• Notice period buyout

Hi,
I have a tax situation. I have switched company in August, I have paid 1.78lakhs to my old company in form of notice period buyout. My new company reimbursed the amount through payroll so I lost 37k in taxes. Can you suggest what should I do such that I get back the money during itr filling.? Have confirmed with my previous employer, the buyout amount won't reflect in form 16
Asked 4 days ago in Income Tax from Bengaluru, Karnataka

Depends on your firm 16 deductions, you can ask your consultant to show amount only which you got in your hand as salary of part of the salary.

Rajkumar Wagh
CA, Kolhapur
8 Answers

Not rated

You are saying that the amount you paid to your old company won't reflect in your old companies form 16. Which means that they would show your full salary instead of deducting this amount from your salary and new company would also show the amount they paid you through payroll. I guess you are getting taxed twice.

I guess you need to deduct the amount you paid from the salary you show received from your old company.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
559 Answers
4 Consultations

5.0 on 5.0

Hi

 

The previous employer is correct. It won't get reflected in Form 16. It is not deductible from salary. Taxes have to be paid if new company has reimbursed such payment to you.

Lakshita Bhandari
CA, Mumbai
2235 Answers
80 Consultations

5.0 on 5.0

Hi,

Hope you are doing well !!

 

1.The amount paid by you as notice pay recovery should be considered as the amount of salary which has not become due to you.  You may rely in this regard on the decision of CIT vs. Mehar Singh Sampuran Singh Chawla 90 ITR 219.  You should claim that on the basis of the said decision the notice pay is not taxable. 

 

2. The amount paid by a new employer towards the reimbursement of Rs 1.78 lakhs on account of shortfall in notice period would be a perquisite and taxable as part of your salary income.

 

Thanks & Regards,

Payal Chhajed

 

Payal Chhajed
CA, Mumbai
1093 Answers
8 Consultations

4.8 on 5.0

Further, if you need any help in ITR filing, please let us know.

Payal Chhajed
CA, Mumbai
1093 Answers
8 Consultations

4.8 on 5.0

Hi,

 

Your previous employer is correct that it wont reflect in the Form 16.  However, according to me, the tax deduction on account of this can be claimed back by you while filing your returns.

 

Regards,

Nikhil

Nikhil Khanna
CA, Mumbai
1426 Answers
19 Consultations

4.8 on 5.0

The position to be analysed is whether the old employer has taxed the gross salary in your hand or the net ie after deducting buy out amount paid by you. Since, you said that old Form 16 does not have this buy out, I presume net salary is taxed.  This is the ideal way.

 

Now, the new company has actually paid the salary to you in the form of buyout pay.  This is actually akin to a salary in your hands, hence TDS is to be done.

 

This is a one time taxability, which is a correct position

Jasmina Jain Shah
CA, Greater Mumbai
101 Answers
1 Consultation

5.0 on 5.0

Yes sir, you can contact me anytime if you need any assistance.

Rajkumar Wagh
CA, Kolhapur
8 Answers

Not rated

Hi,

- It will be reflect in new company Form 16.

- All you do is to mention in the ITR at the time of filing.

 

Thanks

Vivek Kumar Arora
CA, Delhi
1713 Answers
51 Consultations

5.0 on 5.0

Hi,

Yes, your previous employer is correct.

You can convince your new employer to show salary after deducting buyout period reimbursement.

Karishma Chhajer
CA, Jodhpur
619 Answers
3 Consultations

5.0 on 5.0

Dear Sir

 

Your old Employer is right as it wouldn't reflect in your Form 16 & You can claim TDS on amount paid to old Employer.

Shiv Kumar Agarwal
CA, Delhi
284 Answers
61 Consultations

5.0 on 5.0

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