Joining bonus – Income tax liability for receiving joining bonus

Joining bonus – Income tax liability for receiving joining bonusJoining bonus is an amount paid to a new employee by a company as an incentive to join them. Normally employer pays a lump sum amount at the time of joining to lure experienced peoples from the competition.

According to income tax act, joining bonus will be treated as profit in lieu of salary and will be taxable in the hands of the employee who receive it. When you receive the amount, your employer will deduct income tax from it and deposit it with the government of India for which you will be receiving a proof of such payment at the end of the year.

One of the conditions of receiving joining bonus is that the employee should continue with them for a specific time period or else the entire amount received as joining bonus has to be refunded back. The question arises here is, what will happen to the income tax amount that the company has already deducted from my joining bonus. Is it like the company is going to collect joining bonus net off tax from me. 

While leaving your employment, your employer will ask you to pay back the joining bonus (entire amount of joining bonus) or they may adjust the amount in final settlement of your account. At the time of final settlement your employer would have considered the actual amount of salary that you have received from the employer for tax purpose i.e. without taking the joining bonus into consideration. If your employer has deducted higher tax and unable to adjust it with the amount that has already been deducted then on the basis of form 16 (that you receive from your employer) you can claim refund from income tax department.

To get refund we suggest you to do online filling either at the income tax efilling website or with any efilling intermediary for speedy process.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.