Jouning Bonus returned Tax implications

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prakashgyan7 (Querist)
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14 July 2021 Hi,

I joined a company in June 2019 and got joining bonus of Rs 2,00,000 with conditional rider of empoyment with the company for 1 year. TDS got deducted for this amount.

I left the company in November 2019. The company adjusted JB with F&F but it still shows in Form 16.

While filing ITR, I reduced the amount of JB from my total salary. I got response from CPC for defective return asking me the reason for TDS refund demand. I replied with information regarding my case with JB.

Now, I got 143(1) asking for tax demand. What should I do?

Deepa B

Deepa B (Expert)
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14 July 2021 143(1) is an intimation that your return has been processed and in case of demand determined, it will also act as a demand notice. In such case you will have an option in your income tax login to respond to the outstanding demand order saying whether you agree or disagree with the demand. If disagree reason for the same has to be mentioned briefly. Kindly check whether such option is enabled inside your login. If yes, place your response there. But before doing so, kindly re-verify and ensure that the return filed by you, was correct in all aspects.

prakashgyan7

prakashgyan7 (Querist)
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15 July 2021 That was unhelpful reply. My question was specific to returned joining bonus. The reply talks about the process which I already know.

It seems the expert don’t read the complete question.

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Deepa B

Deepa B (Expert)
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15 July 2021 Kindly avoid passing judgements. If your expectation is some other specific reply, kindly put it across in a more specific way. Your question said-" What should I do?". One can infer that it expects guidance on future course of action. Hence procedure to be followed in order to deal with such notice was mentioned. Because generally querist expect such reply from procedural perspective.
If you are trying to ask on the accuracy of calculation done, I would say reduction of JB from salary is correct provided you have reported unadjusted full and final settlement amount.
Alternatively you can also request your employer to revise the TDS return, as you are trying to point out that reported income is appearing in your Form 16 in an incorrect way.

prakashgyan7

prakashgyan7 (Querist)
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15 July 2021 Hi, thanks for the reply.

I genuinely felt you didn’t read the compete question. My motive was not to judge/ offend

My employer has already refused to adjust in Form16 stating that there is no such provision for Joining Bonus in the IT act.

Personally, as much I read about it, I could not clearly find any provision to reduce refunded joining bonus from total income.

There was a known case where assessee lost the case, and had to pay taxes for income which never happened (i.e. returned joining bonus)

It would be extremely helpful if you could quote some IT act provisions to support what you suggested..

Deepa B

Deepa B (Expert)
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15 July 2021 In TDS return has your employer reported unadjusted full and final settlement amount besides JB

prakashgyan7

prakashgyan7 (Querist)
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15 July 2021 Yes, Form 16 show unadjusted amount.

Deepa B

Deepa B (Expert)
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15 July 2021 The answer which I gave, would have hold good if in TDS return there was no excess reporting of salary income. Because your employer can always re-determine the income and the tax deductible at the end of year. Otherwise the Income Tax Tribunal judgement has said that JB refunded to old employer cannot be deducted from salary.
Now the tax authorities will definitely consider it as an under reporting of income due to the inconsistencies. If possible kindly re-check with your employer the possibility of revising the return by stating the inconvenience caused due to such over-reporting.
In addition to that I would suggest you to respond to the demand in login mentioning the fact.

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prakashgyan7

prakashgyan7 (Querist)
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15 July 2021 Thanks, I'll reply to the demand.

Asking employer to re-determine will not work. As this issue is for FY 2019-20, and I persuaded a lot with my employer last year when I got Form 16 to re-calculate. But they firmly denied quoting there is no such provision in IT act to reduce refunded JB from income.

I'll respond to the demand explaining the situation, but it seems AO can still ask for demand and I can't do anything in that case? It is bizarre on IT Act rules that I will have to pay taxes for income which technically I didn't recieve.