Income Tax on Bonuses: Do We Need to Deduct and How Much?

Dear Seniors, I have a question regarding the bonus. Do we need to deduct income tax from the bonus? If yes, what is the percentage we have to reduce from the bonus?

As per the Income Tax Act, you have to deduct the tax on the bonus as well. All the components that are paid to employees come under Income from Salaries. The TDS is similar to Salary.

Regards

Bonus always comes in the tax bracket at the time of TDS calculation on one's salary. Therefore, please add this head to the gross salary, and then tax will be deducted according to the normal income tax rate applicable as per the financial year.

Thanks
Regards

Income Tax Calculation on Salary and Bonus

Everything is applicable as per the Income Tax Act. The percentage we calculate depends upon the slab. For example:

1. If the salary is between 1 - 2 lakhs (no tax).
2. If the salary is between 2 - 5 lakhs (10%).
3. If the salary is between 5 - 10 lakhs (20%).
4. If the salary is above 10 lakhs (30%).

This is how we generally calculate the tax. Calculate the bonus, add it to the salary, then deduct the returns amount, and finally, calculate the tax on that. Ok...

Please let me know if you need further assistance.

Regards

Yes, we have to deduct income tax from the bonus as per the following criteria:

1. Salary is between 1 - 2 lakhs (no tax).
2. Salary is between 2 - 5 lakhs (10% tax).
3. Salary is between 5 - 10 lakhs (20% tax).
4. Salary is above 10 lakhs (30% tax).

Regards,
Srikanth
[Phone Number Removed For Privacy Reasons]
Intersoft International Pvt Ltd

Thank you, everyone, for this valuable reply, but I have one more question: if the bonus is 8% of the employee's salary, how do we calculate that?

Example Calculation

For example, if an employee is receiving 2.5 Lakhs per annum and the bonus is 8% for the month, how do we calculate it?

Bonuses are taxable when they exceed 20% in a financial year; otherwise, the bonus should not be considered in the income tax calculation.

Regards

Income Tax on Bonus

Bonus also attracts income tax. Add the bonus amount to the annual income and work out income tax calculations, then deduct the balance payable income tax in equated monthly installments.

Regards

In addition to this discussion, I have one question. Please clarify: My company deducts a bonus from the salary, but the bonus has not been distributed for the last three years. What is the procedure for TDS deduction?

Thanks,
Parimal

If his salary is 2.5 per annum and he receives a bonus of 10%, his gross salary increases to 2.75. Therefore, on 75,000, deduct 10% as the total tax, including the tax deducted earlier. For a salary of 2.5, you would have deducted 10% of 50,000, which is 5,000. Deduct another 2,500 from the 25,000 he receives.

As per the Income Tax Act, you have to deduct the tax on bonuses and all related employee payments. Tax deduction should be as per the applicable IT slab.

Regards,
Lakshmipathy N
[Phone Number Removed For Privacy Reasons]

Hi Friends, As per my knowledge, a bonus is a one-time payment. Therefore, after considering the taxable income on salaries, we need to include these additional payments as taxable according to the employee's eligible income tax slabs.

I have one doubt—can someone please clarify: Is overtime (OT), incentive, or bonus subject to TDS (Tax Deducted at Source) or not? Also, what are the rules related to these heads?

Thanks with regards,
Ompal Chhoker

The query is whether we need to deduct income tax from the bonus.

Your response is:
Could you please clarify under which provisions this is stipulated?