One Time Tax
8 minutes read

One Time Tax

When it comes to taxes, a one-time tax is a rare and distinctive charge that differs from regular taxes. It’s usually imposed on financial transactions or exceptional circumstances. The intention behind it may vary, from financing important projects to tackling unexpected challenges. This blog will discuss the following points to help you better understand one-time taxes.


What is One time tax?

One time tax is the process of calculating tax deducted at source (TDS) on a lump-sum amount paid to an employee during the year, apart from their salary. This includes components such as bonuses, ex-gratia, leave encashment, arrears, additional earnings. The calculation of one-time tax is based on the income tax slab rates and exemptions applicable to the employee for the financial year.

The amount of one time tax deducted is added to the monthly TDS and reflected in the employee’s payslip. Additionally, it is also shown in Form 16, which is issued by the employer at the end of the year. The one time tax helps the employer and the employee comply with income tax laws and avoid any penalties or interest for underpayment or non-payment of taxes.

Moreover, one time tax reduces the tax liability of the employee when filing income tax returns.

On which heads is it applicable?

It is applicable on the income that is received in a lump sum amount during the year, such as bonus, ex-gratia, leave encashment, arrears, and others. It is calculated under the head of income from salary.

Who should deduct?

It is the employer’s responsibility to deduct the one-time tax from the employee’s income and deposit it with the government. The employer should also provide the employee with a Form 16 at the end of the year, which shows the details of the one-time tax deducted and paid. The employee can claim the benefit of the one-time tax deducted while filing their income tax return.

How to deduct?

To deduct a one time tax from a lump sum payment to an employee, follow these steps:

  • Ensure Form 16 is used to issue TDS certificates to employees by the due date.” with “Calculate the lumpsum amount, other than salary, payable to the employee. Calculate the tax payable.
  • Calculate the lumpsum amount, other than salary, payable to the employee.
  • Calculate the tax payable on the salary as well as the tax payable when added with the lumpsum amount
  • The difference of the tax amount will be considered as the One-Time Tax which will be deducted from the lumpsum amount payable.

How is it paid to the IT department?

Tax Deducted at Source (TDS) can be paid to the Income Tax department through either online or offline mode. For corporate assesses and those who are subject to tax audits, online mode is mandatory. However, other assesses can opt offline by furnishing Challan 281 in the authorized bank branch.

To pay TDS online, you need to follow these steps.

  • Go to ITD’s website for e-payment of taxes and select Challan No./ITNS 281 under the e-pay tax section.
  • Enter the challan details such as TAN, assessment year, minor head, nature of payment, bank details, and amount, and submit.
  • You will be redirected to the payment gateway of your selected bank, where you can log in and make the payment using your debit/credit card or net banking details.
  • After making a successful payment, you will receive a confirmation screen displaying your challan identification number (CIN). Along with you can download the challan receipt for your future reference.
  • You can also check the status of your TDS payment and view your tax credit online through Saral PayPack.

This brings us to the end of our discussion on One-Time Tax. Let us know your other questions and opinions on this topic. Mention below the comment box.


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