Bonus

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

31 March 2016 Dear Expert,

We have declared bonus in Dec 2015 to all employees but not yet paid though we have made an accounting entry in our accounts. Do we need to deduct TDS for this payment to employee u/s 192 though not yet paid. We may pay in May 2016.

Kindly guide on above issue because this is last day and we need to deduct TDS

Rupesh Jain

Rupesh Jain (Expert)
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31 March 2016 bonus is part of salary and tds will deduct when you make payment to employee

pls see section 192

Querist : Anonymous

Querist : Anonymous (Querist)

31 March 2016 can you please detailed as to deduction of TDS, should it be deducted on payment basis or due basis

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Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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18 July 2024 In India, the taxation of salary income and the deduction of TDS (Tax Deducted at Source) for bonuses are governed by specific provisions under the Income Tax Act, 1961. Here’s a detailed explanation to address your query:

### TDS on Bonus Payment

1. **Time of Deduction:**
- **Due Basis:** TDS should generally be deducted at the time of payment or credit of income, whichever is earlier. For salary income, including bonuses, TDS is typically deducted at the time of payment.
- **Exception for Employers:** However, as per CBDT Circular No. 8/2010, dated 13.12.2010, in the case of employers, TDS on salaries (including bonuses) can be deducted either at the time of payment or at the time of provision, whichever is earlier. Provision here refers to when the liability to pay arises and is recorded in the books of accounts.

2. **Bonus Declaration vs. Payment:**
- Since you have declared the bonus in December 2015 but plan to pay it in May 2016, TDS should ideally be deducted in December 2015 (the month of declaration) or at the time of making the accounting provision for the bonus in your books, whichever is earlier.

3. **CBDT Circular 8/2010 Clarification:**
- The Circular provides flexibility to employers regarding the timing of TDS deduction on salaries and bonuses. It allows TDS to be deducted at the time of making provision in the accounts if the liability is crystallized and meets certain conditions.

### Practical Steps:

- **TDS Deduction Date:** Since the bonus was declared in December 2015 and an accounting entry was made, TDS should ideally have been deducted in December 2015 or when the provision was made in your accounts.

- **Compliance:** Given that today is the last day for TDS deduction, you should deduct TDS now based on the provisions applicable in December 2015.

### Conclusion:

- **Due Date:** Ensure that TDS deducted is deposited with the government within the specified due dates to avoid any interest or penalty.

- **Consultation:** It’s advisable to consult with a tax advisor or chartered accountant to ensure compliance with the latest provisions and any specific circumstances of your company.

By adhering to these guidelines, you can ensure compliance with TDS provisions related to bonus payments effectively. If you have further questions or need clarification on any specific aspect, feel free to ask.