Double taxation incidence

[Nipun Bansal]

An employee joins Company 'X' in Dec'08 and gets a joining Bonus of 3 Lakhs. There is a clause that if he leaves the organisation in next 12 months, then he will have to return the above joining bonus of 3 Lakhs to the Company 'X', This employee decides to join another company 'Y' in May 09 and negotiates with 'Y' to pick up the above cost of 3 Lakhs which he has to give back to Company 'X'. The Problem now: He has crossed the financial year 2009-10 and had paid the tax on the joining bonus received from Company 'X' , now the same amount will again get taxed in his hands in Company 'Y' because it will also be treated as income in his hands. Although on a practical note he has earned it only once but will end up paying the tax twice. Moreover the income earned from Company 'X' in FY 2010-11 is not enough to set off the tax paid on joining bonus in previous year Please suggest a way out to avoid the double tax incidence on the above Income. Is there any case law/ruling etc which throws some light on above. Kindly help

AI Summary

Employee Faces Double Taxation on Joining Bonus; Solution Proposed Under Income Tax Act, 1961 Needs Review An employee received a 3 lakh joining bonus from Company X, with a clause requiring repayment if he left within 12 months. After joining Company Y, he negotiated for them to cover the repayment. However, he faces double taxation as the bonus was taxed in the previous financial year and will be taxed again as income from Company Y. A suggestion to avoid this is for Company Y to pay Company X directly, bypassing the employee's salary. The legality and practicality of this solution under the Income Tax Act, 1961, need verification.