Adjustment of Sign on Bonus returned to Employer in same Financial Year in IT Returns

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This query is : Resolved

Quick Summary

If you've returned a joining bonus to your employer in the same financial year, you might be concerned about how it appears on your Form 16 and impacts your tax liability. While your employer may initially include the bonus in your reported income, you can typically adjust this when filing your Income Tax Return (ITR) to reflect the actual income received. It's advisable to discuss this with your employer to ensure accurate reporting and understand the process for claiming deductions.

S (Querist)

26 July 2023 Hi,

I was given a joining bonus of approx 2 lacs when I joined a new company 2 months back. Now I am quitting this job for another one and have been asked to return the amount in full back to the employer, only then they will process my full and final settlement. I have requested them to adjust it in my salary slips so that it is not shown as separate income on my Form-16. Ideally I want my form 16 to include only the salary of 2 months that I worked there and not the joining bonus as that is increasing my tax liability.

However, the company is not agreeing to do so and wants to show 2 months salary plus bonus on my Form-16. They are claiming that I can claim refund while filing ITR at the end of the financial year. However my concern is that Form-16 is the proof of my income from that employer, is it legal for me to just change the value while filing IT return? If so, what is the appropriate section to claim this in as deduction? More so, is it legal for the company to show the bonus as my income when I am returning it to them? Please help me understand this at the earliest as my last working day is in a week. What should I do?

Thanks

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

26 July 2023 The company should not show bonus payment in your income as you paid it back.
While filing ITR reduce the amount from your salary and claim refund.
If it's more than 10% ITR will not allow reduction. Convince your employer and finance people of the company will agree for it.

S (Querist)

26 July 2023 Thank you so much for the response sir. By 10%, do you mean 10% of the income that I received from this employer as per form 16? Or is it 10% of my total income?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

27 July 2023 It's 10% of salary income.

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