LIVE GST Audit Course by CA Sachin Jain. Register Now!!

Notice Pay

10 May 2007

An Employee pay the notice pay at the time of leaving the employer the same is reiumbursed to him by the new employer. What will be taxablity of the same.

Is there is any impact on taxationif the notice pay is paid by the new employer to the former employer directly?

Reply
Follow
Share

8 Replies

Anand Chauhan (183 Points)
Replied 10 May 2007

Deduction by the previous employer as well as reimbursement by the new employer is the result of contract of employment, so deduction should be deducted and reimbursement should be added for arriving at gross taxable income.

Regards

Jaindeepak (52 Points)
Replied 10 May 2007

sir reimbursement of notice pay by new employer will surely add to the salary income of the employee as difinately it is a perquisite within the meaning of section 17, but as far as deductibility of the notice pay to be paid to former employer is concerned therein is nothing in law to permit to deduct the same. Picture will not change even if same is directly paid by the new employer to old employer.

Anand Chauhan (183 Points)
Replied 10 May 2007

Dear Friend,

The employer will show in form 16, salary which is actually paid to the employee, which will be net of notice pay itself.

So there is no need for explicite procvision for deduction, as the assessee is not required to take deduction in return but it will already be considered in form 16.

Even in case of reimbursement or other allowances recovery is deducted from the taxable income of the particular reimbursement/allowance, so is the case with the notice pay. Whatever is paid to employees only should be taxable income of the employee.

Regards.

Chauhan Anand N.

(Guest)

Income tax implications for employee in case he pays the Notice pay to his previous employer and the current employer reimburses him/pays directly to his previous employer. I want to appreciate the follwoing : 1. Whether or not the notice period amount paid would be adjusted in Form 16 by my previous employer? 2. Under what circumstances can i avoid the double taxation on notice pay as in my current employer is not adjusting it in Form 16 ( as he is not reducing it from my tax computation) and the current employer is also deducting tax on the reimburement of notice pay. Please advise