The Joining Bonus Trap
Companies often offer a lucrative joining bonus to attract talent, but it usually comes with a catch: a lock-in period (typically 1 or 2 years). If you resign before this period ends, you have to return the bonus.
This creates a complex tax headache. When you received the bonus, your employer deducted heavy TDS on it. When you return it, you are returning the gross amount, meaning you are out of pocket for the tax you already paid.
How do you fix this in your ITR? It depends entirely on when you return the money.
Scenario 1: Bonus Received and Returned in the SAME Financial Year
This is the easiest scenario. Let's say you joined in May 2025, received a ₹2 lakh bonus, and quit in December 2025.
Since everything happened within the same financial year (April 2025 - March 2026), your employer will adjust your final Form 16. They will remove the ₹2 lakh from your gross salary. The excess TDS they deducted earlier in the year will simply result in a larger tax refund when you file your ITR in July 2026.
Action: Just file your ITR using the final Form 16 provided by the employer.
Scenario 2: Bonus Received in Year 1, Returned in Year 2
This is where it gets painful. You joined in January 2025 (FY 2024-25), got the bonus, and paid tax on it. You quit in August 2025 (FY 2025-26) and had to return the bonus.
- Can you revise last year's ITR? No, because the income was yours in FY 2024-25.
- Can you deduct it from this year's salary? No, the tax department doesn't allow you to reduce current salary for past recoveries.
The Harsh Reality: Under strict interpretation of tax laws, you suffer a loss. You paid tax on income you ultimately didn't keep.
Is There Any Relief?
Some taxpayers rely on Section 15 (which taxes salary on a due/receipt basis) and argue that the returned bonus should be treated as a negative salary or loss. However, doing this manually in the ITR portal almost guarantees a mismatch notice, as your declared salary will be lower than what the employer reported in your AIS.
If the amount is substantial, you should consult a tax professional. They may advise claiming the deduction and preparing a legal defense based on tribunal rulings, though this is a complex and risky path.
A bonus is taxed in the year it becomes due, and a same-year clawback can be adjusted by the employer; a clawback in a later year usually leaves the past tax stranded. Source: Income Tax Act Sections 15 and 192.
What you should do
- Note whether the bonus was received and returned in the same financial year or a later one
- Same year: just file from the revised Form 16, which already removes the bonus
- Later year: keep the clawback letter and bank proof, and take a CA's view before claiming anything
Common mistake
Expecting an automatic refund of last year's TDS after a later-year clawback. You cannot revise the earlier return for this, and you cannot subtract the returned bonus from this year's salary.
For most standard filings, it is safest to follow the Form 16 issued by the employer. You can upload your Form 16s to LastMinute ITR to ensure your calculations match the government's records.