Confused About Tax Deductions and Final Settlement: Why Do I Owe 2 Lakhs?

My last date was on Dec 10th, and I submitted my tax proofs on Dec 6th, which were validated and acknowledged by the finance team before my LWD (taxable income is 0). After one month, I received an email on Full and Final settlement stating I have to pay 2 lakh rupees to the company because of income tax.

When checked with the team, they mentioned that the investment proofs are considered in January along with F&F. However, for December, the tax was deducted. So, after calculating income tax and deducting 10 days of December pay, the overall amount to be paid by me is nearly 2 lakhs.

The company mentioned that the tax deducted can be shown to the new employer.

Questions about Tax Deduction and Settlement

I have the following questions:

1. I submitted all the proofs in December, why was the tax deducted in December?

2. If my last date is on Dec 10th, why was the full and final settlement done in January?

3. I am now considering higher studies and do not wish to file ITR. I expect to receive money for 10 days and 25 leaves as a refund instead of paying 2 lakhs. Is this the correct calculation?

Please provide some insights on this.

Tax Deduction Errors and Company Responsibility

If the company deducted and paid higher tax due to mistakes in its own internal procedures, it is the fault of the company and not yours. The law requires them to compute and deduct tax evenly throughout the year. In case you do not submit the tax proofs, then in the last few months, they can deduct higher. It is really unreasonable for someone to say they do not consider proofs given in December and will only consider them in February.

It appears to me someone messed up and is trying to recover the money from you.

Checking Your 26AS Statement

One thing you need to check is whether the money has actually been credited to your 26AS statement on the income tax website. That would mean the money is paid to the tax authorities, and you can claim it back when you file your returns. Please remember that you need to file your returns in any case, even if you plan to study abroad.

Handling the Financial Discrepancy

How you deal with this is now up to you. You will need to show this experience later, and it may create a problem in the BGV at that time. However, paying them ₹2 Lakhs is a heavy amount, especially when it will be at least a year before you get the refund from the income tax authorities.