What changed
Section 26 of the Code on Wages, 2019 requires a minimum annual bonus of 8.33% of wages earned, or ₹100 if higher, for every eligible employee who has worked at least 30 days in the accounting year, and caps bonus at 20% of wages. The wage limits are left to notification by the appropriate Government. S.O. 4711(E) sets the eligibility limit under Section 26(1), and S.O. 4710(E) the calculation ceiling under Section 26(2).
The figures are the same as under the repealed Payment of Bonus Act, 1965, but the calculation now refers to the minimum wage fixed by the Central Government, and “wages” takes the Code’s definition, under which excluded allowances above 50% of total pay are added back. Bonus must be credited to the employee’s bank account within eight months of the close of the accounting year (Section 39). The Government can extend this, to not more than two years in all.
Both notifications are issued by the Central Government and are deemed to have come into force on 21 November 2025, the date the Code took effect. Where a State Government is the appropriate Government, its own notification applies. Where the Central and State rates differ, read this notification together with your State’s own minimum wage notification before fixing pay.
Who is affected
Employers covered by the bonus provisions of the Code on Wages, 2019, and employees earning up to ₹21,000 a month.
Effective dates
| Item | Date or period |
|---|---|
| Code on Wages in force | 21 November 2025 |
| Notifications issued | 25 August 2026 |
| Deemed effective from | 21 November 2025 |
| Bonus payment | Within 8 months of the accounting year end (30 November for a year ending 31 March) |
What to do now
- Work out each employee’s “wages” under the Code, including the 50% add-back, to see who falls within ₹21,000.
- Compute bonus on ₹7,000 a month or the applicable minimum wage, whichever is higher.
- Check whether the Central or State Government is the appropriate Government for your establishment.
- Credit bonus to bank accounts within eight months of the year end and keep the working on file.
Penalty or consequence if missed
Under Section 54 of the Code on Wages, a contravention such as not paying bonus can be punished with a fine of up to ₹50,000. A repeat offence within five years can lead to imprisonment of up to three months, a fine of up to ₹1 lakh, or both. Unpaid bonus can also be claimed by the employee before the authority under the Code, in addition to the penalty.
Official source
Effective: 25 Aug 2026 · Note published · Last reviewed
Related on this site
This note summarises a public notification for general information. It is not professional advice and does not cover every condition or exception, and the rule can change again by a later notification. Read the notification itself before acting on it, or consult a qualified professional on your own facts.