Deduction - notice pay salary

[Asked by Guest]

Whether Notice pay salary Recovered by employer shall be allowed as deduction for employee, while computing his income under the head salary?

[Surender Gupta]

Notice pay salary may be considered as deduction of salary by the employer. It is the form 16 issued by the employer which helps to decide that it is deduction from the salary to compensation paid to employer. But, there is no separate provision to reduce the notice period salary from the salary shown inform 16 by the employee from his tasable income.

[A RAVINDRA]

No. It can not be deducted from salary income either in form 16 or in ITR filed by the assessee. The notice period salary recoverd from employee by employer is in the nature of penalty for voilation of contractual obligation. Hence the said recovery can not be deducted from the income of employee in his return.

AI Summary

Notice pay recovery: whether recovered notice salary reduces taxable salary is contested, with treatment varying by payroll and legal view.
Whether recovery of notice pay salary by an employer may be treated as a deduction from the employee's salary is contested: one view treats such recovery as reflected in payroll/Form 16 and potentially reducing the salary figure, while another view characterises the recovery as a penalty for breach of contractual obligations and therefore not deductible in the employee's return.