TDS on Notice Period compensation paid to the Company

This query is : Resolved

Rachit (Querist)
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17 December 2010 A Employee has left the company in the first month of the notice period (total notice period - 3 Months) and paid compensation to the company for two months salary.

I would like to know about the accounting and taxation effect on Employee (including for Form 16A) and also on the company.

Can the Company reduce the amount of compensation received from the employee in calculating the final TDS liability of the said employee at the time of full & final settlement?

Also can the employee claim the salary paid to the company as deduction from the total salary income earned?

Aditya Maheshwari

Aditya Maheshwari (Expert)
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17 December 2010 Should be reduced but there is no provisions in Income Tax so not reduced for purpose of calculating TDS as well as Income Tax computation purpose.

If netted off against leave salary payable on leaving then it would be better as there it can be reduced.