Compensation

Dear Radheyshyam Sir,

Compensation paid by new employer to ex employer is taxable in the hands of employee as salary

Ur new employer will get the deduction of the amount paid as compensation to ur ex employer.

For ur ex employer the said compensation will be trading receipt & will be treated as Income under PGBP.

Dear Amir,

Then it will be double taxation on single amount??

Hi Poornima,

I knw it is treated as Income in the hands of employee as well as ex-employer but then that is how the position is......

Y u have ny diffrnt opinions...............

I think in this it will not be taxable in the hand of employee. Here new employer is paying to Ex employer then only because it is for employee tax liability should not come.

Is in defination of salary any treatment of compensation is given???

Dear Poornima,

I could say that this compensation is covered in the definition of "Profits in lieu of Salary" -

Sec 17(3)(i) the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions relating thereto;

But for me the present case doesnot fall into this clause, simply becos it is covered in the definition of "Perquisite"-

Sec 17(2)(iv)  any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee;

Becos new employer has discharged the obligation of employee..had new employer not paid this amount then employee himself would have liable to pay it......