# How to Calculate Bonus

Tutorial on how to calculate payroll bonuses.

## Bonus Calculation as per Bonus Act

**Bonus** is a sum of money **added to a persons wages** as a reward for good performance. It can also be defined as the **extra dividend paid to the shareholders** of a company. Bonus is the payment paid under the **Bonus Act, 1965 of India**. Have a look at the below tutorial on how to calculate bonus percentage of salary.

Below are the criteria for bonus calculation as per bonus act.

1. The **bonus percentage** is decided by the management of the organization.

2. **Minimum** bonus is **8.33%** of basic salary earned throughout the year and **Maximum is 20%**.

3. Employees with a **basic salary less than Rs. 3500** are eligible for receiving bonus.

4. For employees with salary less than Rs. 2500, the bonus is calculated assuming their basic salary is Rs. 2500.00 or less than that.

5. The total yearly sum of salary multiplied with the rate of bonus is the amount of bonus to be paid to the employee.

**Bonus Calculations Scenarios:**

**Bonus Calculation - CASE 1: Basic Salary <= Rs. 3500**

Bonus = Actual Basic x (Bonus Months) x 8.33%.

**Bonus Calculation - CASE 2: ****Rs. 3500** **> **Basic Salary <= Rs. 8400

Bonus = Rs. 3500 x (Bonus Months) x 8.33%, Exgratia = 0

**Bonus Calculation - CASE 3: ****Rs. 8400 ****> **Basic Salary <= 10000

Bonus = Rs. 3500 x (Bonus Months) x 8.33%, Exgratia = Basic Salary - 8400

**Bonus Calculation - CASE 4: Basic Salary > Rs. 10000**

BONUS = 0, Ex gratia = 1 month basic salary

## Related Topics