Form 16 Includes Salary Recovered Towards Notice Pay – How Should I File My ITR?

To handle notice pay recovery when your employer refuses to revise Form 16, report the gross salary as per Form 16 to avoid AIS mismatches, and claim the deducted notice pay amount as a deduction under salary income while retaining your full and final settlement statement and bank proofs for verification.

Hi Sir,

Thank you for your response. Could you please guide me on under which section we can claim this deduction? As far as I can see, Section 10 does not appear to have any provision for it.

I hope you have earned  only 37 days Salary Income  of F.Y 25-26 and you are filling return for the same period , So as per section 139 (1) (b) of the Income tax Act 1961( please refer) , if your 37 days salary was less than basic exemption limit then you are not required to file Income tax return . 

( Basic exemption limit for old tax regime is 2,50,000/- and New tax regime 4,00,000/-) 

Note -As per the above mentioned section if total income of a person exceeds basic limit then it is compulsory to file Income tax return.

Take more opinions as well. 

Thank you for your reply. To clarify I was employed in a different organisation for about 8 months during this financial year. Including that salary and other sources of income, it exceeds 13L and I am trying to file ITR in New Regime 

When Form 16 reflects a higher amount due to notice pay recovery, report gross salary as shown in Form 16.

Why: The AIS and 26AS reflect the employer reported figure. If your ITR shows a lower number, it triggers a mismatch notice under Section 143(1).

On the deduction question: Notice pay recovery is NOT deductible as a separate line item under Section 16, which only allows standard deduction and professional tax. There is no provision to deduct salary forfeited to an employer from gross salary.

What to do:
- Report gross salary per Form 16 to avoid AIS mismatch
- Retain documented proof: pay slip showing the recovery, full-and-final settlement statement from HR
- If the department later questions the figure, this documentation is your justification

File before July 31 with the Form 16 gross amount. This [guide on reading Form 16 and filing ITR for salaried employees](https://taxgarden.in/blog/how-to-read-form-16-file-itr-salaried-ay-2026-27) walks through the salary schedule and how to handle common discrepancies.

There was case law of  Nandinho Rebello vs. Deputy Commissioner of Income tax 

Decision by ITAT Ahmedabad ( Income tax Appellate Tribunal) . You can refer in this case , I think decision is in favour of employee , please confirm. 

It is recommended that file your income tax return, with help of CA .

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When reporting foreign shares or RSUs across all 5 major foreign brokerages—Fidelity NetBenefits, Charles Schwab, E-Trade, Morgan Stanley StockPlan Connect, and Shareworks—in Schedule FA, it is mandatory that initial and peak lot conversions adhere strictly to Rule 115 using exact historical SBI TT Buying Rates on the transaction dates. For practitioners and taxpayers managing complex returns ahead of the July 31st deadline, manual Excel rate conversions are time-consuming and prone to errors. You can search online for the ITRFA tool (ITRFA tool) to see how automated parsing of raw CSV, Excel, and PDF account statements across all 5 brokers generates audit-ready Table A2, A3, and Table F figures instantly without manual data entry.