Tipping point

Last Updated: Mon, Feb 11, 2013 05:39 hrs

How can I limit the tax outgo on bonus salary earned?

As bonus is fully taxable in your hand, tax is applicable when the bonus is paid. If you have huge tax liability in one year, you can request your employer to pay the bonus in the next year, pushing your tax liability to the next year. This especially helps if tax rates have been or are likely to be reduced.

What if the employer does not agree to a shift to the next year?

If the bonus is to be paid in the current year, you can at best spread the tax liability over the remaining months of the financial year concerned. This will lower your one-time liability and ensure better cash flow management. If your employer deducts tax on bonus before paying it, make sure you give your tax saving investment details to the employer to get higher bonus in hand.

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