Section 26: Eligibility for bonus, etc
Creates annual bonus eligibility subject to the notified wage ceiling, minimum service condition and minimum/maximum bonus framework.
Statutory identity
What the provision requires
Creates annual bonus eligibility subject to the notified wage ceiling, minimum service condition and minimum/maximum bonus framework.
Implementation control: Identify the establishment, employee eligibility, wage ceiling, qualifying days, statutory wage base and minimum bonus obligation before considering allocable surplus.
Provision-level reading sequence
- Read each subsection, clause, proviso and explanation in the official text.
- Apply section 2 definitions before testing the obligation or exception.
- Identify the appropriate Government and the applicable Central or State rule.
- Check commencement, section-specific notifications and saved predecessor-law instruments.
- Document the factual test and the evidence supporting the conclusion.
Provision map — subsection, clause and qualification
This map decomposes the section into its operative tests. Use the linked India Code text for exact numbering and wording.
Coverage and ceiling
Bonus applies to eligible employees within the wage ceiling notified by the appropriate Government.
Service condition
The minimum working-day condition must be tested with section 28 deemed days.
Minimum bonus
The statutory minimum applies subject to the Code even where allocable surplus is insufficient.
Wage base
Use the statutory calculation wage/ceiling, not an internal CTC figure.
Maximum
Additional bonus is capped by the Code.
Linked Code on Wages (Central) Rules, 2026
Payment of bonus to contractual employee
Exact rule text, paragraph map, forms and compliance controls.
Central Rule 22Calculation for sixth accounting year
Exact rule text, paragraph map, forms and compliance controls.
Central Rule 23Calculation for seventh accounting year
Exact rule text, paragraph map, forms and compliance controls.
Central Rule 27Manner of carrying forward when allocable surplus exceeds maximum bonus payable
Exact rule text, paragraph map, forms and compliance controls.
Central Rule 28Manner of carrying forward when there is no allocable surplus for payment of minimum
Exact rule text, paragraph map, forms and compliance controls.
Authority, form and filing map
Evidence pack
- audited financial statements
- employee eligibility and attendance data
- gross/available/allocable surplus workbook
- set-on/set-off ledger and payment proof
Compliance consequence
Underpayment or delayed payment can generate employee claims, compensation/recovery and offence exposure under the Code.
Remedy path: identify the claims authority, appellate authority, adjudicating officer, Inspector-cum-Facilitator or criminal court applicable to the issue.
Worked example
An employee crosses the notified eligibility ceiling during the year. The employer must apply the statutory eligibility and calculation rules rather than using an internal bonus policy alone.
Illustrative only. Apply actual wage notifications, contracts, dates, State rules and evidence.
Practical Q&A
Can an employment contract override this section?
Not where the contract reduces a statutory entitlement. Sections 60 and 61 must be considered, including any more favourable award, agreement or contract.
What should be checked before payroll or HR action?
Confirm coverage, appropriate Government, operative rate/order, the exact subsection and proviso, linked rule, evidence, approval and payment/filing deadline.
Primary sources
India Code — exact Section 26 text ↗
India Code — official consolidated Act PDF ↗
Ministry of Labour — Codes, Rules, notifications and FAQs ↗
Last official-source review: 16 July 2026.