There are two ways of calculating personal income tax for the annual lump sum bonus.

The first method is to combine the year-end lump-sum bonus into the annual comprehensive income, calculate the individual income tax according to the seven-level ultra-progressive tax rate, and make up for the excess in the remittance.

The second method is to calculate the individual income tax of the year-end lump-sum bonus separately and not combine it with the annual comprehensive income.

This method of calculating personal income tax is divided into the following steps:

The first step is to calculate the monthly taxable income.

The full month's taxable income = annual lump sum bonus ÷ 12.

The second step is to determine the applicable tax rate and quick deduction.

Corresponding to the table of comprehensive income tax rates converted by month, determine the applicable tax rate and quick deduction.

The third step is to calculate the amount of personal income tax payable.

The amount of personal income tax payable = annual lump sum bonus × tax rate - quick deduction.

For example, the annual lump sum bonus of 250,000 yuan, according to the second method, not merged into the annual comprehensive income, separate calculation of personal income tax, the calculation process is as follows:

The first step is to calculate the monthly taxable income.

The taxable income for the whole month is 250,000 ÷ 12 = 20,833.33 yuan.

The second step is to determine the applicable tax rate.

Corresponding to the monthly converted comprehensive income tax rate table, 20833.33 yuan belongs to the bracket 3, the tax rate of 20%, the quick deduction for 1410.

The third step, calculate the amount of personal income tax payable.

The amount of personal income tax payable is 250,000×20%-1410=48,590 yuan.

It is important to note that the two methods, the amount of personal income tax calculated is generally different. It is up to the taxpayer to choose which method to use. In general, taxpayers should choose the method that is relatively favorable to them, i.e., the method that pays less tax. So, try both methods and choose the one that pays less tax.

Specific policy provisions:

According to the Announcement on the Continuation of Preferential Policies on Individual Income Taxes, Such as Annual Lump-sum Bonus (Announcement No. 42 of 2021 of the Ministry of Finance and Taxation zongbureau), the Notice of the Ministry of Finance and Taxation zongbureau on the Convergence of Preferential Policies after the Revision of the Individual Income Tax Law (Cai Shui [2018]) No. 164), the implementation period of the preferential policy on separate taxation of annual lump-sum bonuses has been extended to December 31, 2023.

The following is Cai Shui [2018] No. 164:

If a resident individual obtains a full-year lump-sum bonus, which is in line with the provisions of the Circular of the State-Taxation Zong Bureau on the Adjustment of Methods for Calculating and Collecting Individual Income Tax on Individuals' Acquisition of Full-Year Lump-sum Bonus, etc. (Guo Shui Fa [2005] No. 9), before December 31, 2021, the bonus will not be merged with the comprehensive income of the year

The formula is:

Taxable amount=income from annual lump-sum bonus×applicable tax rate-quick deduction

Resident individuals who have received an annual lump-sum bonus can also choose to combine it with their comprehensive income for the current year to calculate tax.