Variable compensation · component
Commission, sales incentive and productivity pay
Performance-linked cash is fully taxable salary in the year it is paid.
How the taxable value is determined
Taxed at slab rates on receipt. Where commission is a fixed percentage of turnover achieved, it also counts as salary for computing HRA exemption and provident fund in some structures.
Regime availability
- Old regime
- Prescribed value applies
- New regime
- Prescribed value applies
Documentation to keep
Payslip for the incentive month and the incentive plan document.
Legal basis: Section 17(1), Income-tax Act
Frequently asked questions
Is commission, sales incentive and productivity pay taxable in India?
Performance-linked cash is fully taxable salary in the year it is paid. Taxed at slab rates on receipt. Where commission is a fixed percentage of turnover achieved, it also counts as salary for computing HRA exemption and provident fund in some structures.
Does the exemption apply under the new tax regime?
Under the old regime this treatment is not applicable — the value is prescribed, not exempted; under the new regime it is not applicable — the value is prescribed, not exempted. Legal basis: Section 17(1), Income-tax Act.
What records should I keep for commission, sales incentive and productivity pay?
Payslip for the incentive month and the incentive plan document.
Related tools & guides
Reflects provisions in force for FY 2026-27; verify against the latest government publications (incometax.gov.in). Information, not tax advice.