regarding taxabilty of notice period salary

 

situation :

the terms of employment provides that if an employee wants to leave his job he will have to give 3 months notice period before leaving or otherwise compensating the company for same period with notice pay.

On 31st march 2010 employee left the job with one month notice period ( i.e. employee worked for 12 months including with 1 month notice period). Therfore, employee have to pay to his employer the compensation for two months notice pay salary.

on 1st april 2010 he will join new company and his new employer will reimburse the same amount which the employee have given to his previous employer for not giving 2 months notice period.

how will that be shown in form no. 16.

what will be tax treatment in both fiancial year.

(whether that compensation paid by employee will be allowed as deduction in previous year 2009-2010?)

how will be tds treatment by both the employer old and new?

 

Replies (2)

Dear Vishal,

Since employee worked with his 1st employer till 31.03.2010 so for FY 2009-10, his salary till march will be taxable.

The compensation payable/paid will not be allowed as deduction.

Fy 2010-11

Salary as well as the Reimbursement of compensation received from his new employer will be taxable as perquisite..BUT HERE ALSO NO DEDUCTION WILL BE ALLOWED IN THIS CASE ON ACCOUNT OF PAYMENT OF COMPENSATION.

Is there any change for AY 2020-21, for the same situation. Can I get relief from double taxation.

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