Tax Liability on

[Rahul Bagaria]

Hi

My current employer has paid the 'Notice Pay' to my previous employer. Wanted to know the tax liability status in the hands of the employee under 2 options:

1 .If the payment is directly made to the previous employer by the current employer

2. If the amount is paid directly to the employee to be by the current employer, which the employee will directly pay from his own pocket to his previous employer

Will under both the circumstances, the employee will have to bear the tax liability.

Thanks

[CAGOPALJI AGRAWAL]

Though it is not the real income but somewhat in the nature of surrender of salary. If the previous employer deduct the same in salary paid - form 16 then no further probelm would arise otherwise the taxability would depend upon the term of employment and AO would generally not exclude notice pay from salary income.

AI Summary

Tax Implications of 'Notice Pay': Direct vs. Indirect Payments and Impact on Salary Income and Taxability An individual inquired about the tax implications of 'Notice Pay' paid by a current employer to a previous employer. Two scenarios were considered: direct payment to the previous employer by the current employer, and payment to the employee who then pays the previous employer. A tax advisor responded, indicating that although this is not real income, it resembles a salary surrender. If the previous employer deducts it in the salary form (Form 16), no issues arise. Otherwise, taxability depends on employment terms, and the Assessing Officer typically does not exclude notice pay from salary income.