IT provisions pertaining to Notice pay

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Navdeep Mahajan (Querist)
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30 November 2007 Please guide me to appreciate the following wrt to the supramentioned subject
1. My employer is not adjusting Rs. 2 lacs i.e. the amount it has recovered from me in lieu of notice pay, in my tax computation. It contends that the same cannot be adjusted against the salary income accrued to me as per the terms of the employment. It says that the amount has been adjusted against the leave encashment and the salary for the month of Sept,07 in which i worked with them.

I have the following to submit as per the income tax act salary is defined as "
salary is the remuneration received by or accruing to an individual periodically for service rendered as a result of an express or implied contract".

Accordingly net inflows against the contract of employment is what should be brought under the ambit of tax and the total salary paid net of notice pay received should be used for tax computation. To simplyfy my observation, I want your opinion for a scenario where the employment contract outlines for a payment of 2 months basic pay to an employee in case he achieves his objectives by the end of the year otherwise the employee is responsible for paying 2 months basic pay to the company. In my opinion in the above scenario salary will be adjusted with 2 months basic pay in both scenarios i.e. in case of payment by employer it'll be added in the tax compuation of the employee and vice versa. Please help me because i am getting hugely impacted due to this stance of my employer.

2. Further, i want to check with you that will there be any difference in tax for me in case my present employer pays the notice period directly to my previous employer.

Many thanks for your thoughtful advise.

K V Subba Rao

K V Subba Rao (Expert)
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01 December 2007 Pl. visit https://www.blonnet.com/iw/2007/06/10/stories/2007061001141200.htm

Navdeep Mahajan

Navdeep Mahajan (Querist)
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01 December 2007 I think there are couple of questions still unanswered.

Navdeep Mahajan

Navdeep Mahajan (Querist)
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03 December 2007 Please pls pls provide your valuable opinion on my qestions above i.e. tax implications on
1.where the employment contract outlines for a payment of 2 months basic pay to an employee in case he achieves his objectives by the end of the year otherwise the employee is responsible for paying 2 months basic pay to the company
2.Further, i want to check with you that will there be any difference in tax for me in case my present employer pays the notice period directly to my previous employer.

CA RITESH JUNEJA

CA RITESH JUNEJA (Expert)
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23 January 2010 CLOSE THIS QUERY NOW

CA RITESH JUNEJA

CA RITESH JUNEJA (Expert)
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23 January 2010 CLOSE THIS QUERY NOW

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