Is Special Allowance Part of Salary for Notice Period Recovery? Seeking Legal Insights

Dear All,

I am working as a Payroll Manager in a multinational corporation (MNC). One of our employees has raised a query regarding the inclusion of Special Allowance in the salary for the purpose of Notice Period Recovery. According to our company policy, the notice period recovery/payment and the leave encashment are to be based on the gross salary (Basic+HRA+Special). Can anyone guide me to the relevant section in the Income Tax Act or any other law that specifies the Special Allowance as part of the salary?

Thank you.

Hi Anjani,

Since both notice pay recovery and payment, and leave encashment are done on the same components, there should not be any question of non-inclusion of special allowance for notice pay recovery. I do not think there is any law regarding this. Some companies have a policy of notice pay recovery or payment based on gross or basic salary. Therefore, it is up to the company to decide the policy.

Regards,
Harshad