Tds on compensation

A Ltd (Mfg Co.) entered into Development Agreement with B Ltd (Developer) for Sale of Factory Land along with all liabilities of workers dues including unpaid wages etc, sales tax, property tax, provident fund exc. & some lump sum amount as consideration.

Later on B Ltd Converted into B Pvt. Ltd.

The Recognized Union of the Workers had filled the Case In Industrial Court under Industrial Dispute Act (ID Act) Against A Ltd for nonpayment of Wages and other issues & Made party to B Pvt. Ltd as well.

Later on Industrial Court has directed to B Pvt. Ltd. to Pay Retrenchment Compensation as well wages till workers services are terminated by following due process under Section of 25F of the ID Act.

 Questions :-

  1. If one time Settlement amount will be paid to individual workers, whether this receipt will be taxable under the Income Tax Act in Workers hand. If yes, what should be the nature of such receipt Salary or Income from Other sources? As no bifurcation will be provided for individual head wise Income.
  2. Whether, this payment will attract any provision for deduction of TDS either by B Pvt. Ltd or A Ltd. If yes who should deduct TDS and at what rate?
Replies (1)

As per Section 17(3), "profit in lieu of salary" includes amount of any compensation due to or received by an assessee from his employer or former employer at or in connection of termination of his employment. Therefore, retrenchment compensation will be taxable as salary in the hands of the employees & tds will be deducted by the payer company u/s 192.
 

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