Can you claim the amount of joining bonus refunded to your employer?

I was paid ₹10 lakh as a joining bonus, which I was required to refund if I left the employment within three years. The same was included in my form No. 16, and tax was deducted at source on this joining bonus amount. I decided to quit my employment before completing three years, and therefore had to refund the entire joining bonus amount. Can I claim the bonus refunded against my salary income? 

Any amount received from the past or present employer is taxed under the head of salaries, and the employer is required to deduct the appropriate tax at the time of payment of the joining bonus.

Can you claim the deduction?

So, the joining bonus you received was taxable in your hands as salary, and your employer correctly treated it as salary and deducted the appropriate tax from it. Though the joining bonus was taxable in your hands at the time of its receipt, there is no provision under the income tax laws to allow any deduction in case the same is required to be refunded to the employer. 

So, though you have paid taxes on the amount of the joining fee received, you will not receive a deduction for refunding it.

What do the tax regimes say?

Under the tax laws, presently, two items are eligible for deduction against salary. The first is the standard deduction, which every salaried and pensioner is eligible for.

The amount of standard deduction available under the old tax laws is restricted to ₹50,000/- where as you get a higher deduction up to ₹75,000/- in case you opt for the new tax regime.

The second deduction is available in respect of the amount of professional tax deducted by your employer. Except for these two deductions, no other deduction is available against the amount of taxable salary.

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Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on his X handle.

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