I left my job early and bore heavy costs — Can I claim tax relief on joining bonus repayment and notice period shortfall?

Joining Bonus taxability

Many employees face this tricky situation of a joining bonus repaid or notice pay deducted when leaving a job early. Today's Ask Wallet-Wise query answers can these amounts be claimed back in your income tax return? 

Moneycontrol’s Ask Wallet-wise initiative offers expert advice on matters related to personal finance and tax. You can email your queries to askwalletwise@nw18.com, and we will try and get a top financial expert to address your queries.

Query: I joined a company on 1st June 2024. They paid me a joining bonus of Rs 2 lakh on the condition that I would refund the joining bonus if I left before completing two years. Tax was deducted on the joining bonus. As I got a better opportunity, I resigned and left on 15th March 2025. Since I left before two years, I had to refund the joining bonus of Rs 2 lakh and also pay Rs. 1,15,000 for shortfall in notice period. The company did not reduce these from my taxable salary and deducted full tax. Can I claim these amounts in my ITR ? 

Expert Advice: Under the Income Tax Act, only two deductions are available against salary income: the standard deduction (Rs 50,000 under the old regime, Rs 75,000 under the new regime) and deduction for professional tax paid. Beyond these, no other deductions can be claimed.

Any amount received from an employer, such as a joining bonus, is taxed as salary. While you may have refunded the bonus and paid notice pay, the tax laws do not permit you to adjust these amounts against taxable salary. Employers are obliged to deduct tax on payments made, but there is no provision for them to reverse tax once such amounts are refunded.

This may feel unfair, but currently the law does not allow you to claim these as deductions in your ITR. Unfortunately, this means you cannot claim back the tax deducted on the joining bonus repaid or the notice pay paid to the employer.

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