Actual bonus payable as per bonus act and tds payable on it
This query is : Open
25 May 2012
I had a doubt regarding practical issue concerning bonus. It has remained unresolved since year 2008. Below is link to the post :
https://www.caclubindia.com/experts/bonus-provision-practical-issues-27021.asp
The experts who tried to respond to query have not replied to my further question based on their reply.
I request someone to please resolve the query.
Kindly note that in the above case bonus liability booked is ACTUAL bonus payable to employees. The entry is similar to salary payable on which TDS is deducted.
Thanks.
https://www.caclubindia.com/experts/bonus-provision-practical-issues-27021.asp
The experts who tried to respond to query have not replied to my further question based on their reply.
I request someone to please resolve the query.
Kindly note that in the above case bonus liability booked is ACTUAL bonus payable to employees. The entry is similar to salary payable on which TDS is deducted.
Thanks.
26 May 2012
Would you please ask the query further. It is very much simple.
27 May 2012
Dear Soumitra Sir,
Thanks for your response. I would like to keep this post open so that other experts can express their opinion.
Thanks for your response. I would like to keep this post open so that other experts can express their opinion.
27 May 2012
Dear Anil,
I did not expressed any opinion. I wanted to know what is the actual query, if possible with figures. If you state then I will be able to reply.
I did not expressed any opinion. I wanted to know what is the actual query, if possible with figures. If you state then I will be able to reply.
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27 May 2012
Here is another link which may be of help to you in expressing your opinion:
https://www.caclubindia.com/forum/bonus-provision-practical-issues-continued--202678.asp
I hope the above link along with the link I gave you earlier in this post should be enough for you to get clarity regarding my query.
Assume Any figure as Bonus / TDS. The query does not involve any calculation
Thanks.
https://www.caclubindia.com/forum/bonus-provision-practical-issues-continued--202678.asp
I hope the above link along with the link I gave you earlier in this post should be enough for you to get clarity regarding my query.
Assume Any figure as Bonus / TDS. The query does not involve any calculation
Thanks.
30 May 2012
Though I am very week in computer operation still I could manage the link.
First of all I shall get the privilege to advise you that if you want to get your doubts cleared then you should detail your query again but not to show him the link.
Now answer to the query.
You are correct that according to Income tax bonus is part of salary and TDS should have been deducted from the Bonus also.
In your case it is different for the reason that on the 31st March netither the Bonus was computed not declared by the Management. The same was declared and paid in the following financial year. On the date of the Balance Sheet the employeees has no right to receive the Bonus. According to accrual basis of accounting and read with the books Events Occuring after the date of Balance Sheet, the management provided the Bonus in accordance with matching concept theory. You will find that as per Income Tax Act TDS has to be deducted only at the time of payment of salary. The due TDS may be deducted at the time of payment of Bonus and that shall comply the provision of TDS. In this connection I may refer the procedure for payment of arrear salary. Though it is belong to earlier years, yet the TDS on the same is being deducted at the time of payment of salary.
First of all I shall get the privilege to advise you that if you want to get your doubts cleared then you should detail your query again but not to show him the link.
Now answer to the query.
You are correct that according to Income tax bonus is part of salary and TDS should have been deducted from the Bonus also.
In your case it is different for the reason that on the 31st March netither the Bonus was computed not declared by the Management. The same was declared and paid in the following financial year. On the date of the Balance Sheet the employeees has no right to receive the Bonus. According to accrual basis of accounting and read with the books Events Occuring after the date of Balance Sheet, the management provided the Bonus in accordance with matching concept theory. You will find that as per Income Tax Act TDS has to be deducted only at the time of payment of salary. The due TDS may be deducted at the time of payment of Bonus and that shall comply the provision of TDS. In this connection I may refer the procedure for payment of arrear salary. Though it is belong to earlier years, yet the TDS on the same is being deducted at the time of payment of salary.
05 June 2012
Dear Soumitra Basu Sir,
Based on your reply , I have two more questions to ask :
a) If TDS is to be deducted from salary ONLY at the time of payment of ACTUAL salary as per Income Tax Act, Why do companies always ESTIMATE the whole years salary in advance , compute tax and start deducting TDS equally in all months ?
b) If Salary payable can be ESTIMATED and TDS deducted, Why cannot BONUS which is considerd as Salary as per income tax act given different treatment ?
Based on your reply , I have two more questions to ask :
a) If TDS is to be deducted from salary ONLY at the time of payment of ACTUAL salary as per Income Tax Act, Why do companies always ESTIMATE the whole years salary in advance , compute tax and start deducting TDS equally in all months ?
b) If Salary payable can be ESTIMATED and TDS deducted, Why cannot BONUS which is considerd as Salary as per income tax act given different treatment ?
06 June 2012
The company has to estimate the tax to be deducted per month based on the annual salary and proposed investment of the deductee. Any short deduction is being adjusted in the last month. Please go through the CBDT Circular issued in this respect.
I have told you before that since the declaration and payment of Bonus is made only in the following year the right to get the Bonus by the employee arose on the following year irrespective of the fact that for the purpose of accrual basis of accounting as provided in section 209(3) of the companies act, the company has provided the sum in its account. For instance I may refer you regarding payment and distribution of Dividident. Though the same has to be accounted for as Proposed Dividend in the year for which Dividend has to be declared, the Dividend payment tax has to be paid in the following year on the same assumption unless the Shareholder gets the right to receive the same it cannot be taxed as Income. The Shareholders have every right either to accept or to refuse the Dividend in the Annual General Meeting.
For any further clarification you may call me - 9434001177
I have told you before that since the declaration and payment of Bonus is made only in the following year the right to get the Bonus by the employee arose on the following year irrespective of the fact that for the purpose of accrual basis of accounting as provided in section 209(3) of the companies act, the company has provided the sum in its account. For instance I may refer you regarding payment and distribution of Dividident. Though the same has to be accounted for as Proposed Dividend in the year for which Dividend has to be declared, the Dividend payment tax has to be paid in the following year on the same assumption unless the Shareholder gets the right to receive the same it cannot be taxed as Income. The Shareholders have every right either to accept or to refuse the Dividend in the Annual General Meeting.
For any further clarification you may call me - 9434001177
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06 June 2012
Thanks Sir.
I wish I could get the CBDT circular reference number and date.
I am aware that - under the new proposed Companies bill Dividend expense is to be accounted in the year in which dividend is proposed and approved. Please let me know whether Bonus payable under Bonus Act is also to be treated similary from Assessment year 2013-14.
I wish I could get the CBDT circular reference number and date.
I am aware that - under the new proposed Companies bill Dividend expense is to be accounted in the year in which dividend is proposed and approved. Please let me know whether Bonus payable under Bonus Act is also to be treated similary from Assessment year 2013-14.
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