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Is bonus on salary is taxable?

Sridip Kumar Shaw (Executive-Accounts) (62 Points)

21 July 2021

Hi Sir/Madam,

I am a salaried employee and I have 2 queries:

1. I have got bonus on my salary. Is that bonus taxable under the head, Income under the head Income from Salary?

2. I have encash my leave travel encashment is that also taxable under the same head as well?

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3 Replies

Yoga M. (99 Points)
Replied 21 July 2021

Yes, it is taxable

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CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 22 July 2021

Yes bonus is taxable under the salaries

Leave encashment is exempt upto 300000 rupees

CA Rashmi Gandhi (Chartered Accountant) (86220 Points)
Replied 22 July 2021

In case you have not taken leaves and have opted for encashing these leaves, your employer would be paying you some amount as leave encashment. The amount so received on account of encashing the leaves not availed would be liable to tax under head “Income from Salary”.

Computation of Amt Exempted from Leave Encashment

Encashment of leave during tenure of service: Leave encashment to an employee, while he continues to be in service with the same employer is fully taxable and no exemption is allowed.

Encashment of leave salary at the time of retirement

Exemption from amount received as leave salary is available under Section 10(10AA). For the purpose of availing exemption under section 10(10AA), the employees are divided into 2 types of categories:-

Govt Employees (Central Govt and State Govt employees only): Leave encashment of accumulated leave at the time of retirement, whether on superannuation or otherwise, received by a Govt employee, is fully exempt from tax. No tax would be levied on any amount received as leave encashment by govt employees on retirement.

Other Employees: Leave encashment of accumulated leave at the time of retirement whether on superannuation or otherwise received by any other employee (except those covered above) is exempt from tax to a certain limit. In such a case, the least of the following shall be exempted:-

Leave encashment actually received

10 months “average salary”

Cash equivalent of unavailed leave calculated on the basis of maximum 30 days leave for every year of completed service.

Amount specified by the Govt i.e. Rs. 3,00,000

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