Tax calculation on Incentives paid - CiteHR
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Asso.prof.(commerce & Management) Pg
Rahul Chhabra
Hr Professional

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Dear All,
Kindly help me understand, how to calculate tax on the incentives paid on monthly basis to employees.
Regards
sandeep kaur

Dear Sandeep,
Incentives paid to employees are fully taxable in nature; and they need to be added to the total taxable salary to compute the taxes.
Regards
Rahul

There is no separate rate applicable for Incentives. This is paid as %age to the 'sales turn over' or as a fixed sum. It need not be regular every month but could be randomly paid. In many firms it's also paid - in lieu of OT wages; for regular attendance; 'NIL' leave availed; achievement of sales targets; production linked basis etc. In whatever manner it's paid still its part of salary paid and therefore it's part of 'taxable income' and appropriate rate of tax has to be deducted as TDS or IT. In case, even after adding the income received as Incentive but still within/ less than/below the 'taxable income' i.e. Rs.2.5/3.00 lakhs as the case may be, then there is no IT payable by the concerned.
The IT slab for the Financial Year 2018-19 is as follows:
(A) Income Tax Slabs for Individual Tax Payers & HUF (Less Than 60 Years Old) for FY 2018-19:
Tax Rate Health and Education Cess
Income up to Rs 2,50,000 No tax
Income from Rs 2,50,000 – Rs 5,00,000 5% 4% of Income Tax
Income from Rs 5,00,000 – 10,00,000 20% 4% of Income Tax
Income more than Rs 10,00,000 30% 4% of Income Tax
(B) Income Tax Slabs for Senior Citizens (60 Years Old Or More but Less than 80 Years Old) for FY 2018-19 –
Income Tax Slabs:- Tax Rate Health and Education Cess
Income up to Rs 3,00,000 No tax
Income from Rs 3,00,000 – Rs 5,00,000 5% 4% of Income Tax
Income from Rs 5,00,000 – 10,00,000 20% 4% of Income Tax
Income more than Rs 10,00,000 30% 4% of Income Tax
(C) Income Tax Slabs for Senior Citizens(80 Years Old Or More) for FY 2018-19:
Income Tax Slabs: Tax Rate Health and Education Cess
Income up to Rs 5,00,000 No tax
Income from Rs 5,00,000 – 10,00,000 20% 4% of Income Tax
Income more than Rs 10,00,000 30% 4% of Income Tax

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