Bonus Calculator — Calculations & Slabs for FY 2026-27

The Payment of Bonus Act 1965 mandates a minimum bonus of 8.33% of annual basic salary (or ₹7,000 per month, whichever is higher) and a maximum of 20% for eligible employees. It applies to factories and establishments with 20 or more workers. The salary ceiling for eligibility is ₹21,000 per month.

Statutory bonus is a legal requirement under the Payment of Bonus Act — fixed at 8.33%–20% of basic salary. Performance bonus (also called variable pay or incentive) is discretionary and based on your individual KPIs, team targets, or company profitability. IT companies typically call this variable pay and link it to a percentage of your CTC.

Yes, all types of bonus are fully taxable as salary income in the year of receipt. Your employer adds the bonus to your salary and deducts TDS accordingly. There is no exemption for bonus under the Income Tax Act. If a large bonus pushes you into a higher slab, you may see higher TDS in that month.

Any employee earning up to ₹21,000 per month (basic + DA) and who has worked for at least 30 working days in the accounting year is eligible. The minimum bonus payable is 8.33% of wages (₹7,000 minimum) per year. Employees earning above ₹21,000 are not covered by the Act but their employer may still pay a discretionary bonus.

Statutory bonus must be paid within 8 months of the close of the accounting year — for most companies, before 30 November. Many companies pay it around Diwali or before October. Performance or annual bonus varies by company policy — commonly paid quarterly, half-yearly, or annually based on the appraisal cycle.