Notice pay

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karan (Querist)
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02 November 2011 Should we Excempt the Amount deducted towards recovery of Notice Pay from Final Settlement

should this amount be added into income tax calculation or should not be

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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02 November 2011 Tax is required to be deducted by the employer on Salary Paid or payable to the employee.

It is a controversial issue and you may receive different opinions.

In my view, if salary is deducted from the amount of settlement, it clearly shows that the amount has not been paid to the employee. In such a case tax can be deducted on Net Amount.

However, if Notice Period salary is received from the employee by cheque or in cash at the time of resignation, and the employer is receiver only, in such a case, employer has to deduct tax on the basis of amount paid without considering the recovered amount as the notice pay.

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