---
title: "What Is Statutory Bonus in India? Eligibility & Rate"
url: https://www.wisemonk.io/glossary/what-is-statutory-bonus
lang: en
---

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# What is statutory bonus?

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**Statutory bonus is a mandatory annual payment that employers in India must make to eligible employees under the Payment of Bonus Act, 1965.** Unlike a discretionary performance bonus, it is a legal entitlement, payable as a percentage of qualifying wages to employees who fall within the wage limit and have worked a minimum period in the year. It is one of the recurring statutory obligations a company takes on when employing people in India.

## Who is eligible for statutory bonus?

Eligibility is defined by wages and time worked, so not every employee qualifies. The main conditions are straightforward.

- **Wage limit:** employees earning up to a monthly wage ceiling, commonly 21,000 rupees (about 252 US dollars), are covered.
- **Minimum service:** an employee must have worked at least 30 days in the financial year to qualify.
- **Covered establishments:** the Act generally applies to establishments with 20 or more employees.

## How much is the statutory bonus?

The bonus is a percentage of qualifying wages, within a floor and a ceiling set by law. The amount depends on the employer's allocable surplus for the year, but the bounds are fixed.

- **Minimum:** 8.33 percent of qualifying wages, payable even if the business made no profit.
- **Maximum:** up to 20 percent of qualifying wages, depending on the surplus available.
- **Calculation base:** the bonus is computed on a capped wage base, so it is not always a percentage of full salary.

## Statutory bonus vs performance bonus

The word bonus covers two very different things in Indian pay, and confusing them is common. The table sets out the distinction.

| Feature | Statutory bonus | Performance bonus |
| --- | --- | --- |
| Basis | Legal requirement | Employer's discretion |
| Amount | 8.33% to 20% of wages | Set by the company |
| Who qualifies | Employees within the wage limit | Per company policy |

*This information is for general guidance. Confirm current limits and consult experts for your specific situation.*

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