The 38-year-old, who is chairman and CEO of News International Europe and Asia, saw his pay rise 74% in the 12 months until June 30.
However, James released a statement today declaring that rejecting the bonus would be the "right thing to do" in the wake of the controversy, which led to the closure of the News of the World and saw key figures at News International, including the tabloid's former editor Rebekah Brooks, hand in their resignations.
"In light of the current controversy surrounding News of the World, I have declined the bonus that the company chose to award to me," he said.
"While the financial and operating performance metrics on which the bonus decision was based are not associated with this matter, I feel that declining the bonus is the right thing to do.
"I will consult with the compensation committee in the future about whether any bonus may be appropriate at a later date
James's father Rupert, owner of News Corporation, is expected to pocket an extra $12.5m, while the conglomerate's deputy chairman Chase Carey collected a 16% pay rise to bring his salary to $30.2 million.
Both of the Murdochs are due to be quizzed by a judge in a High Court session that could potentially be broadcast live to the public.