Every month Employees get some earnings which are fixed in nature. They include Basic, HRA, Conveyance Allowance, Medical Allowance, Special Allowance, etc among others. And IT computed on this Earning is spread over the whole FY and deducted every month.
But there are certain components like Bonus, Incentives, Arrears, etc which are not paid every month, but just once or twice a year.
Since these are paid just once or twice a month, IT on this should not be distributed over the entire stretch of the FY; instead, should be deducted only in that month this is paid.
This IT, computed and deducted on the one-time earnings is called “Adhoc Tax”.
Illustration 1: (Excluding Surcharge)
If Rahul falls under 30% tax slab and in the month Sep 2016 he has been paid Rs. 2,50,000 Incentive. Adhoc tax will be calculated as
30% Tax on Incentive |
3% Cess on Tax |
Total Adhoc Tax |
250000*30%=75000 |
75000*3%= 2250 |
75000+2250 = 77250 |
In this case, Tax for the month is 83221, and then the breakup is calculated as below:
Monthly Tax Payable : 5971 (83221 – 77250 = 5971)
Adhoc Tax Payable for the month : 77250
Tax for the month : 83221
Illustration 2: (Including Surcharge)
If Rahul falls under 30% tax slab and in the month Sep 2016 he has been paid Rs. 2,50,000 Incentive. Adhoc tax will be calculated as
|
30% Tax on Incentive |
15% Surcharge on Tax Amount |
3% Cess on Tax Amount + Surcharge |
Total Adhoc Tax |
250000*30%=75000 |
75000*15% =11250 |
(75000+11250)*3%= 2587 |
75000+11250+2587 = 88837 |
In this case, Tax for the month is 183221, and then the breakup is calculated as below:
Monthly Tax Payable : 94383 (183221 – 88837 = 94383)
Adhoc Tax Payable for the month: 88837
Tax for the month: 183221
Note: Any components which are mapped to Section 10 i.e., under Transactions >> IT Mapping, will not be considered for Adhoc Tax calculation.