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saswatabanerjee
2383

Any amount that is not paid to an employee for whatever reason, is not taxable in the hands of the employee. So what needs to be considered for tax is only the net amou t of rs. 10,000 that he has received. The deduction of notice period salary is not considered in income tax as a penalty. It is income not earned.
Else, all salary deducted for absence from work would also not be considered as allowable in computation of tax. The same logic would be used - leave without pay is a penalty for failure to adhere to terms of employment, that is, he was suppose to come to work but has not come.

From India, Mumbai
Raj Kumar Hansdah
1426

I tend to agree with Saswat.

Just because someone's salary software lacks certain provisions; does not mean that any THEORETICAL amount be considered as Gross Salary of the person. For example in the hiring CTC statements lots of things are added as Salary components, but never given.

For example, if INCENTIVES is given as Rs. 500,000 p.a. on fulfilment of more than 100% targets; and the company as well as the individual achieves only 50 % and thereby gets only Rs. 200,000 which means penalized by Rs. 300,000. Does it mean that the FULL AMOUNT of Rs. 500,000 be shown as his INCOME ???

If this be so, then Income Tax at source should also be deducted on such FICTITIOUS incentive income in full, too.

This is the reason that employees who separate during the year, have their Form 16; containing their Gross Salaries as that of the whole year, as if they had continued service till the end of the year.

The software, the FULL SALARY DATA is fed once, and the same data is without any change or rectification/modification is used till the end of Financial year; thus resulting in displaying the TOTAL GROSS SALARY in the Income Tax Statements.

Please refer to this thread :

https://www.citehr.com/467783-false-...ml#post2082808

The problem lies with such Software and not the Income Tax rules; and this has to be rectified. If an employee is not paid any amount for whatever reasons by the Employer; then how can he be asked to pay Income Tax on it ??

I am certain that this is a bug, or a matter that escaped the attention of software developers; Or, there must be Codes/system to reconcile and rectify this type of errors.

It appears as if the Software have been designed keeping only the employees on roll/service in its scope, and there are no sufficient provisions built in for eventualities such as correct/rectified Form 16 for employees who left service mid year.

Warm regards.

From India, Delhi
pon1965
604

I am not expert in I.T. but share my exp. Recently Rs.2 Lac was deducted from my F/F for the shortfall in notice pay but the deducted amount is not taken for the tax exemption but the full calculation of F/F. The new employer who refund the shortfall in notice pay, treat such reimbursement as taxable income and I.T.gets deducted. In sum, for the same amount, the employee is losing heavily on I.T. This is the practice being followed across reputed companies as far as I know.
Pon

From India, Lucknow
saswatabanerjee
2383

In this case, you happen to be in a peculiar situation where the circumstances are against you. Neither the law is designed to take this exception into account nor does it change the requirement of law.

Let me try to explain.

From your new employer view point, it's simple.

Every amount he pays you, he has to account for in salary tds working.

So since his is paying you (and you are paying the previous employer), he has to deduct tds on the payment. Here he does not have a choice. Even if he was to pay directly, actually he is still paying on your behalf and its equivalent to payment being made to you.

For your previous employer :

The law requires him to deduct tds equally every month.

So he has to get workings from you in April as to what is the earnings and tax exempted investments you are doing, so he can compute the total earning and tax you are liable for. If he does not cover tds equally every month, he can be asked to explain (eg if you promised to but didn't make PPF payments).

By the time you resigned, and then paid back notice pay (effectively reducing your taxable income in that company substantially), it was too late for them to modify the tds working or refund the amount of excess tds. Once paid, tds can not be refunded by the company (only option is refund after assessment).

Of course, in some cases it may be deliberate to punish you for leaving, but in most cases, the scenario pans out like this. Higher the salary, higher is the impact in such scenario.

Income tax department made the tds rules stronger as people were not paying taxes honestly, etc etc.

Of course, for of this is not a complete loss. You need file a return showing the total taxable income and amount of tax paid (tds) and claim a refund. They will take some time to pay it back. But you are entitled to interest from date of filing returns till date of refund.


From India, Mumbai
arungk4u
5

Dear All
Thanks for your valuable inputs. It was nice to have discussions/suggestions from all of you.
The various inputs received from all of you may be right or wrong but after going through the different views, it really makes us to think what is the right thing to decide in such a scenario.
My sincere thanks to all of you.
Regards
Arun

From India, Pune
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