Notice period pay

[Mukund Honkan]

If employer recovers notice period pay whether it should be deducted from Salary for Income tax purpose, pl let me know with supportings case laws/circulars thanks Mukund M Honkan

[Ganeshan Kalyani]

Sir, when an employee resigns, his Full and Final Settlement includes various elements of amount to be paid by company to employee.

If the employee is not serving the agreed notice period then the employee is supposed to pay to the company the salary of those uncompleted number of months of notice period. Here the company while settling F&F deducts the notice pay recovery amount and the income goes down by that amount. This also gets reflected in Form 16. Thus the benefit is received by the employee for the payment made toward notice pay recovery. This is my view. Thanks

AI Summary

Notice Period Pay Deduction Lowers Taxable Income, Provides Tax Benefit in Form 16 During Final Settlement An individual inquired whether notice period pay recovered by an employer should be deducted from salary for income tax purposes. A respondent explained that during an employee's Full and Final Settlement, if the employee does not serve the agreed notice period, the company deducts the notice pay recovery from the total settlement. This deduction reduces the employee's taxable income, which is reflected in Form 16, thus providing a tax benefit to the employee for the notice pay recovery.