Hello, My father inlaw got seperated from TBWES company in last year which was based in Pune.Company have shutdown the factory and asked all employees to give the resignation.At the time of resignation he was 58 years old and his service was remain for 2 years.Company has given salary of 6 months as a benefit to employee.They have given this amount as "Notice Pay Payment".The amount was INR 8,64,000/- After leaving the company he has not joined any other company and now he is like retired workmen.I wanted to know that whether he will get Income tax benefit for Notice pay amount? He already paid tax on it and it got reflected in his FORM 16 also.He wanted to file his ITR now and need to know whether he can get tax refund on it under Section 10 (10 B) or (10 C)
I think the compensation received by your father due to closure of the business will be exempt and covered under section 10(10B) under the definition of retrenchment and thus the salary received will be exempt and the TDS deducted on such salary can be claimed as refund while filing the return of income.
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Thank you
Hi,
- The fact that the company got closed down will not change the nature of Notice pay payment to any other form. Section 10(10B) deals with the compensation on retrenchment. An employee does not get compensation against resignation, therefore sec.10(10B) is not applicable.
- Section 10(10C) deals with payment at the time of VRS. For VRS there are proper guidelines in the Act which needs to be fulfilled to claim the benefit of VRS exemption.
- The amount of Rs.8,64,000 is taxable and file your ITR according to the Form 16.
Thanks
Thank you Vivek.You are correct that payment was not done under any proper guideline of VRS however it was retrenchment only.Company has forcefully taken the resignation from most of the employees as part of cost cutting.Some employees are still working in the company.Also they done the payment for six months in advance which can be considered as retrenchment compensation.
Good evening sir,
I don't think you have considered my consultation however I would like to again suggest you that the compensation received by your father due to closure of an undertaking would be covered under the definition of retrenchment as retrenchment includes closure of an undertaking and undertaking means (as per section 2 of income tax act) an undertaking or a part of it.
Thus it is not necessary that whole company should shut down, shutting down of an undertaking would also fulfill the condition and as per industry dispute act any compensation received on closure of undertaking would be considered as retrenchment.
Thus the compensation received is exempt u/s 10(10B).
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Thank you.
Hi,
Going through your case, I dont think your FIL will be eligible for deduction u/s 10(10B) or 10(10C) and will have to pay taxes on INR 8.64 lakhs.
Regards,
Nikhil.
Hi,
- In your case, employer had accepted resignation and in case of retrenchment there is no resignation. Also employer had deducted TDS on the payment which is reflected in the Form 16 and Form 26AS. If you claim exemption u/s 10 then it would be subject to litigation.
Thanks
Dear Sir,
Hope you are doing well !
As per my understanding, your father inlaw will have to pay taxes on entire amount i.e INR 8,64,000/-.
He will not be eligible for deduction u/s 10(10B) or 10(10C).
Thanks & Regards,
Payal Chhajed
Dear Sir,
He will not be able to get any benefit as specified in section 10 (10 B) or (10 C).
He will have to pay taxes on INR 8,64,000/-.
