TDS calculation on notice pay recovery

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This discussion clarifies the tax implications of recovering notice pay from an employee's salary. It confirms that TDS (Tax Deducted at Source) must be calculated on the full salary amount, even if deductions are made for unserved notice periods. The consensus is that such penalties are not deductible for salary TDS purposes.

Chahat Khanna

Chahat Khanna (Querist)
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12 December 2024 Resolved and deleted.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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12 December 2024 Employer has to deduct five months salary.

Chahat Khanna

Chahat Khanna (Querist)
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12 December 2024 Resolved and deleted.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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12 December 2024 As per the directions from ITD, the notice period penalty is not deductible under salary account.
So, TDS has to be deducted for the total salary amount.

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