Notice Pay

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

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.

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.

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

What is the basis of salary to be considered in case of notoce pay>

As there is no clause specified in Income Tax Act, request you to kindly refer any ruling by IT dept or court, if exist.

This is not shown in the Form 16.

 

Salary net of notice pay will be subjected to tax at source and as such the figures of net salaries will be reflected in form 16.