01 September 2012
If employer has deducted Notice pay from Salary while paying it to the employee but while calculating TDS in form 16 full salary has been taken , then, can the assessee claim the salary actually received after deducting Notice pay in ITR or he has to take the whole salary as shown on form 16.
02 September 2012
“Salary” is the recompense or consideration given to a person for the pains he has bestowed upon another’s business—Stroud’s Judicial Dictionary.
The doctrine of real income is inapplicable to salary because section 15 of the Act imposes the charge when salary becomes due, whether paid or not—CIT v. P. Nataraja Sastri [1976] 104 ITR 245 (Mad.). Moreover, sections 15, 16 and 17 lay down the method of computation of the income under the head “Salaries”. They do not provide for deduction of notice pay or compensation or payment made to relieve oneself of an inconvenient contract from wage or salary receipts. It is also a settled law that tax will be payable on salary which is surrendered after it has become due. It is the annual income under the head “Salaries” that is assessable ; and any forfeiture of wages made before the close of the year reduces the amount of wages, due in terms of the contract of employment, for the services rendered during the year unless the contract of employment makes it clear that salary accrues or is due from month to month. It has been held that even salary foregone before the end of the accounting year when it was strictly due could not be regarded as income—CIT v. Mehar Singh Sampuran Singh Chawla [1973] 90 ITR 219 (Delhi). If the employer is entitled to withhold six months’ salary out of the total amount due for the previous year 2009-10, it is only the balance that has fallen due to the employee at the end of the year. If this contention is raised by the employee, the revenue authorities may ask for copies of the contract of employment and of the account of employee in the company’s books.
In CIT v. Raghunath Murti [2009] 178 Taxman 144 (Delhi), the assessee- managing director revised return because he had to refund certain sum to his employer-company as the same was found in excess of limits prescribed in the Companies Act, 1956. The Delhi High Court held that as the said refund was neither voluntary nor was it for any extraneous consideration, the same could not be held to be the assessee’s income and, therefore, was not assessable. Even the employer can provide such reduction at the time of deduction of tax at source on the basis of this decision.
02 September 2012
Means we can take the salary actually received as taxable salary bcoz in my case the salary falls due on 31st May but the emolyee left the job on 28th May, so his 3 day salary got deducted, but in Form 16 whole amount of salary of that month was taken for TDS calculation.
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