Hello,
I had to pay a notice period amount to my previous employer. The total amount was 2 lacs. They held last month’s salary of 1.5 Lacs so net amount due was 50k. I paid 50k to my previous employer and got 50k from my new employer under a notice period buyout option. My new employer paid 50k along with my salary and also deducted TDS on it which is fine.
But my question is that, do I need to pay taxes on that 1.5 Lacs which was held by my previous employer and the amount never got credited to my account? I can see that 1.5 lacs under the salary section of AIS and TDS wasn’t deducted from it.
depends on what your Form 16 says… has the previous employer taxed the gross salary in your hand or the net i.e. after deducting buyout amount paid by you?
the new employer has actually paid the salary to you in the form of buyout pay. This is actually analogous to getting paid a salary … ideally TDS should have been deducted & it has been deducted… so all good.
What you are referring to is an anomaly which exists in tax rules and the Govt has not done anything to sort this despite repeated representations…
In case the employee pays for the notice period, no deduction of such amount is allowed to him. However, when the new employer pays for the notice period, that amount is included in the total income of the employee and tax is deducted accordingly from the employee.
Income Tax on Payment for Notice Period: How payment for notice period by salaried employees is taxed - Income Tax News | The Financial Express
Requesting Team @Quicko to pls cross-check & respond…
Thanks @sufimonks for the response.
It is for the current financial year so I am yet to receive Form 16. But as I can see payslip generated in the online portal & also salary has been updated in AIS. So I believe, they’ll also add it in Form 16.
I have no concern on the tax being deducted from notice period reimbursement amount I got from my new employer. But if it’s possible and allowed in laws of income tax then I don’t want to pay tax on 1.5 lacs which I never got in my hand.
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