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.