What happens if i return bonus back to my company

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 June 2015 Hi All,

I was paid a retention bonus in 2013-14 on one condition that I will not leave the company before Dec-2015.

However, I left my company in Aug 2014. So, I had to pay back my retention bonus to the company.

The problem is - My form 16 from my company does not deduct this retention bonus from my total income, which I earned while being there.

Question is how can I claim the tax benefit for the tax, which I already paid in 2013-14.

Amol S Joglekar

Amol S Joglekar (Expert)
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04 June 2015 The tricky issue is.....whether or not the amount required to be paid as compensation to the company is to be deducted from the salary income.
The answer is NO.

In your case, just ask your company, if it is ready to revise your form 16 for that year i.e. 2013-14. If it is ready to revise the form then you can claim refund, if any, for that year.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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04 June 2015 the general practice is like this only. companies don't revise the returns in such cases as the idea is to penalize the person who leaves early! so dont expect too much of cooperation from ur ex-employer

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Querist : Anonymous

Querist : Anonymous (Querist)

04 June 2015 Thank you !

Can I show this as my loss to income while filing tax in case my company does not provide me a corrected for 16.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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04 June 2015 how will you do that? what you returned is not exactly salary but a contractual payment...

Rupesh Jain

Rupesh Jain (Expert)
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05 June 2015 YOU HAVE TO SHOW THE TOTAL INCOME DUE TO TDS DEDUCTED AT TIME OF PAYMENT AND AFTER THAT YOU MAKE DEFAULT AND RETURN THE AMOUNT. NO WAY TO REVISED THE FORM 16.

Amol S Joglekar

Amol S Joglekar (Expert)
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05 June 2015 Try to distinguish between Salary and non compliance payment. Although the parties to both are same, the class and nature of payment is different. Once you realise this distinction, the subsequent journey of not repenting about the tax already paid on the income would be easy.

In effect you can conclude that the compensation for non compliance is salary + income tax paid on that. Hope next time, when leaving the job you will be more alert in calculations.

Querist : Anonymous

Querist : Anonymous (Querist)

25 June 2015 I filed a revised return, after reducing the retention bonus amount from total income. That was so simple ..

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Querist : Anonymous

Querist : Anonymous (Querist)

25 June 2015 Also, since I received a certificate from my company stating that I had returned my retention bonus, and they had not deducted from salay, I can show as a proof. hahahaha

Nikhil Kaushik

Nikhil Kaushik (Expert)
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25 June 2015 everything is simple friend. you can show anything you want to show in your return.

We just don't advise querists to do something which we don't believe is correct as per law.

Querist : Anonymous

Querist : Anonymous (Querist)

25 June 2015 why it is against law? ... I just rectified my return again. And in case, Income Tax office asks me to show the proof, I have certificate from employer.

Querist : Anonymous

Querist : Anonymous (Querist)

25 June 2015 for your reference, see this:

https://www.caclubindia.com/experts/tax-on-retention-bonus-given-and-recovered-in-diff-fin-years-701740.asp#.VXwo4vmqqko

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Nikhil Kaushik

Nikhil Kaushik (Expert)
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25 June 2015 choosing opinion that suits you is a natural action friend!

an obvious question comes to my mind:

the treatment of an income/expense item should have a standard treatment.

lets say you resign on 31 March 2015 and return the retention bonus in may 2015 and don't work for the next whole year. Then how would you account for the returned bonus? from where will you deduct this payment if there is no salary in 2015-16. Plus loss under salary is not allowed!

these advisories look awesome within a narrow scope but do they hold good universally?

Amol S Joglekar

Amol S Joglekar (Expert)
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30 June 2015 the person who is caught raid handed is called as thief. That does not mean ohters are not thieves...... Your return is not called for scrutiny...is a good thing. All the best. But the amount paid at the time of leaving the company is NOT allowed as deduction.

Querist : Anonymous

Querist : Anonymous (Querist)

01 July 2015 could you give me the IT act number which states that "amount paid at the time of leaving a company is not allowed as deduction" ... Thanks

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Querist : Anonymous

Querist : Anonymous (Querist)

01 July 2015 and can not be claimed for tax rebate

Amol S Joglekar

Amol S Joglekar (Expert)
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13 July 2015 01. My dear, please try to consider that it is basically a TAX on INCOME.

02. Certain deductions/ exemptions are allowed as provided in the foregoing provisions of the Act.

There is no ANY such deduction OR exemption available for the payment referred by you. So sorry about it

Querist : Anonymous

Querist : Anonymous (Querist)

13 July 2015 Hi Amol,

I don't know much about it. I have filed a revised return. Let us see what happens. I will post whatever is the result of my experiment.

Thanks

Regards,
Om

Amol S Joglekar

Amol S Joglekar (Expert)
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13 July 2015 Don't worry. The result will be in your favour because Income Tax department does not scrutinise more than 10% of the returns filed. You will get the result accordingly. This is the difference between LAW and PRACTICE.