Bonus provision - Practical issues

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Anil (Querist)
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17 March 2008 REGARDING BONUS:

Computation of Bonus payable for the year involves an elaborate process. It starts with adjustments to Net profits earned during the period( Please refer Section 4 and Second Schedule of Payment of Bonus Act, 1965).

REGARDING TDS ON SALARY INCOME:

Bonus shown as payable to employees is taken into consideration for computation of tax on Salary income of employees . Further TDS deducted from salary is to be paid to IT dept before 7th April( For March month)

CONCLUSION:

It means the bonus computation is to be finalised before 7th April of a year. For this company has to finalise its balance sheet before 7th April.

ISSUE / QUESTIONS:

1) Can anyone please let me know how do companies practically manage to finalise a Balance sheet before 7th April?

2) Even if the company somehow manages to finalise its balance sheet before 7 April, there is possiblitlity of Auditors recommending some changes to finalised Accounts sometime later than 7 April. How do companies deal with that?

CA. Amit Daga

CA. Amit Daga (Expert)
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17 March 2008 Anil hope you know abt the AS-5.Please refer it

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Anil

Anil (Querist)
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17 March 2008 Dear Sir,

Thanks for your response.I would like to bring to your notice that -

1) AS-5 does not answer my first question.

2)My second question is -
In case if there is any change is done in P & L A/c after 7th April, Net profit gets adjusted, that will have its implication on bonus calculation and that in turn will disrupt the figure of TDS already deducted on bonus and paid to IT dept .How does the company deal with the changed figures of TDS, when TDS paid and TDS payable dont agree?What can be done to avoid such differences?

AS-5 does not answer my above question.

I would like to keep the querry open and request other learned members to kindly express their views.

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Jitender

Jitender (Expert)
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17 March 2008 tds deducted in march is deposited upto 31st may.

Anil

Anil (Querist)
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18 March 2008 Dear Mr.Jitender,

Thank you for your response.

I agree that if TDS is deducted ON last day of the financial year i.e, 31 March , TDS has to be deposited before 31 May.

BUT above provision is NOT applicable to -Payment of Salary.

Kindly refer point 12 in the given link below:

http://ghalla-bhansali.com/it_tds.asp

If you hold a contrary view please let me have the Income Tax Section / Rule reference.

Thank you.

kartik_somu

kartik_somu (Expert)
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19 March 2008 TDS on salaries is made on amount paid or estimated to be paid till the month end. Generally companies compute the aprrox bonus payable based on past records and calculate TDS accordingly. There cannot be 100 % accurate calculation of TDS.

Anil

Anil (Querist)
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20 March 2008 Thank you very much Mr.Kartik for your response.

I just want to keep the query open to have other learned members to express their views on the topic.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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05 April 2012 First of all TDS is NOT required to be deducted on Provision for bonus.

So, computation of bonus is not required to be completed before the 7th.

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Anil

Anil (Querist)
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20 May 2012 Dear Siddartha Bhardwaj Sir,

Please let me have income tax section or rule which states that TDS is not required to be deducted on bonus provision.

Thanks and regards,

Anil.