Payroll · Salary and Bonus

Payroll Calculator With Bonus (India, 2026)

Updated for 2026 · Claw Editorial

Working out payroll with a bonus means putting together the salary components, adding the bonus correctly, and then applying the statutory deductions to reach the net pay. The bonus part trips people up because statutory bonus follows its own rules on eligibility and calculation, separate from a discretionary performance bonus. This guide explains each component, how bonus is calculated, the deductions, and shows a worked example from gross to net.

01The salary components

A typical salary in India is split into parts, and the split matters because deductions and bonus are based on specific components.

• Basic salary: the core component, on which PF and bonus are usually based.
• Dearness allowance (DA): where applicable, counted with basic for several calculations.
• House rent allowance (HRA): for rent, with a tax exemption subject to conditions.
• Other allowances: conveyance, special allowance and so on.
• Bonus: statutory bonus or a performance bonus, added to gross.

Gross salary is the total of all these before any deduction. Net salary, or take home, is gross minus the deductions.

02How statutory bonus is calculated

Statutory bonus is a legal right for eligible employees, separate from a discretionary bonus an employer may choose to give. The usual rules are:

• Eligibility: employees earning wages up to a notified monthly limit are covered.
• Rate: a minimum and a maximum percentage of the bonus-qualifying wage, with the actual rate depending on the employer's allocable surplus.
• Calculation ceiling: bonus is calculated on wages capped at a notified amount, not on the full salary, where the salary is higher.

As commonly applied, eligible employees are those drawing up to Rs 21,000 a month, the minimum bonus is 8.33 per cent and the maximum 20 per cent, and the bonus is computed on wages capped at Rs 7,000 or the minimum wage, whichever is higher. Confirm the current figures before relying on them.

03The deductions from salary

From gross salary, these common deductions are made:

• Provident fund (PF): the employee contributes 12 per cent of basic (plus DA) in most cases, matched by the employer.
• Employees State Insurance (ESI): where applicable, the employee contributes a small percentage and the employer a larger one, for employees within the ESI wage limit.
• Professional tax: a state level tax, deducted monthly where the state levies it, up to a yearly cap.
• TDS on salary: income tax deducted at source based on the employee's estimated annual tax under the chosen regime.

Net salary is gross salary minus PF, ESI, professional tax and TDS.

04A worked gross to net example

A simplified monthly example. Figures are illustrations only.

Here the employee's wage is above the ESI limit, so ESI is not deducted in this example. The bonus shown is a monthly portion for illustration; statutory bonus is often paid as a yearly amount. A payroll calculator automates this arithmetic for every employee each month.

05Bonus and the new labour codes

India's four labour codes came into force on 21 November 2025. For payroll, the key change is the Code on Wages, 2019, which brings together the earlier laws on wages and bonus, including the Payment of Bonus Act, 1965, under one framework.

The Code also uses a standard definition of wages, under which certain allowances must make up at least half of total pay for these calculations. This can change PF, bonus and gratuity figures compared with the old structure, so payroll set up before November 2025 should be reviewed against the new definition. For a related calculation, see the gratuity calculator.

06Why payroll goes wrong

• Bonus on the wrong base: statutory bonus is on capped wages, not full salary, unless the employer chooses to pay more.
• Wrong wage definition: not applying the new wages definition can understate PF and gratuity.
• TDS mismatch: deducting too little means a shortfall and interest later; see the 234A, 234B and 234C interest calculator.
• Missed deposits: PF, ESI and TDS have monthly due dates, and late deposit attracts interest.

07How Claw Tax helps

Claw Tax and Accounts is an online tax, GST and accounting service for India that connects you with a verified chartered accountant at a fixed, published price, with a Claw reviewer checking every filing before it is submitted.

For one or two employees you can run payroll in a spreadsheet, and a calculator handles the arithmetic. It gets harder as you add staff, because PF, ESI, professional tax and TDS each have monthly deposits and returns, and the new wages definition changes several figures.

With Claw Tax and Accounts payroll, a verified chartered accountant sets up and runs your monthly payroll, computes salary, bonus and deductions, files the PF, ESI and TDS returns, and a Claw reviewer checks the figures before filing, at a fixed, published price, with reminders before each due date. You approve first.

This is general information, not tax or payroll advice; a verified professional handles the specifics of your business, and figures are notified under the labour codes and tax law from time to time.

08Frequently asked questions