26 June 2010
As per my company (employer)process, the CO. withholds the last month,s salary and pays it with full and final settlement. I retired from my job on 31/03/2010,as such my salary of March was not paid in March10 but was paid on 05/04/10. My employer deducted the income tax on this payment treating it the payment for the yr.2009-10 whereas I am of the opinion that since this amount has been released /paid to me on 05/04/10 this should be included in the income for the fin. yr. 2010-11 , and as i have retired on 31/03/10, the income for the yr. 2010-11 will not be upto the taxable limit so the I.T. will not be deductable. Please advise whether my presumption is correct? Incase the employer does not agrees to it what should I do. The employer will also issue form 16 according to his version(i.e.treating it as income of 2009-10), what should I do to file my income tax return correctly. Kindly advise.
27 June 2010
No your employer is correct in treating this as a part of 2009-10 income. You have rendered the services in 2009-10. Also a company would be following accrual method of accounting whereby it will accrue its cost towards the services rendered by you (irrespective of when it will actually pay you) and would deduct TDS accordingly.
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