Income tax query

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Ankur Pandey (Querist)
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25 September 2014 I have resigned from XYZ organization where I was supposed to serve 90 days notice period.However,I served only 81 days.Rest of 9 days was adjusted with my accumulated approved paid leaves(19 days). Gross Leave Encashment amount was Rs.23,300 and Notice Period Recovery Amount was Rs 11,037(for 9 Days) However,actual leave encashment has been credited to my account Rs 12,263 (Leave Encashment Amount 23,300 -Notice Period Recovery Amount was Rs 11,037). However,in tax sheet prepared by my organization done all calculation considering Gross Leave Encashment amount was Rs.23,300 not the net amount which I received. Could you please explain me which amount should be considered while preparing tax sheet.Is it Gross Leave Encashment amount or Net Leave Encashment amount ?(Adjusted after deducting Notice Period Recovery Amount) .what income tax says about it?And I am not getting compensated by my new employer for any recovery amount. Many thanks in advance. Regards, Ankur

Nikhil Kaushik

Nikhil Kaushik (Expert)
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25 September 2014 you dont get any special deduction in income-tax for notice settlement adjustment. However, if your employer adjusts it within form 16, the tax liability can be reduced to that extent. What your employer has done is the correct treatment of notice settlement...

CA Devanand Jethanandani

CA Devanand Jethanandani (Expert)
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25 September 2014 Hi Ankur,

If your organization show full amount of leave encashment or net amount, it will not affect total income or tax liability, in either case it will be same.

This is because if your organization is showing full amount of leave encashment (Rs.23,300) then they might have reduced the short notice recovery amount of Rs.11,037 from your salary in the form 16.

Ankur Pandey

Ankur Pandey (Querist)
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25 September 2014 Hello Nikhil & Dev,
Thanks for the reply.
My employer is considering the Gross amount of 23300 in form 16.
So my question is what amount should they consider Gross or adjusted amount in form 16

Regards
Ankur

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