Verify before relying on this. Some figures or dates here are pending confirmation against the official gazette or circular. Check the sources below, or ask us.
What was notified
The Payment of Bonus Act 1965 was repealed on 21 November 2025, when the Code on Wages 2019 came into force. Bonus is now governed by the Code's bonus chapter, which starts at s.26. The Code leaves two key numbers to notification: the wage limit for eligibility and the wage figure on which bonus is calculated.
On 25 August 2026 the Ministry of Labour and Employment issued two notifications under s.26, both deemed effective from 21 November 2025:
- S.O. 4711(E), eligibility. An employee drawing wages of up to ₹21,000 a month is eligible for bonus.
- S.O. 4710(E), calculation ceiling. Where wages exceed ₹7,000 a month, bonus is calculated as if wages were "seven thousand rupees per mensem or the minimum wage fixed by the Central Government, whichever is higher".
The numbers are the same as under the 1965 Act as amended in 2015. The retrospective date closes the gap that opened on 21 November 2025, so the FY 2025-26 bonus can be computed on one consistent basis for the whole year.
The rules in one table
| Item | Rule |
|---|---|
| Establishments covered | Establishments to which the bonus chapter applies (traditionally 20+ persons). Check your coverage |
| Eligible employee | Wages up to ₹21,000 a month, and at least 30 working days in the accounting year |
| Wages for bonus | Code "wages" (basic + DA + retaining allowance, with the 50% add-back) |
| Calculation ceiling | ₹7,000, or the minimum wage per S.O. 4710(E) if higher. Employees earning below the ceiling are computed on actual wages |
| Minimum bonus | 8.33% of wages for the year, or ₹100 if higher. Payable whether or not there is an allocable surplus, subject to the Code's exceptions |
| Maximum bonus | 20% |
| Allocable surplus | Share of available surplus, with set-on / set-off carried forward as before |
| Disqualification | Dismissal for fraud, violent behaviour on the premises, theft, misappropriation or sabotage, or conviction for sexual harassment |
| Payment deadline | Within 8 months of the close of the accounting year: 30 November for an April–March year |
Worked example: FY 2025-26 (April 2025 – March 2026), payable by 30 November 2026
Employee A. Code wages are ₹20,000 a month for all 12 months. A is eligible, because wages are ₹21,000 or less.
- Scenario 1: the ceiling is ₹7,000, because the minimum wage used is below ₹7,000. Bonus wages are 7,000 × 12 = ₹84,000.
- Minimum bonus at 8.33%: ₹6,997
- Maximum bonus at 20%: ₹16,800
- Scenario 2: the applicable minimum wage is higher. For illustration only, take ₹700 a day × 26 = ₹18,200 a month. Bonus wages are 18,200 × 12 = ₹2,18,400.
- Minimum bonus at 8.33%: ₹18,193
- Maximum bonus at 20%: ₹43,680
The choice of minimum wage more than doubles the statutory minimum bonus.
Employee B. Wages are ₹15,000 a month, but B joined on 1 September 2025 and worked 7 months. B qualifies (more than 30 days). If the ceiling is ₹18,200, B's actual wages of ₹15,000 are below it, so bonus is computed on actual wages: 15,000 × 7 = ₹1,05,000. At 8.33% that is ₹8,747.
Employee C. Wages are ₹23,000 a month and C is not eligible. If C's wages rose above ₹21,000 during the year, common practice has been to pay bonus for the months in which wages were within the limit. Take advice on your policy.
The open question: whose minimum wage?
S.O. 4710(E) refers to the minimum wage fixed by the Central Government. Section 26 of the Code, however, speaks of the "appropriate Government". For establishments in the state sphere, which covers most private-sector shops, offices and factories, the state is the appropriate government. Commentators disagree on the effect:
- Literal reading. Use the central minimum wage for the relevant category. This usually gives a higher ceiling than most state rates.
- Appropriate-government reading. State-sphere employers use the state minimum wage. Some states, such as Maharashtra and Telangana, now exceed the central rates for some categories.
Until the Ministry clarifies or state notifications settle the point, compute both and document your position. A conservative employer pays on the higher of the two. Also watch for a statutory national floor wage under s.9 of the Code, which had not been notified as at September 2026. If notified, it will set a minimum for all minimum wages.
Transition points
- FY 2025-26 straddles two laws: the 1965 Act to 20 Nov 2025 and the Code from 21 Nov 2025. Because the thresholds are identical and retrospective, a single computation for the year is reasonable. Keep a note of the legal basis.
- Registers and returns. Central-sphere establishments use the formats in the Code on Wages (Central) Rules 2026. State-sphere establishments use the state's rules, or the legacy bonus forms until the state notifies its rules.
- Payment by the 30 November deadline is the compliance event. Claims under the Code are subject to its limitation and recovery provisions.
What employers should do
- To do: Recompute each employee's eligibility on Code wages, not basic pay. Allowances above 50% of pay can take someone above ₹21,000.
- To do: Choose and document the minimum-wage reference (central or state, and the employee's category), and compute Scenario 1 and 2 figures.
- To do: Compute available and allocable surplus from the FY 2025-26 accounts. Apply set-on / set-off, and decide the rate between 8.33% and 20%.
- To do: Pay by 30 November 2026 for April–March years, and keep the bonus register.
- To do: Review any "ex-gratia" or "performance bonus" paid in lieu. Only amounts treated as statutory bonus count.
- To do: Budget for the retrospective effect if last year's accruals assumed ₹7,000 only.
Effective dates at a glance
| Date | Event |
|---|---|
| 21 Nov 2025 | Code on Wages in force; Payment of Bonus Act 1965 repealed |
| 8 May 2026 | Code on Wages (Central) Rules 2026 |
| 25 Aug 2026 | S.O. 4710(E) and 4711(E) notified, deemed effective from 21 Nov 2025 |
| 30 Nov 2026 | Statutory bonus for FY 2025-26 (April–March) due |
Status note (verify: true). The eligibility and ceiling figures are high confidence. Two points are not settled: which minimum wage applies (central or state) for state-sphere employers, and whether the 50% add-back applies to bonus wages. The ₹18,200 minimum wage in Scenario 2 is illustrative, not a notified rate. Check the current central or state minimum-wage notification for your category and area.
General information, not legal advice. Last reviewed 27 Sep 2026.