies by company policy
• Typically ranges from 5% to 30%
• Based on performance rating

Monthly Salary Based

Bonus = Basic Salary × 12 × Performance %

Calculated on annual basic salary component

Tax Calculation

Tax = Gross Bonus × Tax Slab Rate%

Fully taxable as salary income

Festival/Annual Bonus

Percentage Based

Bonus = Annual Salary × Festival %

• Company discretionary policy
• Usually 5% to 20% of salary
• Fixed by employment contract

Fixed Amount Method

Bonus = 1 Month Basic Salary

Commonly one month's basic pay or fixed sum

Tax Calculation

Tax = Gross Bonus × Tax Slab Rate%

Fully taxable as salary income

Understanding the Formulas

Basic Salary:Fixed component excluding allowances and bonuses
Annual Salary:Basic salary × 12 months
Working Days:Actual days worked in the accounting year (excludes leaves without pay)
Tax Slab Rate:Your marginal income tax rate (0% to 30% depending on your regime and income)
Net Bonus:Gross bonus amount minus applicable tax
Max Function:Returns the higher value between two amounts

Important: Statutory bonus is governed by the Code on Wages, 2019. The 8.33% rate is legally mandated and cannot be reduced by employers. Performance and festival bonuses are discretionary and vary by company policy.

Complete Guide to Bonus Calculation in India

Everything you need to know about how to calculate bonus on salary, bonus calculation formula, and your rights under Indian labor laws

Understanding Bonus Calculation Formula

Bonus calculation in India follows specific formulas based on the type of bonus. The most common question employees ask is "how to calculate bonus on salary?" The answer depends on whether you're calculating statutory bonus mandated by law or performance-based bonus determined by company policy.

Statutory Bonus Calculation Formula: The Code on Wages, 2019 mandates a minimum bonus of 8.33% of the annual bonus wage. The formula is: Bonus = (Bonus Wage × 12 months × 8.33%) or ₹100 (whichever is higher). The bonus wage is ₹7,000 a month or your applicable minimum wage, whichever is higher, and only employees earning ₹21,000 a month or less are covered.

Performance Bonus Calculation: Unlike statutory bonus, performance bonus calculation varies by company. The typical formula is: Bonus = Annual CTC × Performance Percentage × Achievement Factor. Performance percentages typically range from 5% to 30% depending on company policy and individual ratings.

Diwali Bonus Calculation: Festival bonus like Diwali bonus is usually calculated as one month's basic salary or a fixed percentage of annual salary. Companies may offer Diwali Bonus = 1 × Monthly Basic Salary or combine it with statutory bonus for payment convenience.

Who Benefits Most from Bonus Calculator

Should Use This Calculator:

  • Salaried employees earning up to ₹21,000 a month entitled to statutory bonus
  • HR professionals calculating bonus for multiple employees
  • Employees planning finances around Diwali or year-end bonus
  • Workers verifying if employer is paying correct bonus amount
  • New employees understanding bonus eligibility criteria

May Not Need This Calculator:

  • Self-employed or freelancers (no statutory bonus applies)
  • Employees in establishments with fewer than 20 workers
  • Government employees covered under different rules
  • Contract workers on daily wages without fixed salary

Tax Implications on Bonus Income

Understanding bonus taxation is crucial for accurate financial planning. Here's how different types of bonuses are taxed in India:

Statutory Bonus Tax Treatment:

  • • There is no tax-free bonus amount
  • • The whole bonus is taxable as "Income from Salary"
  • • Tax is deducted at source (TDS) by employer at applicable slab rate

Performance & Festival Bonus Tax:

  • • Fully taxable as part of salary income
  • • Taxed the same way as statutory bonus
  • • Taxed at marginal rate (your highest applicable tax slab)
  • • Large bonuses can push you into higher tax bracket

Tax Planning Tip: If you receive a significant bonus, consider investing in tax-saving instruments under Section 80C (like ELSS, PPF, NPS) to reduce your overall tax liability. The bonus amount gets added to your annual income, potentially increasing your tax outgo.

Key Bonus Provisions of the Code on Wages, 2019

Eligibility Criteria:

  • • Salary/wages up to ₹21,000 per month
  • • Minimum 30 days of service in accounting year
  • • Applicable to establishments with 20+ employees
  • • Bonus wage: ₹7,000 or minimum wage, whichever is higher

Payment Rules:

  • • Must be paid within 8 months of year-end
  • • Minimum 8.33%, maximum 20% of eligible salary
  • • Customary/Diwali bonus already paid can be deducted
  • • Delay can be extended by the government, up to two years in total

Tips for Maximizing Your Bonus Benefits

1

Verify Your Eligibility

Check that your monthly wages are within the ₹21,000 limit and you've worked at least 30 days in the year.

2

Track Working Days

Statutory bonus is based on the wages you earned in the year, so unpaid leave reduces it proportionately.

3

Negotiate Performance Bonus

During salary negotiations, discuss performance bonus percentage and payout criteria clearly.

4

Know Your Rights

Statutory bonus cannot be denied even after resignation if you meet eligibility criteria.

5

Plan for Taxes

Set aside money for tax payment on bonus to avoid year-end tax surprises.

6

Keep Documentation

Save payslips showing bonus payments for income tax filing and future reference.

Bonus vs Other Employee Benefits Comparison

Understanding how bonus differs from other compensation components like gratuity, PF, and leave encashment

Benefit TypeEligibilityCalculationTax TreatmentCalculator
Statutory BonusSalary ≤₹21,000, 30+ days work8.33% of annual bonus wageFully taxable as salaryThis Calculator
Gratuity5+ years of continuous service15 days × years × last drawn salaryExempt up to ₹20 lakhGratuity Calculator
Provident Fund (PF)Mandatory for wages up to ₹25,000/month12% employee + 12% employerEEE (exempt at all stages)PF Calculator
Leave EncashmentUnused earned leave at retirement/exitDays × daily salary rateExempt up to ₹25 lakh (on retirement)Leave Encashment
Salary ComponentsAll employed individualsBasic + HRA + DA + AllowancesVaries by componentSalary Calculator

Bonus vs Gratuity

Bonus is annual and based on company profits/performance. Gratuity is a one-time payment at retirement/resignation after 5 years of service.

Bonus vs PF Contribution

Bonus is given to you directly. PF contribution is saved for retirement with interest, withdrawn only after employment ends or at specific milestones.

Bonus vs Leave Encashment

Bonus is mandatory for eligible employees. Leave encashment depends on unused leave balance and company policy for encashment.

Frequently Asked Questions about Bonus Calculation

Common questions about bonus eligibility, calculation formula, and tax implications in India

What is the formula for calculating bonuses in India?

The bonus calculation formula depends on the type of bonus. For statutory bonus: Bonus = Bonus Wage × 12 × 8.33% (minimum ₹100), where the bonus wage is ₹7,000 a month or your applicable minimum wage, whichever is higher, and only employees earning ₹21,000 a month or less qualify. For performance bonus: Bonus = Annual Salary × Bonus Percentage. If you worked only part of the year, statutory bonus is smaller in proportion to the wages you actually earned.

How to calculate bonus on salary in India?

To calculate bonus on salary: 1) Check your monthly wages (basic + DA): statutory bonus applies only if they are ₹21,000 or less. 2) Find your bonus wage: ₹7,000 or your applicable minimum wage, whichever is higher (but not more than what you earn). 3) Multiply by 12. 4) Apply 8.33%, or your employer's rate of up to 20%. 5) Remember bonus is taxed as salary at your slab rate. Example: wages ₹18,000 a month and minimum wage ₹12,000 gives ₹12,000 × 12 × 8.33% = ₹11,995 statutory bonus. For a performance bonus, apply your company's percentage to your salary.

How is statutory bonus calculated under the Code on Wages, 2019?

The Code on Wages, 2019 replaced the Payment of Bonus Act, 1965 from 21 November 2025 and kept its main rules. Employees earning ₹21,000 a month or less who worked at least 30 days in the accounting year get a minimum bonus of 8.33% of their bonus wage (or ₹100, whichever is higher), and up to 20% depending on the employer's allocable surplus. Under notification S.O. 4710(E), the bonus wage is ₹7,000 a month or the applicable minimum wage, whichever is higher. Formula: Statutory Bonus = Bonus Wage × 12 × 8.33%, reduced in proportion if you worked only part of the year.

How is Diwali bonus calculated for employees?

Diwali bonus calculation in India varies significantly by company policy, as it is a discretionary payment and not required by the Code on Wages, 2019. Common methods used by Indian companies include paying one month's basic salary as Diwali bonus, applying a fixed percentage typically ranging from 10% to 20% of annual salary, offering a fixed lump sum amount based on the employee's grade or designation level, or simply paying the statutory bonus minimum of 8.33% and timing it to coincide with Diwali. Unlike statutory bonus which is a legal entitlement, Diwali or festival bonus is entirely at the employer's discretion and depends on the company's profitability and policy. From a tax perspective, Diwali bonus is fully taxable as salary income under the Income Tax Act, and the employer deducts TDS at the applicable slab rate. Under Section 37 of the Code on Wages, if your employer pays a Diwali, puja or other customary bonus, it can deduct that amount from the statutory bonus due for the same year, so the two are not always paid in full on top of each other.

What is the difference between statutory bonus and performance bonus?

Statutory bonus and performance bonus differ significantly in their legal basis, calculation method, and tax treatment in India. Statutory bonus is legally mandatory under the Code on Wages, 2019 (which replaced the Payment of Bonus Act, 1965), for establishments with 20 or more employees and employees earning up to Rs 21,000 a month. It is at least 8.33% and at most 20% of the bonus wage, which is Rs 7,000 a month or the applicable minimum wage, whichever is higher. Performance bonus, on the other hand, is entirely discretionary and determined by the employer based on individual performance metrics, team targets, or overall company profitability. Performance bonuses have no salary cap and typically range from 5% to 30% of annual CTC. Regarding taxation, both are fully taxable as salary income, with TDS deducted by the employer. Every eligible employee has a legal right to statutory bonus, whereas performance bonus depends entirely on the employer's assessment and discretion.

What is the minimum and maximum statutory bonus percentage?

Under the Code on Wages, 2019, the minimum statutory bonus is 8.33% of the annual bonus wage or ₹100, whichever is higher. The maximum statutory bonus is 20% of annual salary. Companies can pay anywhere between 8.33% to 20% based on allocable surplus and profitability. Most companies pay the minimum 8.33% to employees earning up to ₹21,000 per month.

Is bonus taxable in India? How much tax on bonus?

Yes, bonus received by employees is taxable in India under the head 'Income from Salary.' There is no tax-free bonus amount: statutory bonus, performance bonus, Diwali or festival bonus and any other bonus are all taxed at the employee's applicable slab rate. The employer deducts Tax Deducted at Source (TDS) on bonus payments at the time of credit or payment, whichever is earlier. The TDS rate is based on the employee's estimated total annual income and applicable slab rate. For example, if you are in the 30% tax bracket and receive a Rs 50,000 performance bonus, approximately Rs 15,600 would be deducted as TDS including 4% health and education cess. Bonus income must be reported in your annual income tax return under salary income, and any excess TDS can be claimed as a refund.

Who is eligible for statutory bonus in India?

Under the Code on Wages, 2019, statutory bonus eligibility in India is determined by several criteria. First, the employee must work in an establishment that employs 20 or more persons. Second, the employee's monthly salary, comprising basic pay plus dearness allowance, must not exceed Rs 21,000 per month to qualify for mandatory bonus coverage. Third, the employee must have completed at least 30 working days in the relevant accounting year to be eligible for any bonus. Employees earning above Rs 21,000 per month are not covered by the statutory bonus rules, but employers may voluntarily pay them bonus as a matter of company policy. Importantly, contract workers, temporary employees, and probationers are also eligible for statutory bonus if they satisfy these criteria. Apprentices engaged under the Apprentices Act, 1961 are specifically excluded from bonus eligibility. Employees dismissed for fraud, violent conduct, or theft during employment may also be disqualified.

When should bonus be paid by employer as per law?

Under Section 39 of the Code on Wages, 2019 (Section 19 of the old Payment of Bonus Act), statutory bonus must be credited to the employee's bank account within 8 months of the close of the accounting year. For an April–March year, that means by 30 November. The government can extend this on the employer's application, up to two years in total. Many companies time the payment for Diwali.

How to calculate bonus for less than 240 working days?

Statutory bonus is a percentage of the wages you actually earned in the accounting year, so working only part of the year means a proportionately smaller bonus. You need at least 30 days of work in the year to qualify at all. This calculator treats 240 or more working days as a full year and scales the bonus down below that: for example, a full-year bonus of ₹6,997 becomes about ₹5,248 for 180 days.

Can employer deduct bonus from salary or adjust against loans?

Your employer can deduct two things from statutory bonus: a puja, Diwali or other customary bonus (or an interim bonus) already paid for the same year, under Section 37 of the Code on Wages, 2019, and an amount for financial loss you caused through misconduct. If you are paid a Diwali bonus and later a statutory bonus, check whether the first was adjusted against the second.

What happens to bonus if I resign or leave the company?

If you worked at least 30 days in the bonus accounting year, you're entitled to a proportionate statutory bonus even after resignation. The company must pay it within 8 months of the accounting year close, regardless of your employment status. If bonus was already due when you left, it should be paid with your full and final settlement. Keep your relieving letter as proof of service period.

Disclaimer: Results are estimates for financial planning purposes only and do not constitute financial, tax, investment, or legal advice. Actual values may vary based on your lender, market conditions, and individual circumstances. Consult a qualified CA, CFP, or financial advisor before making any financial decisions.