Tax implication on Recovered Amount from salary due to not serving the agreed tenure

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An employee paid back £40,000 to their employer for not completing a two-year employment bond, but TDS was deducted on the full £150,000 salary. The employer refused to reflect the £40,000 deduction on Form 16, stating it's not tax-exempt. However, it is possible for the employee to claim tax relief on the recovered amount, as indicated by relevant case law.

Pramod

Pramod (Querist)
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24 March 2023 Dear,

Greetings of the day.
Please help in the below issue.

Employer offered 15Lakh Salary upon a 2 years bond, if he did not serve the job for 2 years and break the bond he have to refund 4Laks rupees to employer.

Due to some reasons he left the job and paid back to employer 4 Lakhs. The TDS is deducted on 15Lakhs.

Employee asked his employer to mention 4Lakhs in FORM16 but employer denied and saying "deduction for not serving the agreed tenure, these deductions will not fall under tax exemptions".

As employee already paid TDS on total 15 Lakhs now is it possible to take tax advantage on that 4Lakh recovered amount?

Please help

Thanks

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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24 March 2023 Yes, tax advantage of 4 lacs can be taken.
See the link for case law.
https://www.taxcorner.co.in/2020/01/recovery-of-notice-pay-for-notice-period-is-deductible-and-not-taxable-itat.html?m=1

Message likes : 1 times

Pramod

Pramod (Querist)
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24 March 2023 Thanks for the reply seetharaman sir..

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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25 March 2023 You are welcome..
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