Variable compensation · component
Referral and retention bonus
Referral and retention payments are taxable salary when received, including amounts subject to clawback.
How the taxable value is determined
Taxed on receipt at slab rates. Where a retention bonus is later refunded on early exit, relief depends on the year of refund — retain the clawback agreement.
Regime availability
- Old regime
- Prescribed value applies
- New regime
- Prescribed value applies
Documentation to keep
Offer or retention letter and the payout record.
Legal basis: Section 17(1), Income-tax Act
Frequently asked questions
Is referral and retention bonus taxable in India?
Referral and retention payments are taxable salary when received, including amounts subject to clawback. Taxed on receipt at slab rates. Where a retention bonus is later refunded on early exit, relief depends on the year of refund — retain the clawback agreement.
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 referral and retention bonus?
Offer or retention letter and the payout record.
Related tools & guides
Reflects provisions in force for FY 2026-27; verify against the latest government publications (incometax.gov.in). Information, not tax advice.