Is Your Leave Reward System Tax-Free? Understanding Income Tax Implications for Salary Bonuses

Query on Leave Reward System and Tax Exemption

If an organization has a reward system in the monthly salary, meaning if any employee doesn't take any leave in a particular month, they will receive one day's salary as a reward. However, this reward is not fixed and depends on the presence of that particular employee in that month. According to the Income Tax Act, is this amount of leave award exempted from salary income tax or not?

Thanks

Mahesh, this is definitely not exempt from income tax. Attendance rewards are fully taxable under IT laws. From salary income, only a few components are exempt, which are given in section 80(c) to 80(u), section 24 (housing loan), section 16, etc., of the IT Act 1961.

Incentives are a part of income and will attract income tax if they fall within the taxable income slab.

Regards,
Pon