TDS on Salary

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varun gupta (Querist)
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05 May 2009 A company lays off its employee in Mid-marcha in a way that his last working day is 15th Mar and pays his full & final settlement amt for salary and other encashments in Apr end. Now, should the company make provision for such expense at Mar end itself as liability is confirmed and also the amt. If yes, when shd company deduct TDS from the amt payable to employee? For employee, this final settlement amt will be taxable in which year?(in yr when he served or when he actually receives the amt)

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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05 May 2009 Yes, you can make the provision.

For TDS - It will be deducted when the payment is made.

Income in hands of employees - In the year when it is due. Salary is taxable on the basis of due or receipts whichever is earlier.

varun gupta

varun gupta (Querist)
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21 May 2009 But in that case, employer will deposit TDS on his behalf in A.Y 2010-11 and file his TDS return accordingly and will also issue the form 16 in APr 2010 whereas Income for employee will be added in A.Y 2009-10, so how can he show that TDS has been deducted by his employer? That will gave rise to lot of contradiction or not!