17 December 2007
Please let me know the tax treatment in the following case of full & final settlement payment to an employee.
Gross Payment(including Leave Encashment for 45 days):Rs.100/- Notice Pay Deduction for 45 days:Rs.20/- Net Payment before Tax:Rs.80/-
Can the leave encashment inflow and notice pay deduction outflow be set off,both being internal company policy related matters,and therefore tax be computed on Rs.100-Rs.20=Rs.80.
17 December 2007
The query remains unanswered in the above example where there is leave encashment,and leave encashment and notice pay deduction both being company policcies,should be set off,to arive at amount payable to employee as F&F settlement and hence to arrive at Taxable salary.
28 February 2008
You may ask the organization to adjust the net pay with the leave encashment. However, if they do not adjust then the tax has to be paid on leave encashment, if the leave encashment availed during service period.
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