Glossary
What is a bonus in salary?
What a salary bonus is, how a statutory bonus differs from a festival or performance bonus, and how it appears on the payslip.
Updated
In short
A bonus is a payment over and above regular salary, such as a festival, performance or statutory bonus. SimpleERP seeds a bonus earning that is paid in full regardless of loss of pay.
A bonus is a payment to an employee over and above regular salary. It can be a festival bonus, a performance bonus or a statutory bonus under the Code on Wages 2019, formerly the Payment of Bonus Act, which, as notified, requires covered establishments to pay eligible employees between 8.33% and 20% of their wages for the year. A bonus is taxable salary and is added in the month it is paid.
Bonus: a worked example
Lakshmi Steel Furnitures pays Karthik R a Diwali bonus of ₹8,000 with his October 2026 salary. Bonus is not part of Basic, so PF does not change.
| Earnings | Amount | Deductions | Amount |
|---|---|---|---|
| Basic | ₹18,000 | Provident fund, 12% of Basic | ₹2,160 |
| HRA, 40% of Basic | ₹7,200 | Professional tax | ₹180 |
| Conveyance | ₹1,600 | ||
| Special allowance | ₹3,200 | ||
| Bonus | ₹8,000 | ||
| Gross pay | ₹38,000 | Total deductions | ₹2,340 |
FAQ
Questions, answered
Is bonus mandatory in India?
A statutory bonus is mandatory in establishments covered by the Code on Wages 2019, formerly the Payment of Bonus Act, for employees up to the notified wage limit who worked at least 30 days in the year. Festival and performance bonuses are at the employer's choice. Bonus rules are as notified; check the current rules with your CA.
How much is the statutory bonus?
At least 8.33% and at most 20% of the employee's wages for the year, worked out on a wage ceiling, as notified. The rate within that range depends on the business's allocable surplus. Your CA can work out the figure for your business.
Is PF deducted on bonus?
PF is commonly worked out on Basic and dearness allowance, and a bonus is usually kept out of both, so PF does not change. In SimpleERP, bonus is a separate earning and PF stays at 12% of Basic.
Can I pay bonus to only some employees in SimpleERP?
Bonus can go to only some employees in SimpleERP. In the run review, open an employee's payslip and use Add line → Bonus for each person who gets one, with their own amount. The line is posted to salary expense with the rest of the run.
Related
Keep reading
Salary arrears
Pay owed for earlier months, usually from a back-dated raise, paid as a separate line in the current month.
Read moreCTC (cost to company)
Cost to company: gross pay plus the employer's contributions, usually quoted per year in an offer letter.
Read morePayroll
Salary structures, monthly runs and payslips with PF, PT and TDS, posted to the books.
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