Incentive bonus is Salary and actualy expenditure incurred by Development officer and later reimbursed by LIC under Incentive Bonus Scheme 1997 and Reimbursement Scheme 1997 are not be regarded as taxable salary . This is the view of CBDT which was asked Kerala High Court in CIT,Kottayam vs Jhon Varghese in its interim order asked CBDT decide -Whether the incentive bonus paid by LIC to Development Officers would be assessable under the head “Salary” or whether it is income from other sources on which 30 % deduction claimed by the Development Officer towards estimated expenditure to earn the income would be allowable.

The Board decided as under

“The Board , after examining these two Schemes of LIC of India , has decided that “ the “incentive bonus” would be taxable as “salary” in view of the employer –employee relationship and only such reimbursements that are actual reimbursement of the expenditure incurred would be treated as “exempt” . Reimbursement of expenditure would not be included in salary but will have tto be shown separately in the “salary certificate”

{F No 173(3)/10/2009-ITA-1 dated 13/May 2009