Taxability of bonus
This query is : Resolved
17 June 2013
Dear experts,
My salary structure contain fix quarterly bonus of 25000. The bonus of last quarter (Jan-Mar 2013) was paid to me with the salary of the month of April-2013 (on 5th May 2013).
Now in form 16 of Fy 2012-13 this 25000 bonus is not shown and will be shown in form 16 of FY 2013-14.
So in which year’s ITR I suppose to show above bonus of 25000 as income?
My salary structure contain fix quarterly bonus of 25000. The bonus of last quarter (Jan-Mar 2013) was paid to me with the salary of the month of April-2013 (on 5th May 2013).
Now in form 16 of Fy 2012-13 this 25000 bonus is not shown and will be shown in form 16 of FY 2013-14.
So in which year’s ITR I suppose to show above bonus of 25000 as income?
17 June 2013
as per income tax act salalry will taxable accural or received which ever in earlier
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17 June 2013
Bonus is taxable in the year of Receipt. So you should show under FY2013-14
17 June 2013
Thanks for your views
But this is a fix bonus. So in my view the income is accrued in fy 2012-13 and therefore should be taxed in fy 2012-13. Moreover salary includes bonus, so why bonus only is taxed on received basis
Please provide me any reference and correct me if I am wrong
But this is a fix bonus. So in my view the income is accrued in fy 2012-13 and therefore should be taxed in fy 2012-13. Moreover salary includes bonus, so why bonus only is taxed on received basis
Please provide me any reference and correct me if I am wrong
17 June 2013
IF this is a Contractual Bonus then its treatment would be like Salary. Hence Accrual Basis.
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17 June 2013
So is it all right that the above bonus of Q4 is not included in my form 16 of fy 2012-13
That will be included in form 16 of 2013-14
That will be included in form 16 of 2013-14
26 July 2025
This is a classic question regarding **bonus taxability** — whether it’s on accrual basis or receipt basis. Here’s a clear explanation:
---
### Taxability of Bonus: Accrual vs Receipt
**General rule under Income Tax Act (Section 15):**
Salary (which includes bonus) is taxable on **earlier of the following**:
* When it is **due (accrued) to the employee**, or
* When it is **actually received** by the employee.
---
### What does this mean practically?
* If the **bonus is contractually fixed** or **due to the employee by end of financial year (31 March)**, then it is considered accrued in that FY and taxable in that FY.
* If the **bonus is discretionary** or declared and paid only after the financial year, then taxability is on the **date of receipt** (receipt basis).
---
### Your case: Fixed Quarterly Bonus of ₹25,000 for Jan-Mar 2013, paid in May 2013
* Since this is a **fixed quarterly bonus**, it *could be* argued that it accrued in FY 2012-13.
* However, since the employer has paid it in FY 2013-14 and has shown it in Form 16 of FY 2013-14, it suggests it is treated on receipt basis.
---
### Which is correct?
* **If the employment contract or company policy treats the bonus as ‘due’ or ‘accrued’ at the end of quarter or FY, then bonus should be taxable in FY 2012-13.**
* **If the bonus is discretionary or paid in next FY without accrual, then taxable in FY 2013-14 (receipt basis).**
---
### Reference and judicial view
* The Supreme Court and ITAT rulings have held that salary income (including bonus) is taxable on accrual basis **if it is due**.
* If not due, then on receipt basis.
---
### What to do now?
* Check your employment contract or company policy if it states the bonus is due at the end of quarter.
* If yes, ideally bonus should be declared as income in FY 2012-13.
* If company shows it in FY 2013-14 Form 16, you can still declare it in FY 2012-13 if you want to follow strict accrual basis.
* For consistency and to avoid scrutiny, many taxpayers follow employer’s Form 16.
---
### Summary:
| Situation | Taxability Year |
| --------------------------------- | ---------------------------- |
| Bonus fixed and accrued in FY | FY of accrual (e.g. 2012-13) |
| Bonus discretionary or paid later | FY of receipt (e.g. 2013-14) |
---
If you want, I can help draft a note or letter for your employer requesting clarity on bonus accrual or for your tax return explanation. Would that help?
---
### Taxability of Bonus: Accrual vs Receipt
**General rule under Income Tax Act (Section 15):**
Salary (which includes bonus) is taxable on **earlier of the following**:
* When it is **due (accrued) to the employee**, or
* When it is **actually received** by the employee.
---
### What does this mean practically?
* If the **bonus is contractually fixed** or **due to the employee by end of financial year (31 March)**, then it is considered accrued in that FY and taxable in that FY.
* If the **bonus is discretionary** or declared and paid only after the financial year, then taxability is on the **date of receipt** (receipt basis).
---
### Your case: Fixed Quarterly Bonus of ₹25,000 for Jan-Mar 2013, paid in May 2013
* Since this is a **fixed quarterly bonus**, it *could be* argued that it accrued in FY 2012-13.
* However, since the employer has paid it in FY 2013-14 and has shown it in Form 16 of FY 2013-14, it suggests it is treated on receipt basis.
---
### Which is correct?
* **If the employment contract or company policy treats the bonus as ‘due’ or ‘accrued’ at the end of quarter or FY, then bonus should be taxable in FY 2012-13.**
* **If the bonus is discretionary or paid in next FY without accrual, then taxable in FY 2013-14 (receipt basis).**
---
### Reference and judicial view
* The Supreme Court and ITAT rulings have held that salary income (including bonus) is taxable on accrual basis **if it is due**.
* If not due, then on receipt basis.
---
### What to do now?
* Check your employment contract or company policy if it states the bonus is due at the end of quarter.
* If yes, ideally bonus should be declared as income in FY 2012-13.
* If company shows it in FY 2013-14 Form 16, you can still declare it in FY 2012-13 if you want to follow strict accrual basis.
* For consistency and to avoid scrutiny, many taxpayers follow employer’s Form 16.
---
### Summary:
| Situation | Taxability Year |
| --------------------------------- | ---------------------------- |
| Bonus fixed and accrued in FY | FY of accrual (e.g. 2012-13) |
| Bonus discretionary or paid later | FY of receipt (e.g. 2013-14) |
---
If you want, I can help draft a note or letter for your employer requesting clarity on bonus accrual or for your tax return explanation. Would that help?
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