Diwali Bonus for Workers 2026: Is It Compulsory and How to Calculate It

Quick answer: there are two kinds of Diwali bonus in India. The first is the statutory bonus, which covered employers must pay under the Code on Wages: at least 8.33% of the bonus wage for the year (or ₹100, whichever is higher) and at most 20%, for employees earning up to ₹21,000 a month who worked at least 30 days in the year. The second is the customary Diwali bonus most small shops, contractors and factories give as a festival gift, which is your own decision. This guide explains both, with worked examples.

Is Diwali bonus compulsory?

It depends on whether your business is covered by the bonus rules.

• Covered establishments must pay the statutory bonus. Since 21 November 2025, bonus is governed by the Code on Wages, 2019, which replaced the old Payment of Bonus Act. Coverage generally applies to establishments with 20 or more workers, and your state's notification decides the details for most private businesses.
• Smaller businesses that are not covered have no legal duty to pay a bonus, but a Diwali bonus is a strong custom. Workers often plan their festival travel and shopping around it, and skipping it is one of the fastest ways to lose good staff after the festival.

The statutory bonus is due within eight months of the end of your accounting year. For an April–March year that means by 30 November, which is why most employers simply pay it at Diwali.

Who is eligible for the statutory bonus?

• Employees whose wage is ₹21,000 a month or less
• Who worked at least 30 working days in the accounting year
• This includes daily-wage and monthly workers, not just office staff

How to calculate the statutory bonus

The formula is simple:

Bonus = Bonus wage for the year × 8.33% (minimum) up to 20% (maximum)

The one twist is the calculation ceiling. If a worker earns more than ₹7,000 in a month, you calculate that month's bonus as if the wage were ₹7,000, or the minimum wage fixed by the Central Government, whichever is higher. Months where the worker earns less than the ceiling are counted at the actual amount. The examples below use ₹7,000 to keep the maths easy; replace it with the applicable minimum wage if that is higher.

Example 1: Monthly staff

Sunil works at a shop for ₹15,000 a month and worked all 12 months.

• His wage is above ₹7,000, so each month is counted as ₹7,000
• Bonus wage for the year: ₹7,000 × 12 = ₹84,000
• Minimum bonus: ₹84,000 × 8.33% = ₹6,997 (about ₹7,000, which equals one month of the capped wage)

Example 2: Daily-wage worker

Ramesh earns ₹500 a day and worked about 22 days a month for 8 months.

• Monthly earning: ₹500 × 22 = ₹11,000, which is above ₹7,000, so each month counts as ₹7,000
• Bonus wage: ₹7,000 × 8 = ₹56,000
• Minimum bonus: ₹56,000 × 8.33% = ₹4,665

Example 3: Part-time helper

Meena earns ₹6,000 a month for 12 months. She is below the ceiling, so her actual wage counts.

• Bonus wage: ₹6,000 × 12 = ₹72,000
• Minimum bonus: ₹72,000 × 8.33% = ₹5,998

The hardest part in real life is not the formula. It is knowing exactly how many days and months each worker actually worked during the year. If your hajri was on paper, this is where arguments start.

How small businesses usually decide a Diwali bonus

If you are not covered by the statutory rules, here are the common practices among shop owners, contractors and small factories:

• Monthly staff: one month's salary for staff who have completed a year, half a month for newer staff
• Daily-wage workers: a fixed number of days' wages, for example 7 to 15 days, based on how long they have worked with you
• Attendance-linked: a higher bonus for workers with good attendance through the season
• Plus a gift: sweets, clothes or a utensil set, which workers value more than the cost suggests

Whatever you choose, decide the rule once and apply it to everyone. Workers compare notes, and a bonus that looks random causes more bad feeling than a smaller bonus that looks fair.

Keep bonus separate from kharchi and advances

Many workers take a festival advance (kharchi) for travel home. Do not quietly adjust that advance against the bonus. Record the bonus and the advance as separate entries, tell the worker what each one is, and deduct the advance from future wages as agreed. Mixing the two is a common source of disputes after the festival. Read our guide on tracking kharchi and advance salary.

Practical tips before you pay

• Pay before workers leave for the festival. A bonus paid after they have gone home helps nobody.
• Pay by bank transfer or UPI where possible, so you have a clear record.
• Give a slip or WhatsApp message showing the bonus amount and how it was worked out.
• Check this year's attendance first. Count days worked per worker before deciding amounts.

Work it out from your attendance in HajariBook

If you mark daily hajri in HajariBook, every worker's days present, half-days and overtime for the year are already recorded. Open the worker's attendance report to see exactly how many days they worked, calculate the bonus, and record the bonus payment so it shows in the worker's ledger alongside their wages and kharchi. No register flipping, no arguments.

Frequently asked questions

Is Diwali bonus mandatory for daily-wage workers?

If your establishment is covered by the bonus rules, yes: daily-wage workers earning up to ₹21,000 a month who worked at least 30 days in the year are eligible for the statutory bonus. If you are not covered, it is customary but not compulsory.

What is the minimum bonus amount?

8.33% of the bonus wage for the year, or ₹100, whichever is higher. The maximum is 20%.

When must the statutory bonus be paid?

Within eight months of the end of the accounting year. For an April–March year, that is by 30 November.

Can I give a gift instead of cash?

A gift does not replace a statutory bonus if you are covered. For a customary Diwali bonus, a gift alone is your choice, but most workers value cash more.

This guide is general information based on the Code on Wages and the bonus limits notified for it. State notifications can differ, so check with your CA or labour consultant for your exact obligations.