| Actual monthly basic + DA | ₹15,000 |
| Calculation ceiling (higher of ₹7,000 / minimum wage) | ₹7,000 |
| Wage used for computation (lower of the two) Ceiling substituted — actual salary exceeds the calculation ceiling | ₹7,000 |
| × months worked | 12 |
| Annual calculation wage | ₹84,000 |
The rate an employer must actually pay — anywhere from the 8.33% floor to the 20% ceiling — is not a management choice. It is derived from the employer’s allocable surplus for the accounting year: gross profit (Section 4) less the prior charges listed in Section 6 (depreciation, direct taxes, development rebate/investment allowance, etc.) gives the available surplus; a fixed percentage of that — 67% for companies that have not made prescribed dividend arrangements under Section 194 of the Income-tax Act, 60% for every other employer — gives the allocable surplus. If allocable surplus in a year exceeds the amount needed for the 20% maximum, the excess is “set on” and carried forward (up to 4 accounting years, Schedule IV) to help fund bonus in a leaner year; a shortfall is “set off” against surplus carried forward from earlier years. This requires the full profit-and-loss computation under Sections 4–7 — it is honestly outside what a payroll-level calculator can do, and we are not pretending otherwise. This tool applies whatever rate (8.33%–20%) the employer has already declared or you want to test, and shows the ceiling substitution correctly.
Valuing the retirement-benefit side too? Try the gratuity actuarial calculator and the leave encashment calculator.
The Payment of Bonus Act 1965 requires every factory and every establishment employing 20 or more persons (or notified to employ fewer) to pay an annual bonus to employees earning up to ₹21,000 per month in basic pay plus dearness allowance — the eligibility ceiling. An eligible employee must also have worked at least 30 days in the accounting year and must not be disqualified under Section 9 (dismissal for fraud, riotous or violent behaviour, or theft, misappropriation or sabotage of company property).
Bonus is not computed on actual salary. Section 12 substitutes a calculation ceiling: the wage used is the LOWER of the employee's actual basic + DA, or the HIGHER of ₹7,000 per month or the minimum wage fixed for that scheduled employment. For an employee on ₹15,000 basic + DA in a state where the applicable minimum wage is ₹7,000, the calculation wage is capped at ₹7,000 — not the actual ₹15,000. The bonus itself is a percentage of that calculation wage: a statutory minimum of 8.33% (payable even if the employer made a loss) up to a maximum of 20%, with the actual rate within that band driven by the employer's allocable surplus for the year.
Allocable surplus is derived from a full profit-and-loss computation under Sections 4–7 — gross profit less prior charges gives available surplus, and a fixed 67% (companies without prescribed dividend arrangements) or 60% (every other employer) of that gives allocable surplus. A "set-on" carries forward surplus beyond what is needed for the 20% maximum (up to 4 accounting years, Schedule IV); a "set-off" draws on that carried-forward surplus to fund bonus in a lean year. This calculator applies whatever rate you declare or test — it does not compute allocable surplus itself, since that requires the employer's full financials. Bonus must be paid within 8 months of the close of the accounting year (Section 19).
An employee earns ₹15,000/month basic + DA and worked the full 12 months of the accounting year. The applicable minimum wage for the scheduled employment is ₹7,000/month. The employer declares a 15% bonus.
