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 recovery reduces taxable salary by deduction at full-and-final settlement and is reflected in Form 16.
When an employee resigns and fails to serve the agreed notice period, the employer recovers the unserved notice period pay by deducting that amount from the employee's Full and Final Settlement, reducing the salary payment and reflecting the deduction in Form 16, so the employee effectively receives the benefit of a lower taxable salary to the extent of the notice period pay recovery.