What is the best practice for deducting Income tax on One time incomes e.g Bonus and Incentive paid with salary to avoid short deduction of taxes ?
as per income tax act, tax needs to be deducted upfront on adhoc amount paid in whichever tax bracket they are in… also it is the best practice why because their monthly take home salary will not impact as the whole tax for that adhoc will get recovered in the same month. take home salary will get reduced for remaining months.
Yes .Thanks for update . Also in case of FNF this practice will help company to avoid short deduction scenarios .As if employee have received bulk incentive and we have deducted regular tax and in very next month employee resigns then for finance team it will be win win situation and difficult to recover the tax in FNF settlement .
TDS Needs to be deducted at the time of making payments or at the time of crediting such incomes in the books of accounts of the employee whicever is earlier as per the average rate of Income Tax Computed based on full yearly incomes.