Diwali Bonus 2026: Who Is Legally Owed a Bonus Under the Code on Wages

Not every Diwali bonus is a legal right. In India, the bonus the law requires is the statutory bonus under the Code on Wages, 2019, and it applies to employees earning wages up to ₹21,000 a month in establishments with 20 or more people. If you are eligible and worked at least 30 days in the accounting year, your employer has to pay at least 8.33% of your wages (calculated on a capped wage) or ₹100, whichever is higher, and up to 20% if the company has enough allocable surplus. Anything above that, including the gift hamper, the sweet box or the "festive payout" many offices announce in October, depends on your company's policy and your contract.

Every year around this time, the same questions come up in WhatsApp groups and on shop floors: "Is the company allowed to skip the bonus?", "Why is mine smaller than last year?", "Can they cut the Diwali amount from my annual bonus?" The answers changed slightly this year because bonus rules now sit inside the labour codes, so here is the current picture.

What changed in 2026

The Payment of Bonus Act, 1965 has been folded into Chapter IV of the Code on Wages, which came into force on 21 November 2025. On 25 August 2026, the Labour Ministry issued two notifications under section 26 of the Code: one sets the eligibility limit at wages of up to ₹21,000 a month, and the other says that where an eligible employee's wage is above ₹7,000, the bonus is calculated as if the wage were ₹7,000 or the minimum wage fixed by the government, whichever is higher. Both are deemed to apply from 21 November 2025.

If those numbers look familiar, that is because the old Act used the same ₹21,000 and ₹7,000 limits after its 2015 amendment. So for most people, the practical change is the legal home of the rule, not the amount.

One caution. These are central notifications, which apply where the Centre is the "appropriate government". For many private establishments, the state government is the appropriate government, and states issue their own notifications. Check what your state has notified if you want to be precise.

Are you eligible? Four quick checks

1. Your wages are up to ₹21,000 a month. "Wages" here follows the Code's definition (basic pay, dearness allowance and retaining allowance, with some allowances added back if they cross half of your total pay), not necessarily your gross or CTC figure.
2. You worked at least 30 days in the accounting year.
3. Your establishment employs 20 or more people, or did on any day in the accounting year.
4. You are not in an excluded category. The Code leaves out employees of LIC and RBI, government departments, universities and educational institutions, non-profit hospitals and some others. A newly set-up establishment pays bonus in its first five accounting years only for years in which it makes a profit.

If all four fit, the minimum bonus is owed whether or not the company made a profit.

How much, roughly

A worked example makes this clearer. Say you earn ₹16,000 a month in wages. You are eligible because that is below ₹21,000. For the calculation, the Code uses ₹7,000 a month or the applicable minimum wage, whichever is higher. If ₹7,000 were the higher figure, your yearly wage base for bonus would be ₹84,000, and 8.33% of that is about ₹7,000. At the 20% maximum, it would be ₹16,800.

In many states and jobs, the applicable minimum wage is higher than ₹7,000 a month, which raises the base. So treat this as a way to understand the formula, and use your own state's minimum wage for your category to get a closer figure.

If you did not work all working days in the year, the minimum bonus can be reduced proportionately. Days on paid leave, maternity leave with pay, lay-off and temporary disablement from a workplace accident are counted as days worked, so they should not cut your bonus.

Can the company adjust the Diwali amount against your bonus?

Yes, and this is the part that surprises people. Section 37 of the Code allows an employer who has paid a puja bonus or other customary bonus during the year to deduct it from the statutory bonus for that year. So if your company pays you a festive amount in October and later pays a smaller annual statutory bonus, that may be perfectly legal. What it cannot do is pay you less, in total, than the statutory minimum.

The opposite also happens: some companies pay statutory bonus monthly or quarterly as part of salary. If you see a "bonus" line on every payslip, that may be your statutory bonus already being paid. Ask HR before assuming you are owed more.

When it has to be paid

Statutory bonus must be credited to your bank account within eight months from the close of the accounting year. For a company whose year ends on 31 March, that is by the end of November. The government can extend the deadline on the employer's application, but not beyond two years in total. Many companies pay before Diwali out of custom, which is welcome, but Diwali itself is not the legal deadline.

When you can lose it

The Code disqualifies an employee from bonus only if they are dismissed for fraud, riotous or violent behaviour on the premises, theft, misappropriation or sabotage of company property, or on conviction for sexual harassment. Resigning, being on notice or leaving mid-year does not by itself take away bonus for the period you worked.

If you earn above ₹21,000

Then the statutory bonus does not apply to you, and any performance bonus, variable pay or festive payout is governed by your offer letter and company policy. Read the variable pay clause carefully: is it guaranteed, linked to company results, linked to individual rating, or linked to attendance? Some IT employers have tied variable pay to office attendance, for instance. Our guide on CTC versus in-hand salary explains why the variable component should be treated as uncertain when comparing offers.

Raising it without a fight

If you believe your statutory bonus is missing or short, start with a polite written request to HR or accounts. Mention the accounting year, your monthly wages, days worked, and ask how your bonus was calculated and whether any customary bonus was adjusted against it. Most of the time, that email gets an explanation. If it does not, the labour department of your state is the next step. A short record of payslips and your appointment letter makes any complaint much stronger. Our guide to the new labour codes and your salary covers what your appointment letter should now show.

Bonus law matters most in retail, warehousing, logistics, hospitality and skilled trades, where many wages sit below ₹21,000. If you work in these areas and are thinking about your next move, you can browse retail, transportation and skilled trades jobs on CareerCola.

This is general information, not legal advice, and it is based on the central Code and notifications. State notifications and your company's policy can add to it.