I worked with 2 companies in FY 2018-19. I worked for 1-30 April with the first organization and joined the 2nd organization on 7th May 2018. My first employer deducted 2.9L as notice period deduction for 45 days of notice period shortfall while making my F&F payment. From what I understand basis a 2017 judgement by IT tribunal this deducted notice period salary is not taxable since it was not "paid" to me. (http://www.mondaq.com/india/x/599766/Income+Tax/ITAT+Holds+That+Deduction+In+Salary+For+Failure+Of+Service+Of+Notice+Period+Is+Not+Taxable) Now I have to file my IT return. How can file a return to get refund in this case as TDS has already been deposited taking the notice period deducted pay as part of my income.
Yes sir tax cannot be deducted for salary which was not provided so you can reduce if from gross salary and claim refund.
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Thank you
Hi,
- In case of salary, TDS liability arises on the basis of payment of the salary and not on due basis.
- The same applies in your case i.e. the income which was not received by you then why tax liability.
- Problem will arise at the time of mismatch between Form 26AS and ITR.
- Please take a phone consultation for further discussion.
Dear Sir,
Hope you are doing well !!
Section 15 of the IT act deals with the asked scenario.
The notice pay deducted by the first company need not be shown as salary income earned from the first company. The notice pay received from the second company need be shown as salary income earned from the second company. Section 15 says the salary income is taxable on Receipt or Accrual basis whichever is earlier but the salary can be taxed only on one basis. Thus the salary earned in the second company can be offered on receipt basis and the deducted notice pay in the first company shall not be offered as salary on receipt basis.
Hello,
Yes, this notice period deduction won't be taxable. You can reduce it from your gross salary in your return.
There might be a need for clarification due to a mismatch between Form 26AS and ITR, but it can be explained.
I hope this answer satisfies your requirement.
Regards,
CA Hunny Badlani
Hi,
You cant get deduction of notice period buyout payment. Its your expense and no expense deduction is allowed against salary buyout.
While, the ITAT has given the ruling in favour of the Assessee but tax departmet will certainly challenge this. You need to take it into account litigation cost as well.
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