Income Tax Deduction on Retention Bonus

TDS 9095 views 3 replies

Abhijeet

29 Points Joined May 2010

Hi All,

I am having the query about the Income Tax deduction on Retention Bonus, Please help me about same.

Query:

An organisation is giving retention bonus to employee on completion on a candidate year.

(If an employee leaves or fired from company then he/she won't be getting Retention Bonus).

As the retention bonus is given at the end of candidate year, so the income tax should be deducted at the time when employee is getting paid.

But the organisation is deduting the income tax on rentention bonus from employee's salary on monthly basisi in whole financial year irrespective of whether he get the retention bonus or not.

So is it legal to deduct the income tax on retention bonus at the time of getting it?

Is it Income tax deduction from an employee's salary in whole year on monthly basis?

Please clarify or suggest, I want income tax to be deducted at the time of getting Retention Bonus so that my monthly take-home will be good enough.

If possible, please provide me link or name of rule or law to support these things.

Replies (3)

Rahul Gupta

Project Controller ACA MBA(Fin.)

8019 Points Joined July 2007

My view is that Company is doing wrong. It should be deducted at the time of payment.

TDS on salary is deducted by the company on the Estimated Income of the employee for the year. Retention bonus is somewhat a Contingent Income and cannot be said as more than probability chances to include in the income.

Also, from individual point of view, if by chance employee did not avial the retention bonus then TDS deducted will not be reverted back, although it may be adjusted with TDS to be deducted at the ime of resignation, but stil the bonus is not sure, so TDS should not be deducted.

Right now, I don;t know eaxactly the provisions which supports my views. However, support by Provisions from members are solicited....

Regards

Shudhanshu Agrawal

Business

2570 Points Joined May 2008

When we calculate TDS on Salary u/s 192 we assume that the employee will work for full year and accordingly we calculate his/her tax liability. So according to me if bonus is a part of CTC and it is heavy in amount then it may be considered in the tax calculation without payment also.

Vishal

Senior Software Engineer

25 Points Joined December 2010

Hi All,

I have similar query with this post, could you help please. It's like -

My company wants to pay me a rentenion bonus of 1.4 Lakhs (it's advance pay, not at the end), the conditions is I should stay back for next one year from the date they pay it (that's until Dec 2011). I understand it's a taxable amount (30% or so) and I'll receive approximately 1 Lakh when I accept the offer.
The question here is - Suppose I want to leave the company before next December (lock period) ? As per the condition in the letter I need to re-pay the full amount (that's 1.4L) to the company. What will happen to the tax paid? I understand the comany will not take care about that part - will I be able to file this under IT returns in next cycle and reveive the amunt from Income tax dept.? If yes, will I get the full amount and by when that credit to me? Please suggest.

Best Regards,

-Vishal