Posted on 26th Jul 2018 | 19946 views

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Statutory bonus calculation

The statutory bonus in India is paid according to the bonus payment law (1965). The bonus is a deferred benefit, and some companies choose to pay it in advance. The bonus rate is between 8.33% and 20% depending on the "surplus available" mentioned in the law.

Pay" is not only basic. It would also include other salary components (excluding subsidies and temporary reimbursements, social security benefits, etc.)

For calculation purposes, the maximum "salary" is set at Rs 7000 (according to the 2016 amendment) the maximum bonus is, therefore, 20% * 7000 per month (1400 Rs per month or Rs 16,800 P.A)

Bonus rules in India

Bonus rules in India

The main changes to the Act are:

Eligibility for the bonus has been increased to include employees income up to INR 21,000 per month (up from INR 10,000 per month before).

Increase of the premium ceiling: previously, for the calculation of the statutory bonus, a salary ceiling of INR 3,500 per month was applied (so that the salary of an eligible employee exceeded INR 3,500 per month for calculation purposes). Of the statutory bonus, the bonus was calculated using a salary of INR 3,500 per month). This ceiling was increased to INR 7000 per month or the minimum wage for employment under the Minimum Wage Act 1948, whichever is greater.

Statutory bonus India

CTC employees have a fixed compensation structure that includes several components where the gross salary is much higher than the minimum wage.

If the base salary is lower than 7000 and also lower than the minimum wage

Bonus calculation

Basic salary x 20% = bonus per month

6800 x 20% = 1360 (16320 p.a.)

6800 x 8.33% = 566 (6792 p.a.)

The base salary is lower than Rs.7000, so we consider the real base salary of Rs.6800 for the calculation of the bonus.

The base salary is above Rs.7000, but below the minimum wage

Bonus calculation

Basic salary x 20% = premium p.m.

7000 x 20% = 1400 (16800 p.a.)

7000 x 8.33% = 583 (6996 p.a.)

The base salary is more than 7000 and also the minimum wage, so we consider a base of Rs7000 to calculate the bonus.


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