Question 1

How is Diwali bonus calculated for private company employees under the Payment of Bonus Act, 1965?

Accepted Answer

Under Sections 10, 11, and 12 of the Payment of Bonus Act, 1965, statutory bonus is mandatory for employees earning up to ₹21,000 per month. The calculation is capped at ₹7,000 per month (or the state scheduled minimum wage, whichever is higher). The bonus percentage ranges from a statutory minimum of 8.33% (yielding approximately ₹6,997 for 12 months) to a maximum of 20% (yielding ₹16,800). If you worked fewer than 12 months, it is calculated on a pro-rata basis, provided you worked at least 30 working days.

Question 2

What is the calculation formula for Indian Railways 78-day Productivity Linked Bonus (PLB)?

Accepted Answer

As notified in Railway Board Order RBE No. 84/2026, eligible non-gazetted railway employees receive a Productivity Linked Bonus equivalent to 78 days wages. However, the calculation is subject to a statutory monthly wage ceiling of ₹7,000. The daily wage rate is computed as (₹7,000 × 12 months) ÷ 365 days = ₹230.137 per day. Multiplying by 78 days yields the statutory ceiling payout of ₹17,951.

Question 3

How is the Central Government Non-PLB (Ad-hoc Bonus) of 30 days calculated?

Accepted Answer

For Central Government Group C and Non-Gazetted Group B employees (including CRPF, CISF, BSF, and central administrative staff), the Ministry of Finance issues annual Non-PLB orders. The formula applies the ₹7,000 wage ceiling: (₹7,000 × 30 days) ÷ 30.4 average days in a month = ₹6,907.89, which is rounded off to ₹6,908. Employees must have completed at least 6 months of continuous service in the financial year to be eligible.

Question 4

Is Diwali bonus taxable under the Indian Income Tax Act?

Accepted Answer

Yes. Under Section 17(1)(iv) of the Income Tax Act, 1961, any festive bonus, statutory bonus, or ex-gratia amount received from an employer is categorized as "Profits in lieu of salary" and is 100% taxable. Employers deduct Tax Deducted at Source (TDS) under Section 192 as per your applicable income tax slab rate (Old or New Tax Regime).

Question 5

Are employees earning above ₹21,000 per month entitled to a Diwali bonus in private firms?

Accepted Answer

Under the strict legal mandate of the Payment of Bonus Act 1965, employees earning above ₹21,000 per month are not legally entitled to mandatory statutory bonus. However, most commercial establishments, IT firms, and MNCs voluntarily pay an "Ex-Gratia" or discretionary festive bonus to employees earning above ₹21,000, which can either be calculated on the ₹7,000 ceiling or on their actual basic salary.

Parameter	Private Sector (Act 1965)	Central Govt (Non-PLB)	Indian Railways (PLB)
Statutory Governing Authority	Payment of Bonus Act, 1965	Ministry of Finance (Dept of Expenditure)	Railway Board (RBE No. 84/2026)
Eligibility Wage Limit	Salary ≤ ₹21,000/mo (Ex-gratia if higher)	Group C & Non-Gazetted Group B	All eligible non-gazetted staff (~11.4L)
Monthly Calculation Ceiling	₹7,000 or State Min Wage (whichever higher)	₹7,000 per month	₹7,000 per month
Full Year Payout Range	₹6,997 (8.33%) to ₹16,800 (20.0%)	Flat ₹6,908	Flat ₹17,951
Minimum Service Required	30 working days in accounting year	6 continuous months in FY	Pro-rata for days rendered
Income Tax (TDS) Status	100% Taxable under Section 17(1)(iv)	100% Taxable under Section 17(1)(iv)	100% Taxable under Section 17(1)(iv)

Diwali Bonus Calculator 2026

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What is the Statutory Diwali Bonus in India?

How Diwali Bonus is Calculated (Official Rules & Guidelines)

Realistic Worked Examples Across Sectors

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